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Economic Gloom Fuels Broader Personal Finance Concerns

Americans' wages are not keeping pace with high inflation, leading to worries about saving for retirement, paying for housing, and meeting health care costs.

Current economic conditions have pushed Americans into a tizzy. A household, on average, spends $460 extra each month. As we reported earlier, one in five Americans is skipping meals or relying on food banks.

The human mind has a higher affinity for negative than positive thinking. As inflation persists and recession emerges, Americans' concerns about their financial well-being increase. Can I maintain my current standard of living? Can I make my mortgage payments? Will I have enough money for retirement? Will I be able to afford health care and medical expenses?

A recent TIPP Poll for Investor's Business Daily probed these concerns. The poll surveyed 1,643 Americans online in early July. The credibility interval for the survey is +/-2.5 percentage points.

Maintaining Current Standard Of Living

Only 19% of Americans say their wages have kept pace with inflation. For most, their wages have not kept pace with inflation. In such a scenario, making ends meet becomes a challenge.

As a result, three-fourths (76%) worry if they can continue to maintain their current living standard. Forty percent are "very concerned," and another 36% are "somewhat concerned." One in five (20%) is "not concerned."

Notice high levels of concern across the board for all age groups and income levels.

Affording Mortgage Payments Or Rent

Six out of every ten (59%) worry about their mortgage or rent payments; 34% are "very concerned," and another 25% are "somewhat concerned." One in five (22%) is "not concerned."

American families are struggling to meet their mortgage obligations. High inflation does not increase fixed-rate mortgage payments. Still, many feel squeezed and struggle to pay mortgages after spending on high energy prices and food expenses.

Mortgage rates rise as the Federal Reserve raises interest rates. Higher mortgage rates may impact some adjustable-rate mortgage holders. It could result in a significant increase in monthly payments.

Roughly 35% of Americans rent. According to a report by Redfin, the median monthly asking rent in the U.S. surpassed $2,000 for the first time in May. It represents a 15% year-over-year increase. Rents increases year-over-year in Austin, TX was 48%; Nashville, TN (32%); Seattle, WA (32%); Cincinnati, OH (32%); and Miami, FL (29%).

Retirement Savings

Seven out of 10 Americans (72%) worry about having enough savings for retirement. Four in ten are "very concerned," and another three in ten (29%) are "somewhat concerned." Sixteen percent are "not concerned."

The concern about having enough savings for retirement runs across all age groups and income categories. It is highest among those in the 45 to 64 age group and lowest among those 65+.

Medical/Health Care Costs

Rising inflation could increase health care premiums. Two-thirds (65%) worry about their ability to meet medical/health care costs. Thirty-six percent are "very concerned," and another 29% are "somewhat concerned."

As the chart below shows, all age groups and income levels share the concern about paying for health care.

The data paints the pervasiveness of the concerns across the country. The economy is slowing down, accompanied by high inflation leading to stagflation. As the Fed tightens its monetary policy to tame inflation, the side effects will likely increase the misery before it gets better.

Washington must pursue a responsible fiscal policy. Lawmakers have recently proposed the "Inflation Reduction Act." It is unlikely to reduce inflation and alleviate Americans' struggle to meet ends.


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