Five Ways Americans Are Cutting Back Spending to Combat Rising Costs

A large majority of Americans—about 69 percent—said rising costs have "significantly" or "fairly" affected their life, according to an exclusive Newsweek poll, with many saying they have cut spending on groceries, clothes, leisure activities and more in the past year.

Only 8 percent of Americans said they haven't been affected at all by rising costs, while an overwhelming 92 percent said they've been affected either significantly (40 percent), fairly (29 percent) or slightly (23 percent), according to the survey.

The survey was conducted on July 6 for Newsweek by Redfield & Wilton Strategies, using a sample of 1,500 eligible voters in the U.S.

Some 36 percent of respondents said their financial situation has worse compared with last year, while 25 percent said that it has improved and 34 percent said that it has remained the same.

Though discouraging, the results are better than those collected during a previous Newsweek/Redfield & Wilton Strategies poll, which asked respondents the same question in October 2022. Last year, 46 percent of respondents said they were worse off than a year before, while 18 percent said it had improved and 33 percent said it had remained the same.

That makes sense considering that the cost of living, though it remains high, has lessened. Inflation dropped to 4 percent this May, compared with a peak of 9.1 percent reached in June 2022. In October 2022, it was at 7.7 percent.

At 4 percent, inflation remains higher than what the Federal Reserve wants as it cuts interest rates, but it's the lowest figure since March 2021. The core inflation rate, which excludes food and energy, has slowed to 5.3 percent. Food inflation was at 6.7 percent in May, 1 percentage point lower than the previous month.

The older age groups were the most affected, according to the Newsweek/Redfield & Wilton Strategies survey. Forty-five percent of those 45 to 54, 44 percent of those 55 to 64 and 43 percent of those 65 and above said their financial situation worsened in the past year. Some 34 percent of those 18 to 24, 25 percent of those 25 to 34 and 23 percent of those aged 35 to 44 said the same.

How Are Americans Trying to Save?

Some 53 percent of Americans, according to the survey, have reduced their spending on groceries, 50 percent have cut down spending on clothes, and 45 percent spend less on entertainment and leisure activities.

Some 40 percent of respondents have cut down on vacations—a rising phenomenon previously reported by Newsweek. Forty-seven percent go to restaurants less and have cut down on food deliveries, 36 percent are spending less on gifts, and 34 percent have done the same with travel.

Some 28 percent of respondents said they have cut down on fuel, 25 percent on electricity. Only 15 percent said they had not reduced this spending.

Half of the respondents said they are buying cheaper product brands because of the higher cost of living, while the other half said they are buying less in general.

On top of concerns about the higher cost of daily goods, 63 percent of respondents said they're worried about their ability to afford mortgage or rent payments this year, with 29 percent "very concerned," 18 percent "fairly concerned" and 16 percent "slightly concerned."

Economists think that the erosion of Americans' savings caused by the higher cost of living will also lead to a slowdown in spending soon.

"U.S. consumers are saving their income at a lower rate than they were pre-pandemic," Wells Fargo economist Shannon Seery told Newsweek. "This is allowing them to spend more in the near term but likely comes at the expense of future growth."

By saving less today, Seery said, "households have been able to continue to spend at elevated rates, and that sustained level of demand is helping stave off a U.S. recession." But, she added, "acquiring less in savings will ultimately leave U.S. households more vulnerable to economic shock and could potentially position them worse off during an eventual economic contraction."