Financial matters account for one of the most significant sources of stress for Americans.
The wild party is over, and the United States is now dealing with the hangover. Americans are experiencing the adverse effects of consequential decisions made by the Federal Reserve Bank and the U.S. government.
The institutions distorted the economy by printing too much money and spending trillions of dollars on various stimulus programs. To revitalize the economy in the wake of business shutdowns during the pandemic, the Fed—through quantitative easing—bought Treasury and agency mortgage-backed securities—amounting to around $8.5 trillion.
The cascade of money flooding the market, in part, led to the rapid rise in inflation. Once inflation rose uncontrollably, it was clear that the jig was up. The Fed has no other choice than clamp down on the economy, which will catalyze job losses, to fight ruinous inflation.
Inflation, Yet Another Tax
These actions result in a lower quality of life for many people. With inflation hovering over 9%, it serves as another tax on purchases. This eats into people’s paychecks and raises the costs of credit cards and adjustable mortgages. It also makes people feel concerned about their financial health and well-being.
According to Bloomberg economists Andrew Husby and Anna Wong, the average U.S. household will have to spend an extra $5,200—$433 a month—just to consume the same goods and services as last year.
Families Surviving Paycheck-to-Paycheck
A recent study from LendingClub and PYMNTS found that nearly 60% of American families self-reported that they are just getting by. Surprisingly, 30% of people earning more than $250,000 also live paycheck to paycheck. According to the survey, “More than half of the U.S. population—an estimated 150 million adults—currently live paycheck to paycheck, making it the most common financial lifestyle in the United States.”
Struggling to make ends meet, people rely upon credit cards. Unfortunately, as interest rates rise, so does the cost of carrying an ongoing unpaid balance. There is an omnipresent fear that families are one healthcare issue away from financial ruin.
Watching Your Net Worth Dwindle
For those who have money, they’re seeing its value erode. As inflation rises, your purchasing power decreases. Don’t look at your financial statements, as they will make you sick.
If you hold investments in an IRA, 401(k), college fund for your children or brokerage accounts, you’ll see massive declines in the value of around 20% or higher, depending on the investments.
As interest rates rise, it becomes harder for families to purchase a home compared to only a few months ago. Soaring mortgage rates have made home prices financially unattainable for young couples starting a family. With fewer buyers, home prices will fall. The plunge in investments and real estate will crush the wealth effect. This term refers to the confidence folks have when they feel they are financially comfortable. When you are confident in the future, you’re apt to spend more money. Conversely, families will cut their budgets as the value of your home (the largest asset for most Americans) and investments decline.
The Quadruple Whammy
The quadruple whammy is that while many people don’t have emergency funds, prices are escalating, layoffs are becoming frighteningly frequent and the costs of purchasing a home or renting an apartment have become exorbitant. Real estate brokerage firm Miller Samuel and Douglas Elliman reported that the average monthly rent for a Manhattan apartment is over $5,000, the highest on record.
Rising Commuter Costs
Workers are faced with the rising costs of commuting from the suburbs into the cities where offices are primarily based. The prices of gas, the wear and tear on your automobile and public transportation have all escalated. The financial pain has prompted workers to ask their employers for travel reimbursements. The average commuting cost in the New York City area is over $4,000 per year.
New Yorkers Can’t Afford To Live In New York
People who work for city or state governments tend to earn less than their private sector counterparts. Their benefits and retirement packages make up for it in the long run. However, municipal workers need to pay the price now.
As costs spiral upward, public workers are quitting their jobs in New York City and across the country. The most recent U.S. Department of Labor jobs report showed an unemployment rate of 3.6 %. The vacancy rate of positions open for public services, such as police officers, firefighters, teachers and sanitation personnel, is about double this amount at 7.7%. One reason they leave is that it's too expensive to live close to their jobs. This is happening in other cities as well.
The Mental Toll Taken On Your Life
At this point, there is a severe mental health problem in the U.S. It's exhibited in the increasingly frequent mass shootings, the aggressive tone on social media and daily viral video clips of fights in stores and on airplanes.
There is also a toll on your mental health when you feel insecure about your finances. As life expectancy has increased, it's understandable to be afraid of outliving your money.
A study by the American Psychological Association found that financial matters account for one of the most significant sources of stress for Americans. A separate survey by the U.S. News & World Report found that more than two-thirds of Americans are experiencing financial anxiety because of increasing costs, inflation and living paycheck to paycheck.
