“Thrifting” — the habit of spending more to save more — has become a dangerous habit for cash-strapped Americans amid soaring inflation and mounting debt.
Inflation eased in April, however, with the consumer price index rising 3.4% year-on-year.
Despite rising prices, Americans continue to spend.
At this point, credit card debt hit $1.12 trillion in the first quarter. Reports From the Federal Reserve Bank of New York.
Retailers are ramping up promotions to combat shrinking profit margins. According to data analytics firm Numerator, temporary price cuts increased 72% between March 2023 and March 2024, while overall promotions increased 15%. Free shipping offers, “buy one, get one free” deals, and minimum order quantities are effective ways for companies to encourage consumers to “save.”
“If you’re putting more money into the trade than you can get out of it, that’s a real danger,” said Charles Chaffin, co-founder of the Financial Psychology Institute.
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of Personal Savings Rate Savings (as a percentage of income) are trending down as households spend down pandemic savings and stimulus checks.. In April, it was 3.6%, compared with a record high of 32% in April 2020. according to To the U.S. Bureau of Economic Analysis.
“Consumers feel like they have less money than they’ve ever had before, so they’re overreacting to sales,” said Melissa Minkow, director of retail strategy at consulting firm CI&T. “There’s a strange mix of variables that’s creating this very unique retail environment.”
Saving money isn’t necessarily a bad thing, but continued impulse spending without planning can have a devastating impact on consumers’ long-term financial goals.
“Basically, if you take on debt that you can’t repay, it will affect your credit score and have a major impact on things like your ability to buy a home or finance a larger purchase,” Chaffin said.
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