A frugal influencer’s financial advice goes viral
Frugal living is becoming a hot topic on TikTok. USA TODAY’s Betty Lynn Fisher spoke with a financial planner who offered practical tips for saving money.
What does it mean to live “normally and comfortably”?
That mindset is changing for U.S. consumers, especially as the economy grows, but it depends, as many don’t feel like they’re benefiting, according to a new report from the Carney Consumers Institute.
“People are saying, ‘I keep hearing that the economy is doing well, but I don’t feel that way,'” Katie Thomas, who heads Kearney College’s in-house think tank, told USA TODAY. Thomas’ new report is “The Hidden Side of the K-Shaped Economy.”
As inflation continues and employment slumps, lower-income consumers are cutting back on essentials and splurging selectively, while higher-income earners are slashing food prices while splurging on experiences, Thomas said. Consumers also tend to abandon long-term plans for short-term goals.
“Many of the high expectations of traditional middle-class life are really being called into question,” Thomas said.
“They’re not saving up to buy a house, they’re going on a vacation,” she says. “Some are wondering if they can afford to have a child or if buying a home is worth it.”
What is a K-shaped economy?
The K-shaped economy is a term and concept that describes the gap between wealthy consumers and those experiencing financial hardship. Economy is represented by the letter “K”.
The diagonal line or upper arm above the “K” represents wealthier people, and the legs of the K represent lower income people. The model was developed in 2020 to explain the growing disconnect between consumers since COVID-19.
Thomas said that while the K-economy is often discussed, the concept is not as simple as saying those at the top of the K are doing well and those at the bottom are struggling.
Thomas said consumers are reporting surprising vulnerability at the top of the K scale and resilience at the bottom in the latest Carney Consumer Stress Index.
The global strategy and management consulting firm surveyed 24,000 consumers worldwide and 2,000 consumers in the United States for its latest quarterly report.
Additionally, K-economic analysis tends to create “an ‘average’ consumer that doesn’t really exist,” the report says. “This helps explain why spending looks healthy when consumer confidence is weak.”
High-income earners may be ‘on thin ice’
Thomas said 50 to 60 percent of the country is traditionally considered middle class, but a single situation, such as a new job or unemployment, can change their financial situation. Those consumers, she says, are riding on K’s two feet.
Hanging dangerously close to the middle or upper leg of K’s leg are those who are “on thin ice” – high-income people who cannot budget and whose spending is at risk of over-leverage.
“They look healthy on paper, but they’re still exposed to all kinds of financial fluctuations or they’re very illiquid,” Thomas said.
These consumers may also be suffering from “lifestyle insecurity,” Thomas said, referring to the idea that as their income increases, they spend more and save less.
They may also live in areas with a high cost of living or be exposed to financial problems that could lead to financial ruin, Thomas said.
“Don’t think that the top of the K is completely insulated and just resilient,” Thomas says.
Consumers at the bottom of K can also rise to the top.
Thomas doesn’t like the concept of the two arms of “K” being “the haves and the have-nots.” That’s because I don’t think it’s accurate.
In particular, Thomas said what she calls “comfortable” in the report are middle-class consumers at the bottom of the K income spectrum.
But those people are mobile, she said, and “once they get a good job or once they sell a good property,” they will move into the upper K tier and become what is considered wealthy. Thomas said many of these consumers are on financial assistance or living within their means, may not be as affected by “deteriorating lifestyles,” or may live in areas with a lower cost of living.
What does comfortable mean?
America’s “comfortable life” has also changed over time, Thomas said. For many consumers, he said, the expectations and costs of a “normal, comfortable life” have ballooned, from the size of the average home to the cost of food to the number of new clothes purchased each year. Even the types of vacations people take are changing, according to the report.
Many consumers want the average home to be larger (less occupied) than it was a few decades ago, and they see something on social media that makes them want to decorate it a certain way. We’re expected to have more technology, and people are wearing more clothes, Thomas said.
“I’ve talked to men who say going business casual has completely increased the amount of clothes in their closets because they don’t wear the same suit over and over again, and they don’t wear one pair of shoes,” Thomas said.
How has the middle class changed since then?
The concept of a K-economy is not new, Thomas said, and the gap between rich and poor is always widening as the middle class shrinks.
But companies are “oversimplifying” how they view consumers and what they want from products, Thomas said. Once upon a time, companies could have a better, better, best pricing model. But Thomas said that model no longer works as consumers shop across all demographics.
Consumers who are considered to be “at the top of K and happy to shop at Aldi” to save money, or who are considered comfortable at the bottom of K, can still afford a vacation to Europe or Disney, she said.
Betty Lin-Fisher is a consumer reporter for USA TODAY. Contact her at blinfisher@USATODAY.com or follow her at @blinfisher on X, Facebook and Instagram and @blinfisher.bsky.social on Bluesky.. Sign up for our free The Daily Money newsletter, breaking down complex consumer and financial news. Subscribe here.
