If you’ve felt like the headlines say one thing about the economy while your bank account says another, you’re not imagining it. On paper, America is booming. The U.S. Department of Commerce reports faster-than-expected growth. Jobs appear strong. Inflation has eased. Yet 96% of Americans are worried about the economy, and millions of families feel financially fragile.
That disconnect didn’t happen overnight. It began in 2020 with a strange and unprecedented moment in financial history: Americans accidentally saved too much money.
Back then, households weren’t suddenly better at budgeting. We just didn’t have anywhere to spend. We stayed home. Restaurants closed. Travel came to a halt. Meanwhile, stimulus checks and enhanced unemployment boosted incomes. The result was a surge of more than $2.6 trillion in excess savings, money sitting in bank accounts waiting for life to resume.
But when the economy reopened, something predictable, but devastating, happened. Economists call it revenge spending. After months of being stuck at home, people rushed to make up for lost time. Dining out. Travel. Clothes. Treats. Upgrades. New toys. All the things we used to say “one day” to suddenly became “right now.”
Pair that surge in spending with supply chain breakdowns and corporate price hikes, and prices skyrocketed. Yet Americans kept buying. This triggered a cycle we’re still trapped in: companies raise prices, consumers buy anyway, companies raise them again.
But here’s the part most families missed: the $2.6 trillion in excess savings is gone. Completely depleted in 2023. Yet spending never slowed, it only shifted. Instead of using savings, people started using credit cards.
And that’s where today’s financial stress really begins.
The Rise of the “Credit Card Lifestyle”
In 2024, the average credit card balance hit a 10-year high of $6,000. Not because families became irresponsible, but because the cost of everyday life rose faster than wages, leaving households doing what they must to survive.
Even simple outings cost double. A lunch that cost you $30 a few years ago now shows up as $60 on the receipt, and with smaller portions. The economy may be “recovering,” but families feel like they’re drowning.
And if you’re asking why everything is still expensive even though inflation is “falling”, here’s the truth: a lower inflation rate doesn’t mean prices drop. It just means they rise slower. That $10 pizza doesn’t go back to $10. It goes from $10 to $10.90… to $11.30… and so on. Your paycheck simply can’t keep up.
The Inflation You See vs. the Inflation Economists See
Economists measure inflation using CPI, a basket of goods that includes everything from groceries to yachts. Literally. Luxury items that most families will never buy distort the picture, making inflation appear lower than the lived experience of everyday Americans.
Policy adviser Eugene Lewig uncovered that the cost of essential household needs, housing, medical care, transportation, rose far faster than official statistics claim. Families aren’t imagining their financial struggle. The numbers are simply failing to reflect it.
Housing costs rose 149%. Medical costs rose 157%. CPI reported only half of that.
The gap between what’s measured and what families experience is widening. Which is why so many Americans feel like they’re running harder while falling further behind.
The Illusion of “Good Times” in Housing and Jobs
One of the most painful divides right now exists in the housing market. If you bought a home years ago at a 3% mortgage rate, you’re sitting comfortably. But if you’re buying now, the same home costs $700 more per month, without any upgrade in quality. Two families can live on the same street with mortgages that differ by over $9,000 a year.
The job market isn’t much better. Tech companies, banks, and major corporations have cut hundreds of thousands of jobs. Even those still employed feel the strain: shrinking bonuses, reduced benefits, heavier workloads, and fewer opportunities. Job postings in tech are down 55%. Banking roles are down 40%. Many industries are quietly pulling back even if layoffs don’t make headlines.
Why You Don’t Want Prices to Fall
With all this financial pressure, it’s normal to wish prices would come down. But deflation, when prices drop across the board, is one of the most dangerous economic conditions. When consumers expect prices to fall, they stop buying. Businesses shrink. Jobs disappear. Wages collapse. It becomes a downward spiral that is far more destructive than inflation.
A stable economy needs prices to rise slowly. The problem today isn’t inflation, it’s the mismatch between rising living costs and stagnant wage growth.
So What Can Families Do?
You can’t fix the economy, but you can take back control of your household:
- Focus on cutting interest-heavy debt to protect your future income.
- Prioritize a small but consistent savings buffer.
- Track spending with intention so lifestyle creep doesn’t quietly drain your budget.
- Create stability through skills, side income, and diversified earning potential.
The economy may feel unpredictable, but your plan doesn’t have to be. With clarity, intention, and a few strategic shifts, you can build a financial foundation strong enough to weather uncertainty, and secure the future your family deserves.
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