Yahoo Finance Inflation Might Be the Least of Your Financial Worries in 2024, Experts Say
Nearly a third of America is heading into 2024 worried about the same thing that concerned them most in 2023: rising prices. According to a new GOBankingRates survey of more than 1,000 adults, 31% say inflation is their top financial stressor in the coming year.
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While they’re certainly not making a big deal out of nothing, many experts believe that inflation is just the most obvious symptom of larger economic challenges.
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Spending More for Less Still Causes the Most Sleepless Nights
The good news is that one in 10 people didn’t report any money stress. About 4% are worried about retirement planning and 8% fret mostly over investing. Debt is the chief concern for one in five people, while one in four is most apprehensive about living paycheck to paycheck.
But the largest share, about 31%, worries most about rising prices — a fact that does not surprise the experts.
“This is the No. 1 concern I hear from clients,” said financial planner Charles Thomas, CFP, founder of Intrepid Eagle Finance. “This comes up in every single meeting we have with the families we work with.”
The inflation rate has fallen from over 9% at its 2022 peak to 3.1% today. While that might sound like excellent news in a headline, the reality is little more than cold comfort for families that still have to stretch their dollars.
“Although the rate of inflation has slowed, that doesn’t translate to a decline in prices,” said Thomas. “It only means prices are rising a little bit slower than before.”
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No One Wants To Spend Another Year Feeling Financially Helpless
It’s easy to see why one in three people is exhausted by the prospect of watching their purchasing power slip away for a third straight year.
“I can understand why many cite inflation as their main financial worry right now,” said Malcolm Ferrante, an ACCA-accredited expert specializing in international finance, investments, and taxation as the head of the Investment Migration Unit at CSB Group. “The rising costs of essentials like food and fuel are impacting everyday budgets. However, inflation is ultimately a temporary phenomenon influenced by broader economic factors outside individual control.”
But the absence of individual control is central to inflation-based restlessness — watching your limited dollars steadily lose their purchasing power is a helpless feeling.
“When people have no control or perceive a lack of control, it’s even harder to cope and easier to sink into a mindset of hopelessness and despair,” said personal finance expert Keisha Blair, international bestselling author of the ‘Holistic Wealth’ book series, founder of the Institute on Holistic Wealth and host of the Holistic Wealth podcast. “And this isn’t unwarranted in some households, either.”
The Danger Is in the Ripple Effects
People worry that inflation will be their biggest problem in 2024 because it amplified all their other money troubles in 2023.
“While inflation is a significant stress, it also compounds into other parts of people’s lives,” said J. Tucker Merrigan, attorney and managing partner at Sweeney Merrigan Law. “Inflation can make it harder for people to afford to pay off long-term debts, like housing, student loans and medical debts. With the added toll of financial stress, people can also become susceptible to other risks, like illness or injury.”
In 2023, the Cure Became as Painful as the Disease
This year, the Fed’s antidote to inflation shrank budgets as dramatically as rising prices did in 2022, which explains why so many people are stressed about what the new year will bring.
“In 2023, what we saw was a lot of shocks in the economy at once,” said Blair. “The Federal Reserve’s steepest interest rate hike in two decades hit consumers hard.”
Loan rates might have dominated the headlines in 2023, but inflation still outranks APRs on the stress-o-meter because its effects are immediate and impossible to ignore.
“While high interest rates are a problem for some consumers, significant price increases have a negative impact on all consumers,” said Baruch Silvermann, CEO of The Smart Investor. “This may explain the stats we see. When the power of the dollar goes down, it means everyone can’t buy as much stuff with the same amount of money. This makes life harder for individuals and families because they can’t afford as much, and it brings down their quality of life.”
Is Inflation the Biggest Challenge? It Depends on Whom You Ask
Money stress is intensely personal, so rising prices impact some people much more than others.
“Inflation undoubtedly strains pocketbooks, as 31% note,” said Jennifer Kropf, a certified financial education instructor and founder of Wealthy Woman Finance. “However, its effects aren’t uniformly felt. Where one struggles, another may withstand present pressures.”
Older People Worry About It More — And for Good Reason
The study showed that men are slightly more likely than women to be apprehensive about inflation, but age is a much better indicator of vulnerability to rising prices than gender. Inflation is the chief concern for roughly 30% of every age group from 18-64, but for people 65 and up, it jumps to 45% — and older Americans have every cause for extra concern.
“Inflation can be incredibly challenging for those on fixed incomes, such as retirees, who typically can’t cut back on their spending or earn more income,” said Laura Adams, MBA, an award-winning personal finance expert with Finder.
It’s Always More Taxing for Those Who Are Already Struggling
Unsurprisingly, the Federal Reserve Bank of Dallas reports that inflation disproportionately hurts low-income households, often for the same reasons that Adams outlined regarding seniors. For other groups, the inflationary pressures of the post-COVID era were made inevitable by the 10 years that preceded it.
In one of her books, Blair described what she calls “the impacts of the ‘lost decade’ between the end of the last recession in 2009 and the pre-pandemic year of 2019, where the broader economy expanded greatly, but Black workers didn’t see their wages, home values, net worth or borrowing power increase nearly as much as whites during that period.”
Age-based vulnerability, racial disparity and insufficient income are just three of the many factors that can make inflation more stressful for some people than for others. But one storyline is consistent among them all — if your situation is already precarious, rising prices never help.
“The problem with inflation is that it tends to be more impactful for people who are already struggling, compounding the impact of whatever they’re going through,” said Merrigan.
People Are Stressed About Inflation Because Inflation Is Stressful
The negative effects of inflation are not limited to the stress of paying more for hamburgers and televisions and gutter cleaning. The 31% who worry about it the most feel the general sense of apprehension and chaos it breeds.
“Another thing to worry about with inflation is that it makes the economy uncertain,” said Silvermann. “When prices keep changing, it’s tough for people to plan for the future. It messes up long-term decisions, like saving for retirement or making big purchases, because you don’t know how much things will cost in the future.”
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This article originally appeared on GOBankingRates.com: Inflation Might Be the Least of Your Financial Worries in 2024, Experts Say
