Even though inflation is slowing down, many families are still experiencing financial pressure.
In October, a recent report from LendingClub revealed that 60% of adults mentioned they’re barely managing their expenses and living from one paycheck to another. Surprisingly, this percentage hasn’t changed since last year.
The report also highlighted that 4 out of 10 consumers feel their financial situation has worsened compared to the previous year.
Consumers anticipate exceeding their budget during the holiday season
The LendingClub study took place in October, right before the holiday season ramps up.
According to a 2023 survey by Deloitte focused on Black Friday and Cyber Monday, holiday spending during Thanksgiving week is anticipated to reach a new high this year. The survey suggests a 13% increase compared to last year, with shoppers spending an average of $567 over the week.
Even with credit card debt surpassing $1 trillion, a whopping 96% of shoppers expect to overspend this holiday season, as revealed by a TD Bank survey.
According to a separate report from Ally Bank, half of consumers are planning to take on more debt to cover their holiday expenses, and only 23% have a strategy to pay it off within one to two months.
Financial stress is widespread, with 74% of Americans expressing concerns about their finances, according to a CNBC Your Money Financial Confidence Survey conducted in August. Factors such as inflation, rising interest rates, and a lack of savings contribute to this stress.
The same CNBC survey found that 61% of Americans are living paycheck to paycheck, marking an increase from 58% in March.
In recent months, a significant number of households have used up their savings, as indicated by reports from LendingClub and others. Additionally, LendingClub discovered that over one-third of consumers intend to dig deeper into their savings to meet holiday expenses.
Expressing concern about this trend, Alia Dudum, LendingClub’s money expert, remarked, “While consumers have been finding ways to cope with inflation, it’s worrisome that many are planning to dip into their savings and even go beyond their budgets to fund their holiday purchases. This could potentially leave them exposed to unexpected emergencies.”
Excessive consumption arises from a lack of mindfulness
Jacqueline Howard, who heads money wellness at Ally, notes that consumers are leaning more towards a “mentality of hyper-consumption,” especially during the holidays when families tend to overspend on gifts.
According to Howard, “Hyper-consumption comes from not being mindful.” She suggests considering what makes the most sense for your well-being and recommends adopting a value-based budget approach for holiday spending. “If your priorities revolve around family, travel, or other experiences, let that guide your spending,” she advises.
