Rapidly rising inflation rates leveled off slightly in April, but higher prices are still putting the squeeze on monthly budgets, forcing many Americans to make tough compromises to keep afloat financially.
The consumer price index (CPI), which measures the average price of consumer goods and services, saw a year-over-year increase of 8.3% in April. But prices did fall sharply from March to April, declining from a monthly increase of 1.2% in March to just 0.3% in April—the smallest monthly increase since August 2021. While the pace of price increases moderated, it was not by as much as experts hoped to see.
The CPI measures the average prices for Americans who live in major metro hubs. It doesn’t track spending patterns of those living in rural areas, Americans in the armed forces, or those in institutions such as prisons or mental health hospitals. It’s also an average, meaning many Americans across the country are seeing much higher spikes.
“I believe inflation is our top economic challenge right now,” President Joe Biden said in a speech Tuesday. He largely blamed rising prices on the pandemic-driven supply-chain issues and Russia’s invasion of Ukraine. “Those two major contributors to inflation are both global in nature. That’s why we’re seeing historic inflation in countries all over the world.”
Inflation might be a global issue, but it feels personal. And the squeeze comes at a time when there’s no more wide-reaching government support on the horizon: Stimulus checks have been cashed and spent, and advanced child tax credit (CTC) payments lapsed. In fact, Americans’ finances are basically back to pre-pandemic levels. Personal savings rates fell to 6.2% in March. That’s the lowest level since 2013—and a far cry from the high of 33.7% in April 2020.
Moreover, the share of Americans living paycheck to paycheck has also ticked back up. When the pandemic hit in March 2020, about 65.7% of consumers reported having no money left over at the end of the month. That dropped to the lowest level of 52% in April 2021 but has been on a fairly steady rise ever since.
As of March, about 64.4% of Americans, or 166 million adults, reported they were living paycheck to paycheck, according to research by LendingClub and PYMNTS.
So how are American families coping with the increased prices—especially the rising cost of essentials like food, gas, and housing? They’re making tradeoffs. Lots of them.
Still contemplating cutbacks
Amid the recent price surges, about 67% of families feel that their income can't keep up with the cost of living, according to Primerica’s latest Middle-Income Financial Security Monitor. Most families surveyed are planning to cut back on expenses due to inflation, with dining out and technology upgrades among the more common expenses on the chopping block.
Tanya Barham, a single mother based in Portland, Ore., recently canceled her Apple TV, HBOMax, and Spotify subscriptions in order to help offset rising food costs. “We don't live an extravagant life by any means. We're solidly middle class,” Barham says. Still, with food prices going up, cutting these streaming services frees up some much needed cash in her budget.
Overall, Barham has seen her grocery bill jump by about 30% to 50% in recent months. Typically her groceries average $25 to $35 per bag; now it’s roughly $50 a bag—or about $400 to $600 per month. “My kid is a teen and doing sports, so she just eats a lot more these days,” Barham, 46, tells Fortune. “Thank God, my kid is into vintage shopping,” she jokes.
But sometimes, the tradeoffs are tougher to make. Barham is considering trading in her Chevy Volt for a bike. Although it’s a hybrid electric car, rising gas prices make it less affordable these days. Barham says she used to spend $40 to fill up her car. These days, that’s enough for only half a tank. And while the CPI reported gas prices fell sharply in April from their jump in March, the price at the pump is still trending high.
Americans across the country are doing "everything in their power" to figure out ways to save at the gas pump these days, Biden acknowledged in his speech. As of Tuesday, the average cost of gas was $4.37 per gallon nationwide, according to AAA, up about 6% from April 2021.
Barham is the founder and CEO of Community Energy Labs, an energy technology company focused on affordable decarbonization of community buildings, which she launched in the winter of 2020, just at the start of the COVID-19 pandemic. As many small-business owners know, income can be unreliable at first. The child tax credit payments were essential in helping her make ends meet as she got her company off the ground.
After the CTC payments lapsed in December, Barham applied for food stamps. “I didn't know if I was going to be able to pay myself, and I'm the sole breadwinner for my family.
“It took me five hours to fill out this application. You're treated like a criminal,” she says, adding that she was approved for the equivalent of about $300 a month.
Meanwhile, she also applied for COVID-19 Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program loans for her small business. Those applications took 15 minutes to complete, Barham says. She received a $5,000 forgivable PPP loan and $13,000 EIDL loan, which she’s currently paying off at a 3.75% interest rate.
“I was just really taken aback by how easy it was to get money as a business, and how difficult it was to get money to feed kids,” she says. In the end, she didn’t need the food assistance because she was able to secure enough funding for her startup to pay herself a modest salary. Still, she’s thinking about every dollar that comes in and out these days.
And it's difficult to explain the budget shortfalls to her daughter. “I know what it's like to really miss out, but my kid doesn't,” she says. “We live in this consumerist culture where your kid is looking at all these other kids who have fancy phones, and you're sitting there going: How can I find something affordable?”
Making up the difference can be exhausting, Barham admits. This year, one of her daughter’s friends is celebrating her birthday with a trip to Manhattan for a Broadway show. Barham can’t afford to compete with that but still wants to make sure her daughter has an equally special day. “You've got to do a lot of research and planning to create something that's really special and unique but not super expensive.
“There's a tax that you pay—it’s the tax of your time,” Barham says. “Having to really think hard about how to shuffle everything around to always make it work.”
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