Most Americans optimistic about their finances in 2022 despite inflation, survey finds

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A new survey from Ally Bank has found that consumers are optimistic about achieving their long-term financial goals despite the effects of inflation. (iStock)

2022 poses a number of financial challenges for American consumers. Inflation is rising at the fastest rate in decades, meaning consumers are paying more than ever for rent, utilities and groceries. Additionally, federal student loan repayments are restarting this year, which could impact the financial stability of millions of borrowers.

However, a new survey from Ally Bank shows that most Americans are optimistic about their finances in 2022, despite rising prices. More than half (53%) of respondents said they are confident in their personal financial situation and 59% think they will be better off financially in a year. Almost two-thirds (65%) said they were likely to meet their financial goals for 2022, even with record inflation.

But inflation will not only hit consumers at checkout, it will also lead to higher interest rates. The Federal Reserve is expected to implement several rate hikes this year to fight inflation, which will lead to higher interest rates on major debt products like mortgages and credit cards.

Although optimistic, consumers will need to be prepared for several financial challenges in 2022:

Learn more in each section below and visit Credible’s online financial marketplace to compare a wide variety of financial products, from mortgages to debt consolidation loans.

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Consumer price inflation outpaces wage growth

The cost of living far outweighs higher wages, which means Americans can spend more money than they earn. While the average hourly wage has risen 5.7% over the past year, consumer prices have risen 7.5%, according to the Labor Department’s Consumer Price Index (CPI). .

Additionally, rising prices caused by supply chain disruptions may prompt some consumers to borrow money to pay their bills. Revolving credit balances in the United States have soared in recent months, signaling that Americans are increasingly dependent on high-interest credit card debt.

Revolving Credit Balances, Federal Reserve

Having a balance on your credit cards each month is an expensive way to cover essential expenses. Due to high credit card rates, you could end up paying hundreds or thousands in interest charges when you pay off your debt by making minimum payments on your credit cards.

If you’re struggling to pay off the credit card debt you’ve accumulated due to rising consumer prices, you may want to consider using a debt consolidation loan. Visit Credible to see your free estimated debt consolidation loan offers with no impact on your credit score.

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Inflation should drive up interest rates

Inflation does not only affect consumers. Rising prices can also have a negative impact on the economy as a whole, which is why federal central bank officials are looking for ways to control inflation. The Fed has already begun revising its monetary policy, slowing its bond-buying program and planning several interest rate hikes in 2022.

Although the Fed’s financial decision may help slow rising inflation levels, it is still likely to cause interest rates to rise. Mortgage rates have already started to rise in 2022, and interest rates on other financial products like credit cards are expected to follow.

Rising mortgage rates can be alarming for current homeowners and potential buyers, but higher rates don’t have to be cause for concern. Current mortgage rates are slightly lower than in 2018, when they hit almost 5%, according to Freddie Mac.

The window for mortgage interest rates below 3% may have passed, but many homeowners may still have the option of refinancing at a lower mortgage rate than they are currently paying on their home loans. The Mortgage Bankers Association (MBA) forecasts that 30-year mortgage rates will average 4.0% in 2022, giving consumers time to lock in a reasonable rate on a home purchase or refinance loan.

You can compare rates from multiple mortgage lenders at once on Credible, which can help you find the best possible deal for your financial situation.

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Major changes to student loans could impact financial well-being

Federal student loan payments and interest have been suspended since March 2020, when former President Donald Trump signed into law the CARES Act. The Biden administration has extended forbearance several times since taking office, but the payment break will expire on May 1.

While 37% of student borrowers surveyed by Ally Bank said they would be able to resume payments this year, 40% were not convinced they could. Most respondents (62%) said the end of the student loan payment pause will prevent them from saving for emergencies.

If you’re not ready to make payments on your federal student loans within a few months, you might consider refinancing at a lower interest rate to lower your monthly payments. A recent analysis by Credible found that well-qualified borrowers who refinanced over the longer term were able to reduce their monthly student loan payments by more than $250 on average.

It’s important to note that refinancing your federal student debt into a private loan would make you ineligible for certain government benefits, like income-contingent repayment (IDR) plans and federal student loan forgiveness programs. But if you don’t plan to use these protections, it may be worth locking in better terms on your student loans when refinance rates are near all-time lows.

You can view your estimated student loan refinance rate on Credible for free without affecting your credit score. Then, use a student loan refinance calculator to determine if this debt repayment strategy can improve your financial situation in 2022.

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Do you have a financial question, but you don’t know who to contact? Email the Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.

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