Vast Majority of Americans Don’t Expect Their Finances to Improve in 2023, Cite Inflation

A woman shops for groceries at a supermarket in Monterey Park, Calif., on Oct. 19, 2022. Frederic J. Brown/AFP via Getty Images

A large number of Americans do not feel optimistic about their finances improving next year amid the continued cost of living crisis and higher interest rates, a new survey has found.

The consumer financial services company Bankrate.com commissioned YouGov Plc. to conduct the survey among 3,656 adults in the United States between Nov. 15-18.

Respondents were asked: “Compared to 2022, do you think your personal financial situation in the year 2023 will get better or worse, or stay the same?”

Roughly 2 out of 3 (or 66 percent) of Americans who responded said they do not expect their personal finances to improve in 2023, including 36 percent who said they expect their financial situation to remain about the same. A total of 29 percent said they expect their finances will get worse next year.

The survey results come as fears of a recession next year continue to rise, driven in part by the Federal Reserve’s continued monetary tightening policy. On Dec. 14, the central bank opted to raise the benchmark federal funds rate again by 50 basis points to a target range of 4.25–4.5 percent, the highest level since late 2007.

Red-Hot Inflation Blamed for Lack of Savings

Meanwhile, inflation is currently at 7.1 percent year over year, squeezing households’ budgets and spending power.

Bankrate.com’s survey found that the majority of Americans who don’t anticipate their finances improving next year blame continued high inflation, with a total of 63 percent of survey respondents crediting it to the soaring cost of living.

A total of 27 percent of respondents blamed stagnant wages or reduced income on the lack of improved finances, while changing interest rates were blamed for no improvement in personal finances next year by 25 percent of respondents.

Another 18 percent cited the amount of debt they have or the amount they make from their savings or investments. Just 34 percent of Americans are hopeful that their personal financial situation will improve in the new year, the survey found.

Shoppers are seen in a Kroger supermarket in Atlanta, Ga., on Oct. 14, 2022.
Elijah Nouvelage/AFP via Getty Images

The survey comes shortly after the Bureau of Economic Analysis found that the personal saving rate—personal saving as a percentage of disposable personal income among Americans—fell to 2.3 percent in October, the lowest level since 2005.

Meanwhile, consumer spending increased 0.8 percent in October from the prior month amid a slight moderation in inflation, according to the Commerce Department.

Strong Spending ‘Real Sign of a Resilient Economy’

RSM’s chief economist Joseph Brusuelas told The Wall Street Journal that increased spending and less saving among American households was a “real sign of a resilient economy.”

Although Brusuelas anticipates a mild recession in the second half of 2023, he said that for now “jobs are easy to get, and people are confident and they’re going to keep spending.”

However, that increased spending appears to be predominantly being paid for with credit cards and personal loans, according to consumer credit reporting agency TransUnion.

Americans took out a record 87.5 million in new credit cards and 22.1 million in personal loans in 2022, according to a recent TransUnion report

However, the agency warned that credit card delinquencies will rise to 2.6 percent at the end of 2023, up from 2.1 percent at the end of 2022, while unsecured personal loan delinquency rates are expected to increase from 4.1 percent to 4.3 percent by the end of next year.

“Rapidly increasing interest rates and stubbornly high inflation combined with recession fears represent the latest in a series of significant challenges consumers have faced in recent years,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion.

“It’s not surprising then to see pronounced increases in delinquency rates for credit card and personal loans, two of the more popular credit products.”