Recent research highlights a troubling trend in the United States: many Americans are losing their spending power, with rising costs across essential categories making a minimal quality of life increasingly elusive. Realtor and economic expert Marcos Segrera has named Housing, Transportation, and Food as the “Big Three” of household expenses. Together, these costs play a major role in the worsening crisis.
The statistics paint a stark picture. In that same time span, rent exploded by 131%. At the same time, medical premiums have exploded by a shocking 301% from 2001 to 2023, and lodging and travel costs have increased by 170%. On top of that, the cost of raising children has risen 107%. These figures highlight the hard choices families and individuals have to make. They can’t even afford to just get by as prices are even having a panic button.
Consumers’ effective real spending power has fallen by an average of 4% – a huge burden with many consumers already feeling the squeeze of cost of living challenges. Meanwhile, about 11% of Americans officially lived in poverty in 2023, with the bottom 60% of households by income falling well short of what is considered a minimal quality of life. These trends suggest that while some individuals may experience pay increases—workers who switched companies in May earned an average pay bump of 7%—such gains are insufficient to counterbalance escalating living costs.
The Big Three Expenses
That’s why Segrera emphasizes the ever-growing importance of understanding the interactions between Housing, Transportation, and Food costs. Together, these factors create a difficult financial environment for millions of Americans. He emphasizes how families have to play a game of chess with these expenses in order to just keep their heads above water.
“This might mean refinancing a mortgage, choosing a more fuel-efficient or used car, or embracing meal planning to cut down on food waste and expensive takeout.” – Marcos Segrera
For the majority of households, housing costs continue to be the most significant component of the overall burden. With rents rising rapidly, many families have been squeezed. They are now forced to use a huge majority of their salary on housing, and so cannot afford to spend money on other essentials. This trend may be exacerbated by rising transportation and food costs, adding even more pressure on households’ budgets.
Food expenses are particularly telling. The average American budget now allocates more money to frequenting fast-casual establishments. Going forward, preparing those beautiful big holiday meals has gotten more expensive too! As property taxes go up, more people feel the squeeze, struggling to match these costs to their own sources of revenue.
A Broader Economic Picture
As these experts remind us, most headline economic stats are based on what we call “survival indexes.” These indexes do a poor job of reflecting the true financial states of Americans. Economist Gene Ludwig warns that many widely cited economic indicators do not show the whole story about what consumers are experiencing.
“What people are thinking about — a real shared prosperity — is not, ‘I can survive,’ but, ‘What does it take to live a middle-class life?’” – Gene Ludwig
Laura Lynch is passionate about finding new ideas. She makes the case, as these solutions would go a long way to lightening the economic load that come with oppressive housing costs. She’s an outspoken proponent of different ways of living. Alternatives such as co-housing, tiny homes, accessory dwelling units and multi-generational ownership can more efficiently help propagate costs and resources.
“The structures around us have created an expectation of a lifestyle that is increasingly becoming unreachable for folks.” – Laura Lynch
Lynch’s desire for new, innovative solutions illustrates the desperate need to change our approach. Outdated financial playbooks won’t cut it anymore in an economy where expenses are skyrocketing and paychecks aren’t budging.
Looking Forward
With financial hardship on the rise, advocates are calling on lawmakers and Americans to take a more holistic view of their finances. Kevin Brady wants us to focus on both sides of the equation—not only spending, but increasing income opportunities. This comprehensive approach can at times reveal paths to progress that families can take to get back on solid ground.