The National Foundation for Credit Counseling say the stress will continue in 2025
of ConsumerAffairs
The economy, as measured by Gross Domestic Product, is growing. The stock market is at an all-time high. Unemployment is in the 4% range and inflation has declined throughout 2024.
Yet many consumers are struggling as though the country is in a recession. In its Financial Stress Forecast, the National Foundation for Credit Counseling (NFCC) predicts that consumer financial distress is likely to persist into 2025.
This forecast aligns with a recent report from The Federal Reserve Bank of New York's Center for Microeconomic Data, which highlights a significant increase in household debt. In the third quarter of 2024, total household debt rose by $147 billion, reaching $17.94 trillion, with credit card debt alone increasing by $24 billion to $1.17 trillion.
According to NFCC CEO Mike Croxson, the Financial Stress Forecast, based on proprietary data from individuals seeking credit counseling, serves as a reliable indicator of financial stress levels across the population.
Record debt levels
"With debt levels at record highs, we are not surprised to see that our Debt Burden Scale has consumers moving rapidly toward dangerous levels of financial strain," Croxson said.
The NFCC's Financial Stress Forecast for the third quarter reached a level of 5.6, marking a 99.3% increase from its low of 3.9 in 2021. Analysts predict that by the end of the year, an increasing number of consumers will reach Stage 6 on the Debt Burden Scale, known as the "Tightening the Belt" stage. At this stage, consumers may be forced to reduce spending on essentials such as food and personal savings to manage their financial obligations.
The findings are in keeping with a recent survey commissioned by real estate broker Redfin, which focused on the significant financial challenges faced by people earning less than $50,000 annually.
According to the survey, nearly three-quarters of individuals in this income bracket struggle to afford their regular mortgage or rent payments. This financial strain has led many to make difficult sacrifices to meet their housing costs.
Skipping meals to get by
Among those surveyed, nearly one-quarter reported skipping meals as a way to meet their monthly housing expenses. This sacrifice is one of the most common, alongside eating out less frequently, taking fewer vacations and borrowing money from family or friends.
"This is an alarming trend with millions of Americans unable to keep up with increasingly unmanageable debt," Croxson warned. He emphasized the importance of nonprofit credit counseling as a resource for those struggling with debt, urging individuals feeling overwhelmed to seek assistance from certified counselors.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-11-22 11:46:52
