Recovery Means Spending
For better or worse, some degree of economic recovery is underway in the United States. Labor markets continue to show signs of improvement. Many employers report difficulties finding enough workers to fill open positions. In some sectors, wages are rising, including traditionally low-wage jobs.
And that means more folks may have more money to spend again.
Still, some degree of uncertainty about the economy lingers. Inflation and supply chain backlogs remain a concern for economists and policymakers. If inflation continues to rise, consumer optimism will likely lag. Yet higher prices and supply issues seem to have little effect on consumer confidence right now. Parts of the economy, particularly at the higher end, have seen spending increase, a trend that continues with no end in sight.
High-Income Spending Continues
It may not be surprising that higher-income Americans are spending money again as the mechanisms aimed at restarting the economy take effect. Stocks are fetching record prices. The real estate boom continues. For the moment, at least, any pessimism about the economy seems relegated to low-wage workers and older Americans on fixed incomes.
Rising prices and ongoing supply-chain issues have no immediate impact on most consumer habits. People still seem willing to spend their money, at least for the present. Holiday spending was up in 2021, a trend likely to continue throughout 2022. Analysts forecast that online shoppers will spend approximately $7.6 billion on jewelry and watches this year.
Higher-end luxuries are especially thriving. The recreational boating industry continues to pump $121.5 billion into the U.S. economy, accounting for some 650,000 jobs and more than 34,000 small businesses throughout the U.S. Other luxuries, including fine dining, travel, and wine tasting, fared better in 2021 as well. People with higher incomes seem desperate to resume pre-pandemic lifestyles and are willing to pay for the privilege.
Middle Class and Small Business Relief
Now, thanks to tax cuts recently announced in Albany, more residents of New York State may soon have additional money in their pockets as well. Middle-class tax cuts, tax relief for small businesses, property tax rebates, and other workforce tax credits are in the works, projected to take effect over the coming years.
These measures aim to put more money in people’s pockets. With some relief in sight, New Yorkers may be starting to think about how to spend this extra cash once it materializes.
Addressing longer-term financial issues may be prudent. Financial advisers recommend investing, paying down debt, seeking additional education, or even starting a side hustle. But given the state of the world, sometimes a little retail therapy can be just what the doctor ordered.
And a broader segment of New Yorkers may be able to indulge soon as well. Governor Hochul’s plan to provide tax cuts for middle-class New Yorkers and additional relief for small businesses seems likely to increase consumer confidence throughout the state. And merely having cash on hand tends to increase spending. ATM users, on average, spend 20-25% more each time they go into a convenience store than folks swiping debit or credit cards at the register.
Regardless of what you spend your money on, it helps to keep a few principles in mind. Mindfulness advocates recommend careful budgeting. Being intentional in your spending can ease consumer remorse. Deciding in advance where and how to spend money may also support financial growth over time. Spending trackers have also increased in popularity recently. Experts agree that tracking spending may improve overall financial security, whether using an app on a smartphone or old-fashioned pen and paper.
Which begs the question–where, and how, will you spend your extra money in 2022?