MW Americans say they are sacrificing their happiness in the face of tariffs and stubborn inflation

By Venessa Wong

All but the richest Americans are looking for more ways to keep up with rising prices as tariffs and economic uncertainty strain their finances

Rachelle Biennestin realized she needed to cut back when her checking account had $40 left in it. She had always enjoyed shopping and dining out, "but with the price changes in grocery stores and my rent going up [by $400] all at the same time," she said, her finances suddenly felt out of control.

Biennestin, who is 31 and earns about $79,000 as an elementary-school teacher, describes herself as working middle class. While she also calls herself "a social butterfly," she said she now mostly stays in and cooks, and she hasn't bought any clothes in nearly six months. These lifestyle changes have allowed her to save $2,600 this year, but the sacrifices have been hard for her. Even with a master's degree, she feels like she is barely making it.

The pandemic is over, Biennestin said, but she now feels locked down by her finances. "We can't just stay inside because everything's too expensive," she said.

Whether they're buying less, trading down to cheaper options or holding off on purchases altogether, low- and middle-income Americans are looking for more places to trim as ongoing inflation and new tariffs stretch tight budgets even tighter. The Trump administration over the last month has imposed some tariffs - taxes on imports whose costs companies typically pass on to consumers - and more tariffs are set to take effect in April. Household expenses are expected to increase by more than $1,000 per year as a result.

"Prices need to drop, but these tariffs are just not going to help anything," Biennestin said. It's not sustainable, she added, for people with good jobs to "sacrifice their happiness."

The White House has said that "trade policy is an integral component of our economic and national security" and that the tariffs "leverage America's economic power to secure our border and stop the flow of fentanyl into our country, while protecting American industry."

How low-, middle- and high-income Americans are adjusting for tariffs

In anticipation of price increases due to tariffs, middle-income households - those earning $50,000 to $99,000 - have been the group most likely to cut back on nonessential spending, at 72%, according to Intuit $(INTU)$ Credit Karma survey data shared with MarketWatch. They have more discretionary income than low-income households, but as prices rise, they are unable to sustain that to the extent high-income households can, the researchers said.

Households earning less than $50,000 annually, the group hit hardest by inflation over the last four years, said they are also cutting back on nonessential purchases (62%), looking for cheaper alternatives like store brands and secondhand products (59%) and delaying major purchases (36%), according to Intuit Credit Karma.

While higher-earning Americans are also cutting back on spending, they were more prepared than their lower-earning counterparts to make other adjustments as well. Households making more than $100,000 (26%) were more likely than low-income households (13%) and middle-income households (15%) to have made purchases ahead of tariffs taking effect. Some, for instance, recently bought electric vehicles in anticipation of the EV tax credit expiring and tariffs lifting car prices overall.

See more: Your money playbook for Trump's tariffs: Here's what to buy now - and later

"Challenging economic environments will almost certainly disproportionately impact low- and moderate-income consumers due to disparities in income, wage growth and access to credit," Courtney Alev, a consumer financial advocate at Intuit Credit Karma, told MarketWatch. "For many Americans, it's a luxury to be able to make healthy financial choices, whether that's saving money or reining in their spending in preparation of higher costs or a potential downturn."

A recent analysis by Moody's $(MCO)$ found that the top 10% of earners - those who make more than $250,000 per year - are responsible for about half of spending in the U.S. Overall spending data, in other words, disproportionately reflect the behavior of high-income consumers.

As was the case last year, "most of the spending strength in 2025 has come from high-income households," who are buying more essential and discretionary goods, according to a recent survey from Morning Consult.

Everyone else, meanwhile, is being more careful with their money. As price sensitivity remains near record highs, more consumers "are walking away from completing purchases with higher-than-expected prices," according to Morning Consult.

Tiffany Morrison, a single parent who shares updates on social media about how she budgets on a $24 hourly wage, told MarketWatch she cut out Amazon Prime $(AMZN)$, switched to a cheaper Netflix $(NFLX)$ account and changed phone carriers in an effort to stay on budget.

These moves together will save her about $2,000 for the year, with a bulk of those savings coming from switching from T-Mobile ($140 a month) to T-Mobile's $(TMUS)$ budget carrier Mint Mobile ($180 for the year).

Read more: Tariffs could cost Americans an extra $1,600 a year. Here's where to find that money in your household budget.

Low-income Americans face tougher financial challenges

Many low-income Americans are up against particularly difficult financial challenges at the moment.

Joe Wadford, an economist at Bank of America $(BAC.SI)$ Institute, told MarketWatch that lower-income workers are now seeing their wages increase at a slower rate than other workers and their housing costs rise at higher rates.

The lowest 20% of income earners already spend 95% of their after-tax income on necessities such as housing, insurance, utilities and groceries, Bank of America Institute said in a new report. The report did not define income thresholds for low-, middle- and high-income households.

Lower-income Americans "are having to work a little bit harder than their middle- or higher- income-household counterparts to keep up with the cost of living," for example, by switching to discount grocers at higher rates, Wadford noted.

Lower-income households have only shifted about 1% of their spending from discretionary expenses to compensate for the rising cost of necessities - roughly the equivalent of a few meals at the drive-through. Still, he said, "I wouldn't be happy about having to cut back on any kind of splurge, or anything that was nice to have or that made things easier."

In Intuit Credit Karma's survey, many low-income households that were not making adjustments in anticipation of tariffs said they had other priorities to focus on. "We can assume this is because low-income households are focused on making ends meet, with little to no flexibility to make changes to their current budget," Alev said.

Despite cutting back, low-income households still struggle to save each month because so much of their monthly income goes toward essential costs, she added. Nearly half (47%) of Americans with a household income below $50,000 said they aren't able to put any of their monthly income toward savings, compared with 26% of those who make $50,000 to $99,000 and 14% of those who earn more than $100,000.

Related: People who make under $130,000 were already cutting back. Trump's trade war will tighten the squeeze.

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-Venessa Wong

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March 26, 2025 09:50 ET (13:50 GMT)

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