Board of Governors of the Federal Reserve System

Expenses

The share of adults who would cover a relatively small emergency expense using cash or its equivalent was unchanged from 2022 but down from 2021. Most adults said that changes in prices they paid compared with the prior year had made their finances worse, and a majority adjusted their spending in response to higher prices. Low-income adults were more likely to experience difficulties covering expenses. These difficulties included not paying all bills in full, sometimes or often not having enough to eat, and skipping medical care because of cost.

Bills and Regular Expenses

To understand how people were handling their regular household expenses, the survey asked about paying bills. Seventeen percent of adults said they did not pay all their bills in full in the month prior to the survey.²⁸

Lower-income adults were less likely to have paid all their bills in full. In the month prior to the survey, 36 percent of adults with a family income less than $25,000 did not pay all their bills in full, compared with 6 percent of adults with a family income of $100,000 or more (table 10). In addition, Black and Hispanic adults were less likely than White or Asian adults to have paid all their bills in full in the prior month.

Table 10. Did not pay all bills in full in prior month (by family income and race/ethnicity)

Renters were more likely than homeowners to say they did not pay all their bills in the prior month (table 11). In part, this reflects that renters have lower incomes than homeowners, although even for those with similar incomes, the share of renters who did not pay at least one bill exceeded that for homeowners.

Table 11. Types of bills not paid in full last month (by homeownership status)

Those who did not pay at least one bill in full were asked about several specific bill types. Of these, the most common types of bills people did not pay in full were a water, gas, or electric bill (5 percent) or a phone, internet, or cable bill (4 percent). Across each of these bill types, renters also had higher rates of nonpayment.

Most adults said that price increases made their financial situation worse. Sixty-five percent of adults said that changes in the prices they paid compared with the prior year had made their financial situation worse, including 19 percent who said price changes had made their financial situation much worse. In contrast, 4 percent of adults said that price changes compared with the prior year had made their financial situation better. Thirty-one percent of adults said overall changes in the prices they paid had little to no effect on their financial situation in the last year.

Adults with income under $100,000 were more likely to say that price changes had made their financial situation worse compared with responses from higher-income adults (table 12).²⁹ White and Hispanic adults, adults with a disability, and parents living with their children under age 18 were also more likely to say that changes in prices they paid compared with a year ago had made their financial situation worse.

Table 12. Changes in prices paid compared with last year made financial situation worse (by demographic characteristics)

Most people took some action in response to higher prices. The most common actions were spending changes, including switching to a cheaper product (62 percent of adults), using less of or stopping using a product (61 percent), or delaying a major purchase (48 percent) (table 13). Forty-five percent of adults reported they reduced savings. Increasing borrowing was less common, as were activities to generate additional income, such as working more or asking for a raise.³⁰ Compared with actions taken in 2022 in response to higher prices, people were less likely to report spending changes or reduced savings but slightly more likely to report asking for a raise.

Table 13. Actions taken in response to higher prices in the prior 12 months (by year)

Adults who had less margin between their spending and their income appeared more likely to take action in response to higher prices. Among adults who said their spending exceeded their income in the month before the survey, 92 percent took at least one action in response to higher prices. Among those whose spending was less than their income, a lower 71 percent took at least one action.

Food Sufficiency

Inability to afford food is a particularly severe hardship. To measure this type of material hardship, the 2023 survey included a new question about food in the household. Seven percent of adults said that members of their household sometimes or often did not have enough to eat in the prior month, referred to here as "food insufficiency." An additional 26 percent of adults said that members of their household had enough to eat in the prior month but not always the kinds of food they wanted to eat.³¹

Twenty-one percent of adults with a family income less than $25,000 said members of their household sometimes or often did not have enough to eat in the past month, as did 10 percent of those with a family income between $25,000 and $50,000 (table 14). Younger adults, Black and Hispanic adults, adults with a disability, and parents living with their children under age 18 were also more likely to report food insufficiency in their household in the prior month than other adults.

Table 14. Sometimes or often did not have enough to eat in the prior month (by demographic characteristics)

Health-Care Expenses

Forgoing medical treatment is another reflection of financial hardship. Twenty-seven percent of adults went without some form of medical care in 2023 because they could not afford it, similar to the share in 2022 but up from 24 percent in 2021 (figure 20). Dental care was the most frequently skipped, followed by visiting a doctor (table 15). Some people also reported skipping prescription medicine, follow-up care, or mental health visits.

Table 15. Forms of medical treatment skipped because of cost in the prior 12 months

The likelihood of skipping medical care because of cost was strongly related to family income. Among those with family income less than $25,000, 42 percent went without some medical care because they could not afford it, compared with 12 percent of adults making $100,000 or more.

Unexpected or large medical expenses can be a particular financial hardship for families. Twenty-three percent of adults had major, unexpected medical expenses in the prior 12 months, with the median amount between $1,000 and $1,999. Seventeen percent of adults had debt from their own medical care or that of a family member (not necessarily from the past year). The share with outstanding medical debt has ranged from 15 to 18 percent each year since the question was first asked in 2019.

Health insurance is one way that people can pay for routine medical expenses and protect against the financial burden of large, unexpected expenses. In 2023, 91 percent of adults had health insurance, similar to that seen each year since 2016, but up from the 85 percent who reported having health insurance in 2013 when the survey began.

Those without health insurance were more likely to forgo medical treatment because they could not afford it. Among the uninsured, 46 percent went without medical treatment because they could not afford it, compared with 25 percent among the insured.

Unexpected Expenses and Emergency Savings

Relatively small, unexpected expenses, such as a car repair or a modest medical bill, can be a hardship for many families, especially those without a financial cushion. When faced with a hypothetical expense of $400, 63 percent of all adults in 2023 said they would have covered it exclusively using cash, savings, or a credit card paid off at the next statement (referred to, altogether, as "cash or its equivalent"). The remainder said they would have paid by borrowing or selling something or said they would not have been able to cover the expense.

The share who would pay using cash or its equivalent was unchanged from 2022 but down from a high of 68 percent in 2021, and around the levels in 2019 and 2020 (figure 21).³² The higher shares who said they would pay with cash or its equivalent in 2021 is consistent with other research showing that fiscal relief measures and a pullback in consumer spending boosted saving in the early part of the COVID-19 pandemic.³³

Among the 37 percent of adults who would not have covered a $400 expense completely with cash or its equivalent, most would pay some other way, and some said that they would be unable to pay the expense at all. For these adults, the most common approach was to use a credit card and then carry a balance, although many indicated they would use multiple approaches. Thirteen percent of all adults said they would be unable to pay the expense by any means (table 16), unchanged from 2022 but up from 11 percent in 2021.

Table 16. Other ways individuals would cover a $400 emergency expense

Some of those who would not have paid an unexpected $400 expense with cash or its equivalent likely still had access to $400 in cash. Instead of using that cash to pay for the expense, they may have chosen to preserve their cash as a buffer for other expenses.

To explore this potential difference between how people would pay for a small, unexpected expense and whether they could pay for it with cash or the equivalent, the survey included a question asking people what the largest emergency expense was that they could handle using only savings. Eighteen percent of adults said the largest emergency expense they could handle right now using only savings was under $100, and 14 percent said they could handle an expense of $100 to $499 (table 17).

Table 17. Largest emergency expense individuals could handle right now using only savings

Sixty-eight percent of adults said they could pay an expense of at least $500 using only their current savings (table 17), unchanged from 2022. This is a somewhat larger share than the 63 percent of adults who said they would pay an unexpected $400 expense with cash or the equivalent, suggesting that some people do choose to pay with other methods, even if they have cash savings available to them.³⁴

Some financial challenges, such as a job loss, require more financial resources than would an unexpected $400 expense. One common measure of financial resiliency is whether people have savings sufficient to cover three months of expenses if they lost their primary source of income. In 2023, 54 percent of adults said they had set aside money for three months of expenses in an emergency savings or "rainy day" fund—unchanged from 2022 but down from a high of 59 percent of adults in 2021.

For those who did not set aside money for this purpose, some would have dealt with a loss of their main source of income by borrowing, selling assets, or drawing on other savings. Fifteen percent of all adults said that they could have covered three months of expenses in this way. Thirty-one percent of adults indicated they could not cover three months of expenses by any means.

 

References

 28. The question on bill payment was revised for the 2023 survey and the results are not directly comparable to prior years. In this report, adults who did not pay all their bills in full are those who (1) did not pay a credit card bill or made less than the minimum payment last month or (2) did not pay another type of bill in full last month. In earlier surveys, respondents were asked about their expected ability to pay all their bills in full this month, and the question did not specify what paying in full meant for credit card bills . Shifting to a retrospective question can affect results since expected ability to make a payment does not perfectly predict actually making the payments (Jeff Larrimore and Erin Troland, "Improving Housing Payment Projections during the COVID-19 Pandemic," FEDS Notes (Washington: Board of Governors of the Federal Reserve System, October 20, 2020), https://doi.org/10.17016/2380-7172.2772). Return to text

 29. This result could reflect both the limited financial buffers that low-income households have as well as differential rates of inflation for high- and low-income households. Recent research has observed that low-income households experience slightly higher rates of inflation than those with higher incomes (Joshua Klick and Anya Stockburger, "Inflation Experiences for Lower and Higher Income Households," Spotlight on Statistics, U.S. Bureau of Labor Statistics, December 2022, https://www.bls.gov/spotlight/2022/inflation-experiences-for-lower-and-higher-income-households/home.htm). Return to text

 30. These results reflect those who indicated that they asked for a raise specifically because of higher prices, which is lower than overall share who asked for a raise, as discussed in the "Employment" section of this report. Return to text

 31. The U.S. Department of Agriculture (USDA) defines food insufficiency as sometimes or often not having enough to eat, and marginal food insufficiency as having enough to eat but not always the kinds of foods they wanted to eat. See the USDA Economic Research Service at https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-u-s/measurement/. The SHED food insufficiency question is similar to questions fielded on the Census Household Pulse survey and the annual Current Population Survey Food Security Supplement (CPS-FSS), although the reference periods are different, which may contribute to differences in their estimates. Return to text

 32. Since 2013, when this question was first asked, median household incomes increased as did consumer prices. To check how changes in price levels affect responses to this question, the 2022 survey asked one-fifth of respondents how they would handle a $500 expense instead. Changing the threshold only altered the share who would pay in cash by 0.5 percentage points, suggesting that shifts in the price level have not materially affected the trend in this series. Return to text

 33. For details on the increase in savings during the pandemic, see Aditya Alandangady, David Cho, Laura Feiveson, and Eugenio Pinto, "Excess Savings during the COVID-19 Pandemic," Finance and Economics Discussion Series Notes (Washington: Board of Governors of the Federal Reserve System, October 21, 2022), https://doi.org/10.17016/2380-7172.3223; and for details on the effects of relief measures on incomes through the pandemic, see Jeff Larrimore, Jacob Mortenson, and David Splinter, "Earnings Business Cycles: The Covid Recession, Recovery, and Policy Response," Journal of Public Economics 225 (2023): 104983. Return to text

 34. The distinction between how people would or could pay small emergency expenses is discussed further in box 3 from Board of Governors of the Federal Reserve System, Report on the Economic Well-Being of U.S. Households in 2019, Featuring Supplemental Data from April 2020 (Washington: Board of Governors, May 2020), https://www.federalreserve.gov/publications/files/2019-report-economic-well-being-us-households-202005.pdf. Return to text