This year, only one group can "easily afford" holiday spending, according to an economist who likens inflation to a "regressive tax."
- Many people feel anxious about spending money during the holidays.
- In 2024, over 50% of high-income shoppers believe they can easily afford holiday expenses.
- According to a report by Morning Consult, the highest-income group is compared to other income groups.
This holiday season, only one group of shoppers believes they have enough financial resources to spend money without falling into debt, but many in that group still expect to struggle.
According to Morning Consult, a survey research firm, approximately 52% of shoppers with incomes of $100,000 or more believe they can "easily afford" holiday expenses in 2024.
That's the highest share compared to other income groups.
According to the report, 33% of those earning $50,000 to $99,900 can afford holiday spending, while only 18% of those earning below $50,000 annually can sustain the costs.
1. Converting to a Roth IRA at the end of the year can be beneficial. 2. Many credit card users are still paying off their holiday debt. 3. A top advisor believes that buying a home is a way to increase net worth over time.
The survey polled 2,201 adults in the U.S. between August and September.
Experts say that the lack of confidence is due to households continuing to struggle with inflation.
"According to economist Sofia Baig of Morning Consult, inflation functions similarly to a regressive tax, negatively impacting lower income individuals more than higher income individuals because it consumes a larger portion of their financial resources."
Holiday debt can be a long-lasting problem
Many people are finding it challenging to afford holiday purchases due to financial constraints.
According to Morning Consult, approximately 20% of surveyed Americans will need to borrow money to cover their holiday expenses and duties.
It is crucial for holiday shoppers who plan to use credit cards to pay for their purchases to be aware that credit card balances can be difficult to reduce. A recent survey by NerdWallet found that approximately 28% of 2023 holiday shoppers are still paying off debt from the previous year.
NerdWallet's credit card expert, Sara Rathner, stated that credit cards have extremely high interest rates.
The average annual percentage rate for credit cards has decreased from a record high of 20.79% in August to around 20.50%, according to Bankrate.com. In comparison, the average APR for retail credit cards is 30.45%, which is also high, Bankrate found.
It is possible to remain in credit card debt for a long time if you're only making minimum payments, she stated.
High earners have 'wiggle room' in their budgets
According to Baig, the labor market being favorable for workers and people still having Covid-19 stimulus payments saved led to an "increased income equality" as the world reopened from pandemic-era lockdowns.
According to government data, over 476 million U.S. households received $814 billion in financial relief through payments.
In recent years, as inflation increased rapidly, the excess savings from the pandemic began to dwindle, she stated.
Baig stated that lower-income households were more impacted by inflation, while high-income households experienced less financial strain.
Stacy Francis, president and CEO of Francis Financial, stated that higher-income consumers are not as price-sensitive.
According to Francis, a member of CNBC's Financial Advisor Council, people in lower wage-earning brackets are more budget conscious than they are.
Baig stated that higher-income individuals are better able to cope with inflation because they have more flexibility in their budget to save and spend.
In October 2023, a Morning Consult report found that 68% of adults earning $100,000 or more can cover three months or more of basic expenses without income, up from 65% in 2023.
According to the report, their substantial savings and income enable them to afford retail purchases and travel during the holiday season.
Baig stated that low- and middle-income consumers cannot be described in the same manner.
Those with incomes between $50,000 and $99,000 have a 47% chance of having enough savings to cover three months of expenses, while those earning less than $50,000 annually have only a 22% chance.
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