Inflation is roaring, with consumer prices soaring 8.6% in the 12 months through May, a 40-year high. It’s no great surprise that this surge is having an impact on consumer spending.
“Non-essential items have been hit the hardest, with two-thirds of [the 2,000] respondents spending less on discretionary items, including entertainment and socializing,” the report said.
Only 9% said inflation has affected their travel plans, while 29% have been forced to cancel or postpone a trip and 34% are traveling less often. Also, 17% are downgrading their journeys to cheaper opportunities.
Meanwhile, 70% are putting off spending on major unplanned purchases. The report points out that consumers won’t be able to do this forever, when it comes to spending on necessities such as household repairs and new cars. So that could become a problem.
Many Are Biting the Bullet For Essentials
As for spending on essential items, About 30% of respondents haven’t changed what they’re buying and are just biting the bullet, spending more money on these purchases.
But 54% are making changes to stay within their budget, opting for cheaper alternatives or buying smaller amounts.
As for the overall picture, 78% of respondents said they have very little wiggle room in their budget. A total of 26% said they already spent more than they could afford, presumably buying on some form of credit.
A total of 27% of respondents said they’re at their spending limit, and less than 10% said they have a lot of space left in their budget.
To pay their bills, 40% of survey respondents with credit cards are using them more often. A total of 26% have started carrying a credit card balance to cover their monthly spending. So it’s no surprise that 64% of respondents are concerned about how increasing interest rates will affect their debt.
Practical Spending Tips
For readers whose budgets are strapped, we have nothing radical to recommend, just common sense. First, cut out unnecessary spending—do you really need that chocolate donut every day?
Second, trade down to cheaper brands for items that you buy. Store-brand laundry detergent will probably clean your clothes just as well as the advertized brands.
If you are going to use credit cards, try to avoid running a balance. And if you can, get a card with rewards, so that you get something back for your spending.