Personal finance valuations in the US slide amid rising prices

Highlights of the story

  • 46% rate personal finances positively, down from 57% last year
  • Inflation defined the biggest financial problem by a large margin
  • Half say gas prices have caused difficulties; the majority expect them to be temporary

WASHINGTON, DC – Far fewer Americans now than they did a year ago rate their financial situation positively and more say their finances are getting worse than they say they are improving. A record percentage mention inflation as the biggest financial problem facing their family. Meanwhile, about half say recent gas price hikes have caused their families hardship, far below what Gallup measured during other times of rising fuel prices. The moderate reaction to gas price increases may reflect the fact that Americans expect such changes to be temporary rather than permanent.

These results come from Gallup’s annual survey of the economy and personal finances, conducted from April 1 to 19.

Americans are more pessimistic about their finances

46% of US adults, down from 57% last year, rate their financial situation as “excellent” or “good”. The current figure is the lowest since 2015, albeit slightly better than the trend lows recorded between 2009 and 2012, when only 41% rated their finances positively.

Furthermore, 38% of Americans describe their financial situation as “only fair”, while 16% say they are “poor”. This latter figure is nearly double last year’s 9%, albeit slightly less than the 19% that claimed it in 2009 and 2010.

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Meanwhile, 37% of Americans say their financial situation is improving and 48% say it is getting worse, a turnaround from last year, when the majority said their finances were improving. The current figures are similar to those of April 2020 during the early stages of the coronavirus pandemic and during the Great Recession in 2008. For most years the question has been asked, Americans have been optimistic rather than pessimistic about the trajectory of their finances.

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Americans across all income groups rate their finances less positively than they did last year. Each of the major income groups shows an eight to 14 percentage point decline in positive assessments of their current finances. The decrease in the percentage of middle-income Americans who say their financial situation is improving is about half that of low- and high-income Americans.

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A separate question in the survey finds a more stable and less pessimistic assessment of personal finances: 67% of Americans say they have enough money to live comfortably, down slightly from 71% last year. The percentage of those who claim to be financially comfortable has changed little since 2013, ranging from 66% to 71%. The clear outlier of the trend was a 60% reading in 2012. However, before the Great Recession, as many as seven out of 10 said they had enough money to live comfortably.

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Inflation behind the growing financial problems

Americans cite inflation as the most important financial problem their family faces today, with 32% mentioning it in response to the open question. This compares to 8% a year ago and is nearly double the previous high of 18% nominal inflation in 2008.

Beyond inflation, 10% of Americans cite energy costs or gas and oil prices. Gas price mentions were last time so high in 2012 (11%) and hit 29% in 2008. Very few Americans between 2014 and 2021 said that energy costs / gas prices gas was their most challenging financial problem.

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Inflation is the top concern this year among Americans across all income groups, but it is mentioned more often by those in high-income households (37%) than those in middle-income households (32%) or below. (27%). There are no significant differences by income group in the mentions of energy costs.

Other common personal financial concerns this year among US adults are lack of money or low wages (11%), costs of owning or renting a home (8%), health care costs (7%), and excessive debt (7) %). Healthcare costs and a lack of money typically top the list.

Gas prices cause roughly half of the difficulties in the United States

52% of Americans say recent gasoline price hikes have caused their family financial hardship. Gallup has asked this question in the past when gas prices were rising. Significantly more Americans said they were hurt financially by rising gas prices in 2005, 2008, and 2011 than today. The peaks were 72% in September 2005 and 71% in May 2008.

Americans are now more likely to say higher gas prices are causing them financial hardship than in 2000, 2001, 2003, 2004, and 2018.

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About one in seven Americans – 14 percent – say gas prices have caused their family “serious hardship”. This includes more than one in four adults in the United States living in low-income households (26%).

Overall, 70% of low-income Americans say gas prices are causing them severe or moderate financial hardship. This compares with 51 percent of middle-income Americans and 35 percent of those residing in high-income households.

Most believe that gas price increases are temporary

Typically, Americans are less likely to say they are experiencing financial hardship due to higher gas prices if they believe the gas price increases are temporary rather than permanent. Currently, 57% expect rising gas prices to be a temporary change, while 42% expect them to be permanent. In other periods of rising gas prices, notably in 2008, the majority believed that gas price increases were permanent and were more likely to say they were experiencing financial hardship as a result.

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In the current poll, 40% of Americans who think gas prices are temporary say the hikes are causing them financial hardship. Of those who believe that price changes are permanent, 66% say they have been financially burdensome.

Republicans are one of the rare subgroups to expect changes in gas prices to be permanent. A 57% majority of Republicans say so, but 55% of independents and 75% of Democrats expect price hikes to be temporary.

Implications

The past two years have brought a number of economic challenges for the United States, including widespread economic freezes, high unemployment, and a recession at the start of the pandemic. Although the economy has since recovered, the fast pace of recovery, high consumer demand for products, a tight labor market and supply chain problems have contributed to the highest inflation rates recorded in four decades. .

Nearly a third of Americans call inflation the most important financial problem for their family, and half say higher gas prices are causing them financial hardship. These problems appear to have an impact on Americans’ financial prospects, with fewer Americans rating their situation positively than they did a year ago and more claiming it is getting worse.

Current personal finance assessments are similar, if not worse, to what they were in the midst of economic closures two years ago at this time. The fact that many expect gas price increases to be temporary, perhaps attributing the price increases to the Russia-Ukraine war or, more broadly, to the fact that past increases in gas prices will eventually decline, could prevent that Americans’ assessments of their finances are even worse than they are.

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