Holiday Spending: A Luxury for the Few
As the holiday season approaches, many Americans are worried about how they will afford the expenses that come with it. According to a recent survey by Morning Consult, only 52% of shoppers with incomes of $100,000 or more said they can “easily afford” holiday expenses in 2024. This number drops significantly for lower-income households, with 18% of respondents who earn below $50,000 annually saying they can sustain the costs.
The Inflation Effect
Experts say that inflation is a major factor in this lack of confidence. “Inflation is like a regressive tax,” said Sofia Baig, economist at Morning Consult. “It hurts lower-income people more than higher-income people because it takes out a larger chunk of their wallet.” As prices continue to rise, households are struggling to make ends meet, let alone afford holiday expenses.
Debt: A Holiday Tradition?
Unfortunately, many Americans will have to go into debt to pay for holiday celebrations and obligations. About 20% of Americans surveyed said they’ll have to take on debt this holiday season. And with credit card balances being very sticky, it’s no wonder that 28% of 2023 holiday shoppers are still paying off debt they incurred almost a year ago.
The High Cost of Credit
Credit cards charge high interest rates, making it difficult for consumers to pay off their debt. The average annual percentage rate for credit cards is around 20.50%, down from a record high of 20.79% in August. Retail credit cards are even worse, with an average APR of 30.45%. “If you’re only making minimum payments on that debt, it is very possible to remain in credit card debt for a long time,” said Sara Rathner, a credit card expert at NerdWallet.
A Tale of Two Households
The survey highlights the stark contrast between high-income and low-income households. Higher-income consumers are less affected by inflation and have more wiggle room in their budget to save and spend. In fact, 68% of respondents who earn $100,000 or more said they can cover three months or more of basic expenses without income. On the other hand, less than half of respondents with incomes between $50,000 and $99,000 said they have enough savings to cover three months of expenses.
Conclusion
As the holiday season approaches, it’s clear that many Americans will be struggling to afford the expenses that come with it. With inflation continuing to rise and credit card debt being a major concern, it’s more important than ever for consumers to be mindful of their spending habits and to plan ahead. By being smart about our finances, we can avoid the financial stress that often comes with the holiday season.
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