Here's the latest personal finance news, how it may impact your financial plan and what you can do to maintain your financial well-being.
Inflation Jumps Slightly While Experts Dispel Concerns
In October, the annual consumer price index (CPI) rose by 2.6%, up from 2.4% the previous month. While the uptick may appear concerning, economic experts say that the rate of inflation met expectations and still supports the Federal Reserve's decision to cut interest rates once again in early November.
It's also important to note that the Federal Reserve's preferred inflation metric, the Personal Consumption Expenditures Price Index, reached 2.1% in September, just above the federal agency's target of 2%.
Why It Matters
While the inflation rate continues to be sticky, economists remain optimistic about its downward trend. Following its first federal funds rate cut in four years in September, the Federal Reserve slashed its rate once again in November, offering a small amount of relief to borrowers.
It's important to note, however, that the inflation rate calculated by the Bureau of Labor Statistics is an average of a large basket of consumer goods and services, and these changes may impact you differently compared to others.
If you spend a lot on gasoline, for instance, the 12.2% reduction in gas prices can provide significant savings. However, if you spend more on transportation services, such as airfare and commuter transit, those costs have increased by 8.2% in the last year.
What You Can Do
- Read the latest inflation report to get more details.
- Understand how inflation works.
- Read up on ways you can fight inflation.
- Look for ways to reduce your risks when borrowing money.
Household Debt Reaches a New Record High Amid Strong Income Growth
Household debt in the U.S. reached an all-time high, according to the latest report from the Federal Reserve Bank of New York. That includes a new record-high credit card debt of $1.166 trillion. The bank also noted that delinquency levels have largely returned to pre-pandemic levels, though credit card and auto loan delinquencies have surpassed those figures.
That said, it's important to keep data in context. While debt has grown consistently since the pandemic began, its growth rate has been outpaced by income growth.
More specifically, the ratio of total debt to income is 82% compared to 86% in 2019.
Why It Matters
Although rising debt can be concerning, especially if delinquency rates continue to climb, debt balances are currently lower relative to income than they were before 2020.
That said, it's important to take stock of your situation to understand your relationship with debt and take steps to eliminate higher-interest balances that can threaten your financial security.
What You Can Do
- Get details on how to define high-interest debt.
- Learn which debts you should pay off first.
- Get tips on how to pay off high-interest credit cards.
- Develop a strategy to eliminate your debt.
Holiday Shoppers Expected to Spend Upwards of $1,000
Americans expect to spend more than last year on holiday shopping, according to The Conference Board, a nonprofit business and research organization. On average, consumers anticipate spending $1,063, including $677 on gifts and $387 on other items, such as food, decorations and wrapping paper.
The total is 7.9% higher compared to 2023 expectations. For the most part, however, consumers plan to spend the same amount on gifts—only 23% expect to pay more.
A recent Experian study on holiday spending shows many consumers are feeling stressed about their finances this holiday season. Inflation will impact holiday shopping, according to 68% of respondents, while 63% admit they overspend during the holiday season.
Why It Matters
The holiday season comes with a host of festive experiences and memories, but it can also put you in debt. While it's important to budget for holiday spending, it's crucial that you consider ways to save money throughout the year to cover your expenses without going into debt.
What You Can Do
- Learn how to create a holiday budget.
- Discover the dangers of taking out a holiday loan.
- Consider opening a new credit card to maximize new-cardholder incentives.
- Look ahead and plan to pay off holiday debt.
Mortgage Rates Near 7% Once Again
After dipping to almost 6% in September, mortgage rates are on the rise again. According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage hit 6.84% toward the end of November.
The government-sponsored enterprise noted in its most recent update that purchase demand is low going into the holiday season in spite of modest inventory growth. High interest rates continue to put pressure on new construction.
It's important to note that, unlike most forms of consumer debt, mortgage loans aren't directly influenced by the federal funds rate. Instead, mortgage lenders use the 10-year Treasury yield as a benchmark. That rate has increased recently over the past couple of months for a variety of reasons, including conflicting economic data and uncertainty about how the Federal Reserve will manage further rate cuts.
Why It Matters
Mortgage interest rates have been uncomfortably high for more than two years now, disrupting the housing market and pushing mortgage payments to record highs.
While rates trended downward for most of 2024, they're now higher than they were at the start of the year, adding more uncertainty to the timeline for housing costs to become more affordable again.
What You Can Do
- Learn how to deal with high mortgage rates.
- Read up on how mortgage interest works.
- Consider whether to buy a house when rates are high.
- Understand the pros and cons of refinancing a mortgage loan.
Good Credit Can Contribute to a Healthy Financial Plan
While there are aspects of your financial situation that are outside of your control, building and maintaining a good credit score can help you weather challenges and save money in the long run.
With Experian's free credit monitoring service, you'll get access to your FICO® Score☉ and your Experian credit report. With this information in hand, you can gauge your credit health and target areas of your credit profile that you can improve over time. And with real-time alerts whenever your report is updated, you can spot potential issues and fraud and address them quickly.