Inflation, recession fears dampen financial health outlook for many: survey

Inflation and rising costs are why 33% of Americans said they were struggling to get by or were in trouble financially, according to Lincoln Financial Group's most recent Consumer Sentiment Tracker.

Survey respondents also said they didn't expect much relief from these economic hardships, with 76% saying they anticipated that inflation, market volatility and debt will worsen this year.

However, 88% of respondents said they saw room to improve their finances and 45% said they believed their financial situation would get better this year.  Moreover, 53% said they planned to set financial goals for themselves this year despite the dire outlook on the U.S. economy.

"It's important that you're honest with yourself about where you are financially and what your goals are," Ed Walters, senior vice president of Lincoln Financial Group's wealth management arm Lincoln Financial Network, said in a statement. "With a little discipline, knowledge, and guidance, you can have a strong financial year and see long-lasting results."

If you are struggling to pay off debt, you could consider using a personal loan to consolidate your payments at a lower interest rate, saving you money each month. You can visit Credible to find your personalized interest rate without affecting your credit score.

CONSUMERS VALUE TRANSPARENCY, TRUST IN CAR-BUYING EXPERIENCE: REPORT

Inflation is cooling, but recession remains a concern

Inflation rose 0.5% in January to register a 6.4% increase – the smallest 12-month increase since October 2021. 

The consecutive months of improving inflation have led many to believe that it may have peaked but continued high prices mean it's likely to take more time before inflation reaches the 2% target rate the Federal Reserve has set.

That means that consumers will likely see borrowing costs continue to increase as the Fed maintains its restrictive monetary policy rates and continues raising interest rates this year to reach its target. 

The Fed has begun easing on interest rate hikes and raised rates by 25 basis points at its latest meeting. That was preceded by a 50 basis points rate hike in December. 

"This latest CPI print is kept aloft most by the housing data component of its calculation," Adam Taggart, CEO and founder of Wealthion, said. "This housing data is lagging, reflecting what conditions were like for housing 12 months ago, much more so than today's, which are fast-softening. 

"Regardless, the Fed will use this stale data to justify hiking the federal funds rate further to tame inflation down towards its 2% CPI target," Taggart continued. "This indeed may lead to 'over-tightening' by the Fed, ultimately creating a deeper, more prolonged and more painful recession than necessary. The Fed would be wise to pause sooner and then wait to see if more hikes will be truly necessary. But it's unlikely to do so."

If you are looking for ways to reduce your monthly expenses, paying down debt could be a good place to start. A personal loan could help you consolidate your monthly payments and pay down debt at a lower interest rate. Contact Credible to speak to a loan expert to see if this is the right option for you.

AMERICANS PREPARE FOR A RECESSION BY PAYING OFF DEBT, SURVEY SAYS

Setting goals helps improve financial wellness

Even though most survey respondents said they expected inflation, market volatility and debt to worsen this year, 53% said they planned to set financial goals. Survey respondents who set financial goals in 2022 were two to three times more likely to say their personal finances improved, according to the survey.

"Lincoln's research underscores the importance of taking a definitive approach," Walters said. "While financial goals don't need to be complicated, you should be able to easily track and monitor your progress. Consumers' wallets are stretched thin with many competing financial priorities, so now is a great time to get back to the basics."

Here are two changes you can incorporate to boost your financial wellness in 2023:

Track and budget expenses

Tracking how you spend your money is one way consumers can flag areas where they can afford to make more cost-effective choices. Lincoln Financial advised that consumers keep it simple and start with fixed costs like mortgages, car payments and savings. Next, add in more flexible expenses like groceries and entertainment.

"Instead of establishing a fixed amount, consumers should bucket the flexible expenses together and adjust how money is allocated on a monthly basis to address needs and plans for that month," the group said. 

Focus on building your savings

Consumers should look to boost their savings. One way to achieve this money goal is by looking at your budget, Lincoln Financial said. 

"Cutting a little bit here and there may reveal extra money to set aside," the group said. "Those funds can be put toward an emergency savings account, employer-sponsored retirement plan or college fund, or be used to prioritize investments."

If you have accumulated debt, you could consider using a personal loan to help you pay it down at a lower interest rate. Visit Credible to find your personalized interest rate without affecting your credit score.

HOME PRICES FORECASTED TO PLUNGE, BUT US EXPECTED TO AVOID A REPEAT OF 2008 FINANCIAL CRISIS: FANNIE MAE

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.