Soaring Inflation, High Interest Rates Are Forcing Americans Into Risky Financial Moves to Make Ends Meet, Survey Finds

Record-high inflation and soaring interest rates are stretching the limits of household balance sheets, leaving many consumers to resort to extreme measures that can have long-term implications on their financial health, according to the latest study by Achieve, the leader in digital personal finance.

The study, Financial Strategies for Fighting Inflation, is the latest research from the Achieve Center for Consumer Insights and highlights the extent of the financial strain facing many Americans due to the rising cost of household goods and interest rates. The survey, based on a representative sample of the U.S. adult population, found that 35% of Americans are planning on or have already had to spend cash from their emergency savings, while 26% have considered or are already in the process of missing a payment or paying less than what’s required on their credit cards, loans or other debt.

“Many money-saving strategies, like cutting back on discretionary spending, consolidating debt and taking on extra work to earn more money, are prudent choices in any economic climate,” said Achieve Co-Founder and Co-CEO Andrew Housser. “But other tactics, like borrowing from retirement savings, pawning valuables and missing debt payments, often mean risking your long-term financial security.”

Other key findings from Achieve’s survey:

  • When asked to identify their most important financial concern right now, 29% said inflation and 22% said earning more money, supplanting long-standing core issues like job security, affordable childcare, education and healthcare.
  • 67% of consumers are either planning to or have already cut back on discretionary household spending and 64% are cutting back on grocery purchases.
  • While just 8% of respondents said they have raised chickens to produce eggs at home, an additional 18% said they are considering the option or researching how to do it.

Gen Z, Millennials at higher risk for falling behind

Taking a closer look at how Americans from different generations are dealing with financial stress, members of Gen Z are more likely to consider more aggressive options to deal with high costs, including those that can come with significant risk. For example, 28% of Gen Z said they are either considering or already taking steps toward filing for bankruptcy. By contrast, just 4% of Baby Boomers are considering or taking steps toward bankruptcy.

Another concerning revelation is that 39% of Gen Z and 34% of Millennials said they are considering or have already taken steps toward either missing payments or paying less than what they owe on credit cards, loans and other debt.

This finding echoes recent data from the Federal Reserve Bank of New York, which shows that Americans in their 20s and 30s are becoming seriously delinquent on their credit cards at a faster pace than before the pandemic and at a rate that’s approaching levels not seen since the Great Recession.

While people of all ages and generations are dealing with the challenges of inflation, younger consumers are more susceptible to falling behind. Credit card issuers and other creditors tend to view people with limited or shorter credit histories as riskier, resulting in higher interest rates and lower credit card limits than individuals with longer credit histories and more experience managing debt. And all of that is before credit card interest rates — which have been increasing for most card holders as an indirect consequence of the Fed’s series of rate hikes the past year — means that a larger portion of consumers’ monthly payments are going toward interest instead of principal.

Soaring food prices are a focal point for financial stress

Achieve’s research also demonstrates how interconnected financial and food security are to each other. In addition to cutting back on grocery purchases and discretionary household spending, many Americans are exploring options or already in the process of growing their own fruits and vegetables. And given the recent spike in egg prices, it’s no surprise that interest is growing in raising chickens at home to produce eggs.

Food costs were up nearly 10% year-over-year in February, according to the Bureau of Labor Statistics’ Consumer Price Index, part of a longstanding trend that’s put considerable strain on the food banks and pantries across the country. Indeed, Achieve found that 46% of Gen Zers and 41% of Millennials are considering or already obtaining services from a food pantry.

Recession concerns prompt behavioral changes

Given ongoing concerns about a looming recession, many consumers are planning on taking steps to strengthen their financial position. When asked what they plan to do to prepare for a possible recession, 55% said they will cut back on spending in the coming months, while 41% plan to save more for emergencies. In addition, 20% of respondents said they don’t plan on making any changes to their financial habits.

The entire Financial Strategies for Fighting Inflation report can be found here.

The Achieve Center for Consumer Insights is an ongoing initiative that leverages Achieve’s team of digital personal finance experts to provide a view into the state of consumer finances. In addition to sharing insights gleaned from Achieve’s proprietary data and analytics, the Achieve Center for Consumer Insights publishes in-depth research, bespoke data and thoughtful commentary in support of Achieve’s mission of helping everyday people get on, and stay on, the path to a better financial future.

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