Americans are 'entrenched' in financial stress amid debt and price pressures
Economic conditions like gas prices well above $4 a gallon, according to AAA estimates, and annual inflation nearing 4%, per the Bureau of Labor Statistics
Economic conditions like gas prices well above $4 a gallon, according to AAA estimates, and annual inflation nearing 4%, per the Bureau of Labor Statistics, are pushing Americans' financial stress levels higher. The Foundation for Credit Counseling expects Americans' economic stress levels to tick back up in the second quarter of the year after a slight fall in the first quarter, according to its quarterly Financial Stress Forecast released on Wednesday. The forecast considers data on consumer counseling behavior as well as other broader economic indicators to predict trends in Americans' financial stability. It rates Americans' financial stress on a scale of 1 through 10, with 10 as the highest stress level. The rating has remained at or above 6.3 since the end of 2024, compared with a post-pandemic low of 3.5 in 2021. The forecast for the three months ending in June: 6.7. Americans "are entrenched in financial stress," Bruce McClary, senior vice president of membership and media relations at NFCC says — the result of elevated prices on top of near-historic highs of consumer debt on credit cards and auto loans.
The nonprofit organization, which provides education and solutions for individuals struggling with their finances, especially debt management, reported a "significant surge" in consumers reaching out for credit counseling, which could be a warning sign for the broader economy, NFCC says. While it's encouraging to see individuals seeking help before they have run out of options and can't pay their bills at all, the widespread struggle could be evidence of the overall consumer economy's health declining, the organization says. Wednesday's reading "tells us that the pressure from sustained credit reliance and affordability challenges has reached a tipping point," Mike Croxson, CEO of NFCC, said in a press release. "Consumers want to manage their obligations responsibly, but their traditional capacity to do so is evaporating under current market conditions." How debt management plans can help reduce financial stress David Devaney understands the weight that comes off your shoulders when you get out of debt. The 80-year-old was recovering from a back injury and subsequent surgery in 2020 when he sought help to address his $45,000 in debt, he says.
He racked up the debt on credit cards prior to his injury on normal cost-of-living expenses and occasionally helping his children with education bills or emergency expenses like car repairs, he says. He hadn't yet missed a payment on the credit card balances he owed, but he knew he would be struggling to keep up as he relearned how to walk after his surgery. "I called my credit card holders and the banks and everything, and they wouldn't talk to me"," Devaney says. "They just said, 'Oh no, we can't help you.' I wasn't in arrears or anything, and they couldn't understand why I was calling." He was living on around $1,800 a month from Social Security, and though he resided in an affordable area in Arizona at the time, his debt payments were threatening his ability to stay afloat. After his banks declined to help him, Devaney reached out to AARP, which connected him with American Financial Solutions, a member organization of NFCC based in Seattle. The organization negotiated a debt management plan with Devaney's creditors on his behalf.
High interest rates were the biggest factor preventing Devaney from being able to get out of debt on his own, he says. The credit counseling organization negotiated his minimum debt payments down to $900 a month from around $1,200, he says, and he paid around $35 a month as a fee to the organization. As his balance shrank, so did his minimum required payment, but he kept paying $900 a month and even upped his payments when he was able to start working and had extra money to put toward his debt. "I found the right agency to [help me] pay it off, and they did a phenomenal job," he says. Devaney finished paying off his $45,000 in debt in 2024. He relocated to New Orleans to be closer to his family, and bought a house. He spent around $3,500 on a credit card furnishing the home, he says, but that and his mortgages are his only debts now. Who debt management plans are best for
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