Nearly half of Americans are taking on more debt as inflation drives up costs

Higher prices have taken their toll.

In an economy that has produced the highest rate of inflation since 1981, Americans are struggling to keep up with their spending and putting less money aside for emergencies or long-term financial goals, according to several studies. recent.

Nearly 40% of consumers can’t save at all, according to a recent analysis of financial health and household preparedness by American Consumer Credit Counseling, while about 19% said they needed to cut their rates savings.

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

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

“Consumers have gone through many different financial phases in a very short time, forcing them to pivot many times depending on the challenge,” he said.

It may get worse before it gets better

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

Most will rely on credit card debt to bridge the gap between what they need and what they can afford, according to the report.

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

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“The truth is, debt can either be a sign of confidence or a sign of struggle,” said Matt Schulz, chief credit analyst at LendingTree.

“A lot of people go into debt because they feel good about their financial situation and aren’t too worried about paying a little interest if it gets them what they want or need,” he said. Schulz. “Many others go into debt because they have to.

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

Do you consider yourself financially healthy?

Over the past year, the number of bank customers who consider themselves “financially sound” has plummeted, a sign that inflation is beginning to impact most people’s economic well-being.

According to data from JD Power, Americans’ overall satisfaction with their financial situation is now at a 12-month low, while those who consider themselves financially unhealthy hit 64%.

This decline in overall financial health is largely due to them borrowing more and saving less with fewer safety nets in place, including emergency funds and insurance coverage, and the impact that it has on their creditworthiness.

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

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