The share of Americans who feel worse about their finances hit the highest level since 2014, a new report found, after inflation and a swooning stock market last year ate into their pocketbooks and savings.
In 2022, 35% of US adults reported they were worse off financially than a year earlier, the highest point since the question was first posed eight years earlier, according to the Federal Reserve Board's 2022 Economic Well-Being of US Households report released Monday.
Seventy-three percent said they're doing okay or living comfortably financially, down 5 percentage points from the previous year and among the lowest levels since 2016. The survey, which was fielded in October 2022, polled 11,000 adults.
The slump in financial well-being occurred broadly across the population, Federal Reserve officials said Monday, with almost every racial and ethnic, income, and education group registering a decline.
Multiple metrics in the report showed deterioration. A higher share of folks reported increased credit card debt, while a lower percentage said they spent less than their income in the month before. Fewer felt their retirement savings plan was on track versus the prior year.
The one bright spot in the report: a strong labor market, which helped to buffer some of those setbacks.
Inflation eats at people's wallets
Inflation was the most common financial challenge, cited by one-third of respondents followed by general needs at 22%. Two in 5 adults said their household's monthly spending last year increased versus 2021.
“Energy costs, grocery costs, gasoline: everything we buy now has increased drastically," one survey respondent stated.
More than half (54%) of folks said their budgets had been affected "a lot" by price increases, with parents living with children under 18, Black adults, Hispanic adults, and those with a disability more likely to report this.
Many took steps to mitigate the rise in prices. For instance, two-thirds stopped using a product or used less of it, while 64% switched to a cheaper option. Almost half put off a major purchase, while just over half cut back on saving.
Stocks' underperfomance hurt savings
Another area of financial concern was saving for the future. One in 8 people cited their retirement and savings as their main financial challenge, up from 1 in 10 in 2021.
A big contributor to that was the stock market's lousy performance last year. For instance, the S&P 500 index dropped 19.44% in 2022, compared with its 26.89% gain in 2021.
That tanked people's nest eggs, with only 31% of non-retirees saying their retirement savings were on track, down from 40% in 2021. The reading was also below the shares cited in 2018, 2019, and 2020.
“My 401(k) and IRA have lost a significant amount of money," one survey respondent said. "I won’t be able to retire as initially planned.”
Silver lining: Jobs
The robust job market helped to offset some of the negative effects from inflation and stock performance.
For instance, a third of adults got a raise or promotion last year, up from 30% in 2021. One in 8 adults said they asked for a raise or promotion in 2022, versus 1 in 11 the year before. Of those who asked, 70% received one.
The share of workers who voluntarily left a job — a sign of confidence in the job market — increased over the previous year, while the percentage who lost a job shrunk. The share of prime-age adults not working because of difficulty finding work also remained low.
The survey results indicated continued labor market strength in late 2022, Fed officials said.
Gabriella is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.
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