Americans are falling deeper in debt as living expenses continue to rise. According to an article by Jessica Dickler at CNBC, credit card balances have jumped 15%, the highest annual leap in 20 years. Former Boston Federal Reserve President Eric Rosengren stated earlier this month that he feels the U.S. is likely headed for a mild recession in 2023. With an increase in analysts adding their recession predictions and Americans entering the peak holiday shopping season, it is quickly creating an avalanche of strains and fractures in consumers’ overall household budgets. As consumers rely on their credit cards more and more to extend their financial reach and rising rates making it more difficult to pay down debt, it begs the questions:
- How much longer will Americans have to stretch their finances?
- How long until American consumers begin to succumb to their debt?
- What can Americans do to avoid heading into delinquency this holiday season?
How much longer will americans bave to stretch their finances?
Modern recessions last on average about 10 months. While the Great Recession of 2007 lasted close to 18 months, nobody knows exactly how long a potential recession will last. Consumers would be wise to begin an emergency fund, if they haven’t already and keep adding to it.
How long until american consumers begin to succumb to their debt?
The Federal Reserve Bank of New York put together a data survey showing the increase in debt delinquency expectation rose in 2022 from 10% in January 2022 to 11.6% in November 2022. With analysts’ predictions of a recession next year, we can expect those percentages to rise. Now, with the holidays upon us, you can expect consumers to add to their debt and potentially increase their risk of delinquency.
What can americans do to avoid heading into delinquency this holiday season?
The holiday shopping season is upon us and with it comes the desire to take advantage of retail sales deals and over-purchase yourself into debt. Making sure to set a budget and sticking to it is the first thing you can do to keep yourself in financial health. Make a list of gift recipients and reduce it to your most personal friends and family. A friendly holiday card can suffice in many cases. Homemade gifts are more personal and can be more budget friendly. Perhaps gifting cookies or other delicious delights can save you some money. Don’t underestimate the power of paying in cash. Avoid those pesky January holiday bills by utilizing cash and avoiding credit card debt. Lastly, continue to keep track of those installment payments and pay more than the minimum to reduce those interest payments and overall balances faster.
While you can’t control the financial atmosphere, you can certainly adjust your finances to better overcome any hiccups and hurdles thrown your way. Continue to create and stick to your budget. Seek counsel with your financial advisor or debt resolution company to keep yourself on track. It’s ok to make a mistake once in a while. Chalk it up to a learning lesson. Just be sure to get yourself back on track with your budget and installment plans. It is the season of spreading joy, not debt. There is only about a month left until the New Year. So have a happy holidays and see you on the other side.
