Feeling the Squeeze? Give Me Some (Household) Breathing Room

I went to the store the other day and saw that hamburger is now pushing $10 a pound. Hamburger.

And get this…A Halloween-size bag is running $25 (chocolate-based, otherwise what’s the point). I used to spend $25 on Halloween candy in total, with a healthy reserve of Twix bars for me.

Groceries, insurance, utilities, car repairs and healthcare…the household budget just doesn’t seem to stretch as far as it used to.

Is my imagination? Do the numbers back that up?

Is Our Household Budget Actually Shrinking?

The talking heads tells us inflation is on the rise, but so are incomes. They don’t tell us how much money we have left after paying for the things we actually need.

So I put my nerd had on and came up with the Household Breathing Room (HBR) — patent pending.

It’s my own invention, not an official government statistic. I’m using reliable government data to answer three questions:

• Is income keeping up with essential expenses?
• How much financial cushion is left after normal household spending?
• Are people starting to cut back, use savings or fall behind?

I looked at three groups: middle-income working households, retirees and renters.

What is the Household Breathing Room (HBR) Index?

I looked at the past 10 years of government data on household income and the major expenses we can’t easily avoid — housing, groceries and healthcare.

I set 2015 as a baseline of 100. If the number is lower today, household income hasn’t quite kept up with those costs. If it’s higher, households have gained a little breathing room.

These numbers give us a useful starting point: despite a decade of rising incomes, the average household hasn’t gained much ground against the cost of the basics. That’s not the whole story – I also looked at savings and signs of financial stress.

One note on the data: the latest complete 10-year demographic spending data available from the Bureau of Labor Statistics runs through 2024. I used more recent 2025 and 2026 data where available to see what has happened since.

Middle-Income Households (aka the “Middle Class”)

The backbone of America.

Middle-income households took a big hit during the inflation run-up in 2021 and 2022. Things improved after that as incomes caught up somewhat, but lately that recovery seems to be slowing.

The HBR number reflects that. Middle-income households are at 97.9 compared with 100 ten years ago. Not a collapse, but not much progress either.

And the more recent numbers are worth watching.

In August 2026, disposable personal income increased 0.3% (great!), while consumer spending increased 0.9% (not so great). The personal saving rate — the share of after-tax personal income that households do not spend — fell to 4.1%. Source: Bureau of Economic Analysis. Not a lot of breathing room there.

The Federal Reserve also found that 58% of adults said higher prices had made their finances worse. Almost half had delayed a major purchase, and 41% had reduced what they were saving. Source: Federal Reserve.

That doesn’t mean most middle-income households are in financial trouble. It means a lot of people who used to feel pretty comfortable are feeling the squeeze and changing their spending habits.

You keep the car another year. You put off the kitchen remodel. You eat out less. You decide not to move because the payment on the next house would be ridiculous.

You’re still (mostly) paying the bills. But you have less room left over after you do.

Retirees

As a group, retirees actually had the strongest HBR score of the three at 101.3. But retirees are a mixed bag.

If you have a paid-off house, Social Security and some retirement savings – pensions, 401K’s, and other investments – you may be in very good shape. You aren’t dealing with today’s mortgage rates, and you have decades of accumulated home equity and savings behind you.

If you’re living mostly on Social Security and you’re still paying a mortgage or paying rent, that’s a very different picture.

Sure, you got your COLA, but the standard Medicare Part B premium went from $185 a month in 2025 to $202.90 in 2026, almost a 10% increase. Source: Centers for Medicare & Medicaid Services. Supplemental plans and drug plans went up too. On a tight fixed income, that matters. That doesn’t leave much for the $25 bag of KitKat bars.

I wouldn’t say retirees as a group are doing poorly. Many are actually in the strongest financial position of the groups I looked at. But the gap between retirees with assets and retirees without them is huge.

Renters

Renters look like the most financially vulnerable group right now.

Their 10-year HBR score is 99.8, which sounds pretty good at first glance. Their income has more or less kept pace with the core expenses in the index.

The problem is that renters generally start with less income, less accumulated wealth and less financial cushion. They don’t have home equity to fall back on, and they don’t have the benefit of a nice, low fixed-rate mortgage like many homeowners do.

Unless they have a long lease and a generous landlord, they are always paying something close to market rent.

And we’re seeing increasing signs of stress.

Twenty-three percent of renters reported falling behind on rent at some point during 2025. Yikes. Nearly one out of four. That was up from 21% the year before and 17% in 2021. Source: Federal Reserve.

If rent, groceries, utilities, insurance and car expenses all go up, there just aren’t that many places left to cut.

Are the Rich Getting Richer?

I was curious about this one too. For comparison, I ran the same HBR calculation for the highest 20% of households by income — the cleanest upper-income group consistently reported by the Bureau of Labor Statistics. Their HBR went from 100 in 2015 to about 109.3 in 2024. Compare the to the HBR for middle-income households at 97.9.

So if by “richer” we mean more breathing room, the answer is yes. Upper-income household incomes have risen faster than core expenses like housing, groceries and healthcare. That doesn’t just mean bigger investment accounts. It means more money left after paying for everyday life, which gives those households more flexibility to save, invest, travel, remodel or absorb another round of price increases without having to cut somewhere else. Source: Bureau of Labor Statistics.

That may be one of the biggest differences in how people are experiencing the economy right now. The price of hamburger may be the same for everybody. The amount of money left after buying it definitely isn’t.

So Are We Actually Worse Off?

For a lot of people, yes, but not necessarily in the way we usually think about financial distress.

The Federal Reserve found that 73% of adults said they were doing “okay” financially or living comfortably in 2025. Source: Federal Reserve. At the same time, 28% said they were financially worse off than a year earlier. Before the pandemic, in 2019, that number was 14%.

The economy can be growing. Unemployment can be relatively low. People can still be paying their bills. And those same people can feel like they have a lot less money to work with than they did a few years ago.

The HBR numbers help explain some of that disconnect. Over 10 years, middle-income households are slightly behind, renters have barely gained ground, retirees as a group have done a little better, while upper-income households have gained considerably more breathing room. Nobody exactly knocked it out of the park — except maybe the people who already had the most room to begin with.

Bottom line: the size of your financial cushion matters a lot.

It’s what drives the broader economy because discretionary spending is usually where the adjustment happens first. People spend less at restaurants. They delay buying a car. They put off home improvements. They travel less. They stay in the house they already own instead of moving.

None of those decisions looks like a financial crisis by itself. Put millions of them together and it’s a big impact.

What Can You Do?

Stop worrying about the national inflation rate and look at your own household breathing room.

Take your monthly take-home income and subtract the basics:

• Housing
• Groceries
• Utilities
• Transportation
• Insurance
• Healthcare
• Minimum debt payments

Then look at what’s left.

Compare that with where you were two or three years ago.

If your income has gone up but the amount left over has gone down, that tells you something.

Are you starting to use your financial cushion to maintain your normal lifestyle? Are you saving less? Carrying a credit-card balance you used to pay off? Putting off repairs or major purchases?

Those aren’t necessarily signs that you’re in trouble. They may simply mean you’re adjusting to a more expensive world.

But it’s a really good idea to stay on top of it. Otherwise, you can wake up one day and find that you’ve dug yourself into a financial hole, and climbing out of that hole is no easy task when there’s already very little cushion in the budget.

I’m going to keep tracking HBR because I think it gets closer to the question most of us actually care about:

After we pay for the things we need, how much money do we have left to live our lives?