American consumers aren’t feeling great about the economy or their own financial situation, with the phrase “affordability crisis” dominating headlines and political campaigns over the last few months.
The majority — 70% — of Americans surveyed in a Marist poll of over 1,400 adults taken in December, say that the cost of living in their area is not very affordable, or not affordable at all, for the average family.
While President Donald Trump called the word “affordability” a “con job by the Democrats,” in a speech in early December, other politicians have insisted it’s an issue for their constituents.
“The affordability crisis is not a hoax, it is a reality felt by Americans everywhere.” Rep. Sarah McBride, D-Del. said in a newsletter.
Nearly half of Americans say their financial situation is worse than a year ago, a recent Credit Karma survey found. And consumer sentiment in December sank 29% from 2024 according to the University of Michigan’s monthly survey.
While annual inflation is down from the historic highs the U.S. saw in 2022, prices for everyday essentials remain elevated, and in some categories continue to rise. In November 2025, coffee prices were up nearly 19% from the previous year and the cost of beef was up around 15%, according to Bureau of Labor Statistics data.
Housing costs rose over 14% between September 2023 and September 2025, per Bureau of Labor Statistics data. Medical costs are up nearly 7% over the same period, and costs for services are up over 8%. While some of those price increases are related to supply issues, Trump’s tariff agenda has also pushed prices on essentials like bananas and coffee and discretionary items like toys and electronics.
“It’s not like people are overspending,” Joey Khoury, partner and senior wealth advisor at Mission Wealth, says. Middle and lower-earners especially aren’t “spending lavishly,” he adds, but as living costs have risen it’s become harder for them to stay within their normal budgets.
Consumers are ‘trying to muscle through’
Consumer spending has increased with each subsequent quarter, according to the Bureau of Economic Analysis, despite worsening sentiment and weakening consumer confidence, per The Conference Board’s monthly survey.
“What we’re seeing is there is still inflation pressure across the system, particularly in the retail environment, and consumers, through our research tell us that they are effectively trying to muscle through this,” Will Auchincloss, Americas retail sector leader at EY-Parthenon, says. “They’re trying to buy what they’ve always bought or want to buy, but in the face of higher prices.”
Higher earners may be cutting back on some nonessentials, including vitamins and supplements, he says, or trading down to lower-cost alternatives.
However, lower earners are “not just talking about pulling back,” he says. “They are actively pulling back and having a hard time making ends meet.”
“Consumers are balancing many pressures,” including tariffs, sticky inflation and a softening labor market, says Leanna Haakons, a business development and marketing expert, and president of Black Hawk Financial.
At the same time, “they’re still seeking a sense of normalcy and value in their purchases,” Haakons says. For some households, she says, that means being more selective about what they do buy.
“Consumers are buying fewer items overall, but focusing on high-value, more meaningful purchases, durable goods, gifts, things for the household, home upgrades, things that really are valuable to their day to day life,” Haakons says.
Some are borrowing to get by
While they may be steadily spending, many consumers are also relying on credit cards and buy now, pay later (BNPL) loans to fund their purchases.
Credit card debt rose to a collective $1.23 trillion in the U.S. as of the third quarter of 2025, according to New York Fed data. And a growing number of Americans say they’re using BNPL plans to pay for groceries, a LendingTree survey found in April.
“Consumers are borrowing more and more to cover the spending challenges they’ve got, and that obviously can’t go on forever,” Auchincloss says.
As of the fourth quarter of 2025, growing shares of consumers are already changing behaviors according to McKinsey & Company research.
Nearly a third of adults (29%) say they’ve dipped into their savings in the last three months, up from 26% in Q3. Another 29% say they’ve reduced their savings rate, also up from 26% in the third quarter. And 28% are using credit cards more, up from 26%, McKinsey finds. BNPL usage also ticked up by a percentage point over the same period.
New year, same problem
Consumers are hopeful they’ll be able to find their financial footing in 2026 and many are optimistic about meeting their goals, the Credit Karma survey found. Still, 32% of Americans expect things to get worse in the new year, according to a recent Bankrate survey.
Rent prices may cool off in 2026, experts at real estate firm Douglas Elliman recently told CNBC Make It. But overall inflation is expected to stay at or above 3% throughout the year, economists at Deloitte and Fitch Ratings predict.
“The smartest approach for households heading into 2026 is to be selective with spending, prioritizing debt repayment going into the new year,” Haakons says. She encourages folks to pay off their credit card balances and try to time major purchases “wisely,” taking advantage of potential interest rate cuts later in the year.
“It’s important to be prudent going into 2026,” she adds, “because there are some strong signals that there could be some more difficult times ahead for employment.”
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