Opinion: Insights into pocketbook issues

Holidays are a good time to assess middle-income Americans’ purchasing power.
If you saved more during the pandemic, consider keeping up this habit to further boost your savings for emergencies, retirement and any other financial goals. (Dreamstime/TNS)

Credit: TNS

Credit: TNS

If you saved more during the pandemic, consider keeping up this habit to further boost your savings for emergencies, retirement and any other financial goals. (Dreamstime/TNS)

Crisp autumn air, aroma of roasting turkey, watching football, family – all hallmarks of a quintessential American tradition – Thanksgiving. A time for us to reflect on, and give thanks for, blessings we hold dear. But for too many, beneath the joy, lies an unsettling anxiety. Middle-income families often grapple with financial burdens and worries that come with the holiday season. As we look wide-eyed at price tags in grocery aisles and compile Santa’s gift lists, the economy’s impact weighs on us.

Economic indexes, such as the Consumer Price Index (CPI), do an excellent job of measuring overall inflation on a macro level. There had been no clear picture, though, of how changes in prices and earnings impact ordinary families day-to-day. Seeing this need, we worked alongside a renowned economist to create an index focused on middle-income households.

Peter Schneider

Credit: contributed

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Credit: contributed

Primerica’s newly unveiled Household Budget Index (HBI) delivers insights into the tumultuous world of household finances and shows just how prepared families are – or are not – to navigate economic demands. The index offers fresh monthly perspectives on the “purchasing power” of middle-income households with incomes between $30,000 and $130,000, measuring the variance between income growth and the wavering costs of necessities. This group accounts for over 50 percent of households in the U.S.

Using January 2019, the last pre-pandemic year, as the reference point, the index tells us whether America’s middle-income families are doing better or worse overall. When the HBI surges above 100 percent, it signals surplus money at month’s end. A figure below that threshold, however, means families must dip into savings, shoulder increased debt, rejigger elements of their holiday traditions – they have too much month at the end of the money.

Necessities like gas and groceries are volatile with prices changing one day to the next, so a regular check-in is vital. Even small shifts in expenses can dramatically interrupt budgeting. The latest HBI results shows purchasing power increased in September due to slower inflation and higher income growth. Even with this positive news, though, families have yet to recover from the precipitous drop in purchasing power from November 2020 (102.8%) through January 2022 (85.4%). This substantial decrease erased six years of financial progress.

Since we are “talking turkey,” consider the cost of having a Thanksgiving dinner over the years. In 2019, one could purchase a 16-pound turkey for $20.80 and the rest of the dinner fixings to serve 10 people cost a little over $28 for a total cost of $48.91. In 2022, that fowl flew to $28.96 (a 39% jump), and today that bird will set families back about $31.30 (up another 8.1%). The total cost for the classic Thanksgiving dinner had risen to $64.05 in 2022, an increase of 31% over the 2019 feast. Our economic consultant estimates that the total bill will come in 6% higher again this year, averaging about $68.

While earned incomes are up 20.4% over 2019, that rise is insufficient to keep pace with price increases for regularly purchased necessities. Thus, the HBI remains below its January 2019 benchmark value of 100%. This deficit leads to two potential outcomes – depleting cherished savings or being gobbled up by credit card debt. Had 2019′s purchasing power trends persisted, middle-income families would currently stand at a comfortable 110% on the HBI, perhaps making room for extras on the Thanksgiving table.

Along with tracking data, it is critical to understand perceptions as well. The latest sentiment measured by the Primerica Financial Security Monitor survey echoes the HBI’s latest findings, revealing that middle-income households are increasingly stressed about their financial situation, with 34% noting increased credit card debt in the last three months. For the upcoming 2023 holiday season, over 43% anticipate reducing their spending compared to the previous year, a sentiment similar to the 41% that reported decreasing their spending levels last year.

None of this is meant to dampen the holiday cheer. Americans are resilient; we figure out how to make do with what we have. Yet, it is important for us to recognize that in addition to pleasure, holidays can bring economic strains. Digesting the data, alongside the perceptions, gives us a snapshot of these pain points and helps middle-income families better plan for a festive season.

Peter Schneider is president of Primerica, a Duluth-based financial services firm.