Nearly half of Americans are getting deeper into debt as inflation raises costs

High prices have affected.

Several recent studies have shown that in an economy that has produced the highest inflation since 1981, Americans are struggling to keep up with expenditures and allocate less money for emergencies or long-term financial goals.

Nearly 40% of consumers can’t put any money at all into savings, according to a recent analysis of household financial health and preparedness by American Consumer Credit Counselling, while about 19% said they had to lower their savings rate.

As of the second quarter of 2022, 48% of consumers said the rising cost of basic necessities had affected their family’s lifestyle, a sharp jump from 39% in the first quarter.

“The pandemic, wars abroad, and other world events have had unprecedented effects on our society when it comes to family finance,” Allen Amadin, president and CEO of American Consumer Credit Consulting, said in a statement.

“Consumers have gone through many different financial stages in a very short period of time which has forced them to pivot multiple times according to the challenge,” he said.

It can get worse before it gets better

In order to make ends meet, 43% of Americans expect their debt to increase in the next six months, especially young adults and parents with young children, according to a separate study by LendingTree.

The report found that most will rely on credit card debt to bridge the gap between what they need and what they can afford.

Indeed, the surge in borrowing, along with auto loans, student debt and mortgages, has pushed total household debt to a record high of $15.84 trillion at the start of the year.

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“The reality is that debt can be either a sign of confidence or a struggle,” said Matt Schultz, senior credit analyst at LendingTree.

“A lot of people take on debt because they feel good about their financial situation and aren’t too concerned about paying a little interest if they get what they want or need,” Schulz said. “A lot of others are taking on debt because they have to.

“There is no doubt that both situations are happening now,” he added.

Do you consider yourself financially healthy?

In the past year, the number of bank customers who consider themselves “financially healthy” has declined, an indication that inflation is beginning to affect the economic well-being of most people.

Americans’ overall satisfaction with their financial condition is now at a 12-month low, according to JD Power data, while those who rate themselves financially unhealthy are as high as 64%.

This decline in fiscal health is largely due to borrowing more and saving less with fewer safety nets, including emergency funds and insurance coverage, and the impact on creditworthiness.

Are you financially weak, or could you be soon? Take this quiz to find out.

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