Despite a decline in inflation, households continue to experience financial strain.
As of October, a new LendingClub report revealed that 60% of adults indicated they are living paycheck to paycheck, a figure unchanged from the previous year. The report also highlighted that 4 in 10 consumers perceive themselves as being worse off compared to 2022.
Holiday shoppers anticipate exceeding their budget.
The LendingClub report was carried out in October, merely a month ahead of the holiday season reaching its peak.
As indicated by a 2023 Deloitte Black Friday-Cyber Monday survey, holiday spending during the Thanksgiving week this year may reach unprecedented levels as consumers aim to capitalize on the weekend’s deals. Deloitte anticipates a 13% increase in spending over the week compared to last year, with shoppers projected to spend an average of $567.
Despite credit card debt surpassing $1 trillion, a separate TD Bank survey reveals that nearly all, or 96%, of shoppers anticipate overspending this season.
According to another report by Ally Bank, half of consumers plan to accumulate more debt to cover holiday expenses, with only 23% having a strategy to pay it off within one to two months.
Financial stress is prevalent, with 74% of Americans expressing concerns about their finances, as revealed by a separate CNBC Your Money Financial Confidence Survey conducted in August. Factors contributing to these concerns include inflation, escalating interest rates, and insufficient savings.
The CNBC survey further discloses that 61% of Americans are living paycheck to paycheck, marking an increase from 58% in March.
Numerous households have depleted their cash reserves in recent months, as indicated by reports from LendingClub and others. LendingClub’s findings reveal that over one-third of consumers intend to further draw from their savings to meet holiday expenses.
Alia Dudum, LendingClub’s money expert, expressed concern about the situation, stating, “While consumers have found a way to manage through inflation, it’s concerning that many plan to tap into savings, and even exceed their budgets, to finance their holiday purchases, which may leave them vulnerable to an unexpected emergency.”
“Excessive consumption arises from a lack of mindfulness.”
Consumers are embracing a “mentality of hyper-consumption” more frequently, particularly during the holidays when families tend to overspend on gifts, noted Jacqueline Howard, Head of Money Wellness at Ally.
According to Howard, “Hyper-consumption comes from not being mindful.” She suggests adopting a value-based budget approach for holiday purchases, emphasizing aligning spending with priorities. “If your priorities include family, travel, or other experiences, let that guide your spending,” she recommends.
