The Financial Squeeze: Navigating America's Growing Financial Pressure

💸 A New Financial Reality

More and more we are seeing the evidence that things are not great in the economy. We’ve read the reports, seen the statistics and heard the rumors, but from our perspective, until recently, nothing had really changed. Whether traveling for work, on vacation or just having dinner in a local restaurant, if activity was any sign, there was little evidence of a broken economy. 

Over the past couple months though, a troubling trend has emerged. In more and more meetings, some families are expressing signs of financial stress, anxiety, or worse. Sadly, a growing number of people with whom we’ve met have lost or are losing their jobs due to employee reductions. We’re starting to see first hand the growing financial squeeze on households. 

The sad reality is, a staggering one-third of American families are now struggling to pay their bills. As with most challenges, understanding the  situation is the first step toward overcoming it.

🌪️ The Perfect Storm

Inflation: In 2022 inflation began to significantly impact the prices of nearly everything.  And it is at this point a reasonable person might ask, “Well who or what caused that?” It’s hotly debated, but I’ve got a pretty well reasoned opinion and the finger points at the very same group of “experts” who are now trying to fix it. But that is a conversation for another day. 

Despite efforts to curb it, inflation also continues to erode purchasing power, making everyday expenses even more burdensome for families across the nation.

As you may have observed, much of what is taking place in our economy is far outside of our control. Regardless, our finances are our responsibility. And really, no one should be surprised that government officials have managed to invent a cure that is worse than the disease.

Rising Debt: Rising costs, often coupled with lifestyle decisions or expectations have led to record-high household debt levels coupled with soaring interest rates have created a challenging environment for many Americans. This combination has made it increasingly difficult for households to manage their finances effectively. 

Here are just a few realities Americans are facing:

• 36.4% of Americans reported significant difficulty in paying for regular household expenses in April 2024, up 6.7% from 2022.

• Household debt hits a record $17.8 trillion.

• 54% of the country has been using a high interest credit card to pay at least one bill for more than a year.

• Credit card balances have risen significantly, reaching $1.142 trillion in Q2 2024, with an average balance of $6,501 per cardholder.

High Interest Rates: Higher interest rates have historically been used to purposefully slow an economy. Unfortunately this has a downstream effect, ultimately making it more difficult for households to manage their finances. 

In March of 2022, the Federal Reserve began to raise interest rates in an effort to combat inflation. This increases the cost of borrowing across the board, affecting mortgages, car loans, credit cards, and other forms of consumer debt. 

This puts additional strain on household budgets, often forcing families to allocate a larger portion of their income to debt payments. Unfortunately what often comes with higher interest rates, by design, is slowed economic growth. This means potential job losses or reduced work hours. 

💪 Build Financial Resilience

In times like these we go back to the basics. After all, the fundamentals are the fundamentals for a reason. One of our goals is to empower you with knowledge and strategies to weather difficult financial times. Here are a few strategies that could help:

Create and Stick To A Budget

I’ve worked in personal finance for nearly 25 years. Without exception, the individuals and families who have consistently grown their wealth while maintaining financial security, even through difficult times, are those who have and live by a budget. It’s like a superpower. Today, with apps and technology that can do 60% or more of the work for you, there really is no excuse. If you would like some guidance, we have some favorites we’d be glad to share. 

Emergency Fund Creation

Did you know that 40% of Americans can't cover a $400 emergency expense? Generally speaking this is not the case with our clients. We guide, encourage and support the practice of building robust emergency funds. They are meant to act as a critical buffer against unexpected financial shocks. If you don’t have one, and you still have the means, start aggressively building one today. Aim for 3 to 6 months of household expenses. 

Strategic Debt Management

If this is a struggle and there is a chance of making some changes, act quickly. Selling, trading, consolidating or renegotiating are all options. Because rates have risen this challenge is greater. Every option may not be ideal, but not taking action as a result is not an option.  

Negotiate and Communicate

If you are at the point (and maybe even if you aren’t) where paying your monthly obligations has become a problem, don’t hide. Take action. Negotiating lower rates on bills like internet, phone, or insurance may be more of an option than you realize. Secondly, contact your creditors and lenders early. Be upfront. Tell them your situation, let them know your desire to pay what you owe, but let them know something else has to be arranged. Being proactive can go a long way and can save you the nightmare of collections calls and scary letters in the mail. 

Side Hustles

Never has there been a time where building a side hustle was more possible. There are seemingly endless ways to make a few hundred to a few thousand extra dollars a month with a little effort. Seeking additional income sources can make a big difference when finances are tight.

Personalized Financial Planning

We recognize that each client's situation is unique. We specialize, not only in growing wealth, but managing and protecting it. Our team has learned and developed many strategies over the years to navigate a variety of financial situations and realities. Our tailored approach ensures that your financial strategy aligns with your specific needs and goals.

🤝 Your Partner in Financial Success

The financial squeeze affecting America is a complex challenge, but it's not insurmountable. With the right strategies, support, and knowledge, you can navigate these turbulent economic waters successfully. At Sequoia Advisor Group, we're more than just financial advisors – we're your partners in pursuing an independent financial future. 

Ready to take control of your financial future? Contact Sequoia Advisor Group today for a personalized consultation. Together, we can build a strategy that not only withstands the financial squeeze but seeks to thrive despite it.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.