Consumers have become increasingly stressed about their finances despite having more tools than ever to manage their money.
Historic household debt, inflation, and overall economic uncertainty make consumers more apprehensive about their spending habits. Money is the number one stressor for Americans, with 90% of adults indicating that their finances impact their daily stress levels.
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TD Bank recently released its annual 2024 Consumer Spending Index, which echoes the increasing consumer concern over their financial health.
TheStreet met with Chris Fred, Head of U.S. Credit Cards and Unsecured Lending at TD, to unpack the data and identify what consumers can do to take control of their financial wellness.
Consumers are worried about their finances but confident in their ability to manage them
TD’s findings highlight an interesting contradiction: 67% of consumers find that some aspect of their finances keeps them up at night, yet 85% feel confident in their ability to manage their finances.
Fred explains, "There's certainly a paradox of how people can feel confident about their ability to manage their finances yet have all these stressors that keep them up at night.”
“Consumers today are much more in tune with their finances than ever. They're smarter, more educated, and have more tools, but it's tough right now," Fred continued. "You have inflation, elevated interest rates, student loans, retirement savings, and daily life. There's a lot to consider, and I think it's exhausting to try to think through all the different ways to manage that.”
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“You have to be thoughtful and spend time looking at your expenses,” he said. “So, in the end, people feel like they can figure out how to make it work. But it's still tiring, and questions like, ‘How am I going to pay the bills? Should I defer this and pay this one first?’ are weighing on their minds."
The current inflation and debt levels have prompted consumers to change their spending habits. Fifty percent of respondents note that grocery prices have increased the most out of all expenses over the last year, and 42% report needing to alter their financial priorities.
Fred recommends that consumers actively monitor their cash flow to prevent spending from snowballing.
"I think there are different variables at play when managing your spending in the context of your income and cash flow, but knowledge is power," he said. "When you're better armed with information about how you're spending and where the money is going, you can start to adjust your strategies more effectively,” he explains. “Whether it's streaming services, coffee, lunch, or daily expenditures, those add up at the end of the month."
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Tips for navigating your finances during high inflation
Despite the availability of tools to help monitor and track expenses, consumers find it increasingly difficult to manage competing financial obligations. Only half of respondents are actively saving for retirement, and one in five note that outstanding credit card debt is holding them back from meeting financial goals.
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Fred highlights that if you carry a debt balance month to month, you should be actively shopping around for the best rates. “Most people have debt, and you know that debt is expensive,” he said.
“If your credit score is high, shopping for a better rate in the marketplace could offer massive savings. In the same vein, if you're paying interest rates on multiple cards, paying off the card with the highest interest rate first allows your money to go a little farther than it ordinarily would,” he added.
Fred shares some tips to navigate the challenging economic conditions consumers are facing today. He notes that one of the best pieces of financial advice is the most straightforward: Small changes can compound over time.
“I think the secret of being financially healthy is in the details; it's the things you don't often see that probably mean the most,” he elaborates. “A few dollars saved here and there over time can be significant. The power of time should never be underestimated.”
“It might require a bit of sacrifice in the near term, but there are 365 days in the year. Those daily routines do matter, and they start to add up. That can influence how things look five, ten, even fifteen years down the road.”
While inflation can be intimidating, minor cuts can help curtail spending and further stretch your paycheck. Tracking expenses also increases awareness of spending behavior and can act as a barometer of financial health.
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