Over Half of Americans Could Be Experiencing a 'Personal Recession,' Study Finds

With stagnant wages and higher prices, many consumers feel like they're losing ground financially.

For much of last year, there were warnings of a potential recession. Just last month, 4 out of 5 economists said they expect a recession in 2023 or 2024. It hasn't happened yet, and despite the prognostications, it's still possible that it doesn't happen at all. But according to recent research, over half of Americans could already be experiencing their own personal recessions.

How inflation is causing a "personal recession"

TransUnion, one of the three major credit bureaus, recently released its Consumer Pulse Study for the fourth quarter of 2022. The study looks at how consumers' personal finances have changed and how they expect them to change in the future. The results of the latest study show that inflation has taken its toll this year.

Wages were either flat or falling for most consumers in the fourth quarter of last year. Here's what respondents said about their household income during that time frame:

• 51% reported their income stayed the same
• 25% reported their income decreased
• 24% reported their income increased

Because prices increased so much last year, 54% of Americans said their incomes hadn't kept up with inflation. This group could be going through what TransUnion called a personal recession. They're more likely to decrease their spending and less likely to seek out any new financing in the near future because of inflation concerns.

Fortunately, the study results weren't all doom and gloom. Despite the inflation concerns, over half of Americans (52%) said they were optimistic about their household finances over the next 12 months. Another 21% felt neutral about their finances, and 26% were pessimistic. Those who felt optimistic were better off financially. Americans in the highest income band were the most likely to feel optimistic about their financial situations.

How to deal with inflation

Even if you don't feel as if you're going through your own personal recession, inflation has clearly impacted many Americans. The cost of living has increased significantly, and that makes paying bills more difficult, especially if you were already on a tight budget.

If you've been having a hard time getting by, the first thing to do is review your spending and see what you can cut or reduce. You might find that there are lots of areas where you can spend less. People often have plenty of nonessential expenses they can get rid of if need be. Maybe that means going out less, or getting rid of some streaming services for the time being. 

Another good strategy is to look for ways you can earn more money. It's no coincidence that the Americans who were most optimistic about their finances were the ones making the most. If you can get a promotion, bring in some extra cash from a side hustle, or find a higher-paying job, any of those things could give you more breathing room financially.

On a positive note, inflation is finally slowing down. The cost of living is still a long way from coming down, but there's hope that it will get more affordable over the next six to 12 months.