The start of a new year often triggers the adoption of new behaviors such as joining a new gym, eating healthier or even opting to save more money. While some people maintain these behaviors for only a few days or weeks, others turn them into lifelong habits.
One such new trend is “loud budgeting.” This money-saving technique involves turning down social invitations, like dining out with friends or attending destination weddings, if they jeopardize your financial goals. The key is to be transparent and honest about the reasons for not participating.
The fundamental idea behind loud budgeting is to promote a culture where individuals feel comfortable openly expressing their current financial priorities.
However, whether “loud budgeting” sticks around or not depends on various factors. Some may succumb to the allure of attending social events, like dinner parties or extravagant weddings, due to the fear of missing out (FOMO). On the contrary, those who are resolute about maintaining financial discipline stand a better chance of adopting this new approach.
The Challenges Ahead
This month, PYMNTS highlighted that consumers accumulated debt not only leading up to the holidays but also during Black Friday. PYMNTS also noted that those of us who live paycheck to paycheck might now experience the repercussions of this increased debt.
According to the most recent data from the Federal Reserve, published on Jan. 8, overall credit has increased by 5.7% on an annualized basis. Within this overarching figure, revolving credit card debt surged in November at an annualized rate of 17.7%.
This marks the most rapid annualized pace observed in the past several months.
At the conclusion of the third quarter, the growth rate was 10.2%, followed by a relatively subdued 2.7% in October.
The total revolving debt has now reached just under $1.3 trillion, an increase from the approximately $1.2 trillion recorded at the end of 2022.
“New Reality Check: The Paycheck-to-Paycheck Report,” a study by PYMNTS Intelligence, divided the U.S. population by financial lifestyle into three categories: struggling consumers (facing challenges with bill payments while living paycheck to paycheck), those living paycheck to paycheck without bill payment issues, and those not living paycheck to paycheck.
The latter two groups show a notable stability over time. Around 42% consistently live paycheck to paycheck without issues, while 35-38% do not encounter financial difficulties.
Struggling consumers — the most vulnerable group — were most influenced by economic changes. However, their share decreased to 19.7% in November compared to before the pandemic, marking a 0.5% YoY decline and a 4-point decrease from November 2020.
Additionally, economic indicators, such as the Fed’s inflation measure, showed a decline in November, while the labor force participation rate and overall personal income demonstrated positive trends.
The combination of higher wages and ample employment opportunities has motivated more individuals to re-enter the workforce. Struggling consumers, who faced intense inflationary pressure and recession fears in the past two years, are now embracing a more optimistic outlook.
Managing Your Finances
Achieving financial stability often involves striking a balance in saving money, much like the challenges individuals face when attempting strict diets. Just as extreme dieting can lead to failure within a short timeframe, overly stringent financial habits can result in setbacks. The key lies in finding a sustainable middle ground that allows for consistent saving without feeling overly restrictive.
Similar to crash diets that may be unsustainable in the long run, extreme financial austerity can lead to frustration and abandonment of saving goals. It’s essential to acknowledge that the path to financial wellness is a journey rather than a sprint. Setting realistic savings targets and incorporating manageable adjustments into one’s lifestyle can contribute to long-term success.
Additionally, just as crash diets may ignore the importance of a balanced and diverse diet, extreme financial measures might neglect the need for a diversified financial strategy. Diversification in savings, investments and financial planning helps mitigate risks and ensures a more resilient financial foundation.
Furthermore, like cheat days in diets, occasional indulgences in discretionary spending can be integrated into a financial plan. Allowing small, planned splurges can make the overall savings journey more sustainable and enjoyable, preventing the risk of burnout.
