The financial well-being of Americans has declined significantly over the past year, according to a new report by the Federal Reserve. In 2022, 73% of Americans reported doing “at least okay” financially—down five percentage points from 2021. Only 34% of those doing “okay” reported “living comfortably.”
Furthermore, a tight housing market and an increase in mortgage rates are the reasons why renters can’t buy a home.
While 36% of renters said they prefer to rent, 65% reported doing so because they can’t afford a down payment to buy. Plus, 44% percent said they couldn’t afford a monthly mortgage payment, and 40% said they don’t qualify for a mortgage.
Among the report’s most striking findings is that when asked the highest amount one could spend on an emergency expense using only savings, 18% reported only being able to cover an expense under $100. Sixty-three percent said they could cover a hypothetical emergency expense of $400 (down five percent from the year prior).
Persistent inflation has also impacted spending and financial strain over the past year. Thirty-three percent of Americans noted inflation was the biggest financial challenge in 2022. Nearly two-thirds of people stopped using a product or reported using it less because of inflation, 64% reported switching to a cheaper product, and 51% saw a reduction in their savings in response to higher prices.