Here Are the Biggest Changes Americans Are Making Due to Inflation

Have you changed any of your spending habits?

Inflation is the rising price of goods and services. Costs always go up slightly over time, but they have gone up dramatically over the course of 2022. In fact, even though inflation has started to cool slightly, the Consumer Price Index for October revealed prices are up 7.7% compared with the prior year. That's a big price increase for people to bear the brunt of.

Since Americans are paying more for just about everything, it's not a surprise that this has prompted some changes to financial behavior. In fact, research from Ramsey Solutions, The State Of Personal Finance In America 2022, shows that people have been spending differently as a result of surging inflation. Here are some of the biggest changes people have made.

Inflation is changing consumer behavior

According to Ramsey Solutions, inflation has caused Americans to cut back on many areas of discretionary spending. For example:

• 70% of survey respondents indicated they'd scaled down or canceled their travel plans, spending less on vacations during the second quarter of 2022. This is a trend that continued from the start of the year.
• 41% of survey respondents said they'd skipped buying something that they had originally planned to purchase during the second quarter of the year
• 33% said they had reduced the amount they were putting into their savings accounts
• 25% said they had cut back on how much they were sending to creditors to repay their debts
• 22% indicated they had reduced the contributions they were making to their retirement investment accounts
• 25% said they had charged purchases on a credit card they would normally have just paid for outright with cash
• 15% went deeper into debt to pay their bills

These financial decisions can impact your life both now and in the future if you're making them. While not taking an expensive vacation will make your life less enjoyable in the present, cutting back on retirement savings or slowing down your debt payoff plans could have a more serious long-term effect on your financial stability.

Some Americans are also taking different tactics instead of reducing spending, with 20% of survey respondents indicating they'd taken on a second job or side hustle and 27% saying they were selling items from around their home. Either of these options could potentially be better than pausing debt payoff or taking on more debt for paying bills.

How can you cope with the effects of inflation?

In an ideal world, the absence of stimulus money in 2022 combined with the U.S. Federal Reserve raising interest rates to tighten the money supply would end up reducing inflation so you can live more easily on your budget without resorting to big sacrifices or borrowing.

But, it's not clear exactly when things will get more affordable for consumers. Unless and until prices fall or your income catches up to the surge in inflation, you'll need to be strategic in trying to cope with inflation's impact. You can do this by substituting cheaper products (such as eating more plant-based and fewer meat-based meals), cutting coupons, and looking for similar opportunities to spend less and earn more.

It may be hard to cope during these troubled economic times, but the more you can do to ensure inflation doesn't hurt your finances in the long term, the better off you'll be.