Almost a third of Americans would have to use a credit card or dip into their savings if faced with an unexpected expense of $1,000, according to a recent survey published by Freedom Financial Network.

The survey,

titled “State of the Household Balance Sheet,” examined consumers’ financial health and stability more than two years into the pandemic. Specifically, it focused on the large purchases they have planned for the year and how they intend to pay for them.

Public relations agency Allion+Partners carried out the survey of 1,002 adults in the United States, in spring 2022. Here are more details and some key findings.

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Americans want comfort: vacations, vehicles, and home upgrades

Inessential expenditures that might have been out of the question earlier in the pandemic are now top of mind for many Americans. Vacations (30%), cars (27%), and furniture (23%) were the most common large purchases survey respondents planned for.

Of those planning a vacation in the next year, 42% plan to pay for it with a credit card.

Of the homeowners surveyed, 56% are planning a large home-related expense. These include things like buying a home, renovations, furniture, or large appliances.

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"Consumers are making up for lost time by booking much-needed vacations put off due to travel restrictions, while others are returning to the office again, leading to more spending on commuting expenses and dining out," said Andrew Housser, co-founder and co-CEO of Freedom Financial.

"But rising gas prices, rising interest rates, and inflation at a 40-year high are starting to strain consumers' wallets, posing potential danger to their long-term financial health if they are not careful with their spending and payment methods."

Payment methods, debt, and income

The ways consumers intend to pay for these expenses vary. While 46% of respondents said they pay for large purchases all at once with cash or a bank account, 32% said they tend to put large purchases entirely on credit cards.

Digital financial services, never more convenient than during the pandemic, remain popular. In the last three months, 49% of respondents used CashApp or Paypal, 43% used mobile banking apps, and 25% used delivery services like DoorDash.

Buy now, pay later (BNPL) services like Affirm and Klarna, which allow buyers to pay for a large purchase in regular installments, have gained popularity in recent years. Around 42% of those who use them have done so in the last three months.

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Here are some statistics about respondents’ debt and income levels in the last year:

A third of respondents said their household debt increased since March 2020

About a fifth of respondents (19%) said their household debt decreased

29% expect their debt to increase in the next year

22% expect their debt to decrease

28% said their income increased in the last year

30% said their income decreased

Increases in the cost of living caused by inflation are affecting consumers’ financial plans, too. Almost half (46%) of respondents expect to spend more on bills and groceries in the next year.

The “State of the Household Balance Sheet” in its entirety can be found

here

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