Trick or treat?
It’s that time of year again, and not just in the candy-and-costumes sense.
We’re entering the most expensive period on the calendar, when consumers traditionally rack up billions of dollars in credit card debt, investors shuffle their holdings and people try to enjoy themselves before making resolutions.
There’s really no telling how things will turn out, either. We could be pleasantly surprised by our financial performance to end 2018. Or, we could give ourselves a reason to stay scared well after Halloween.
So, will this year be more like 2015, when we added just $24 billion in credit card debt during the fourth quarter, or a repeat performance of Q4 2017’s $67 billion buildup?
How much longer can the nearly 10-year-old bull market last? And most importantly, do we have reason to fear for the future of our wallets, even more than we might already?
If you ask ordinary people, there’s plenty of cause for concern. For starters, two in three Americans believe the economy will get scarier in the next 12 months, according to WalletHub’s 2018 Halloween Spending & Financial Fears Survey. And many experts agree.
“If I had to wager a bet on it improving in the next 12 months or getting worse, I would vote in the direction of the economy getting worse,” said Debbie Psihountas, professor of finance and dean of Florida Southwestern State College’s School of Business and Technology.
There are other anecdotal signs of cracks in the economy’s foundation, too. Just consider the three in 10 people—a total of roughly 75 million—who say their finances are a “horror show.” And imagine how that figure might change without near-record-low unemployment rates. Even now, experts say 30 percent might be lowballing the grim truth.
“I would expect that to be higher,” said Sterling Raskie, a lecturer of finance at the University of Illinois Urbana-Champaign. “My guess is that the 30 percent are those being honest.”
Others may simply be too embarrassed to acknowledge the skeletons lurking in their wallets.
One leading cause of horror-show finances is overspending, especially on unnecessary frills. For example, 21 million people say that a Halloween costume is worth going into debt for.
It is not. Whether or not we should be surprised by the number of people willing to dip (even further) into debt for Halloween décor is up for debate, however.
“It does surprise me,” said Dena K. Wise, a professor and family economics specialist at the University of Tennessee. “I think that’s really scary.”
On the other hand, Bradley A. Stevenson, an associate professor of finance at Bellarmine University, is only partly surprised.
“This goes back to budgeting and understanding personal finance,” Stevenson said. “The lack of education most people have about their personal finances makes this more likely.”
Another easily avoidable contributor to a frightening financial situation is having the wrong credit card.
2018’s Worst Credit Cards charge annual fees as high as $995 and APRs up to 36 percent, according to WalletHub’s editors. So, if you’re planning to apply for a new credit card to save on holiday shopping, you definitely know which ones to avoid.
On the flip side, two of the best credit cards for the holidays (and beyond) are Citi Double Cash (2 percent cash back) and the Wells Fargo Platinum Visa (0 percent for 18 months). Both have $0 annual fees.
Finally, much like there are good credit cards to balance out the bad ones, it’s not all doom and gloom for our wallets moving forward.
In fact, there are still more positives to point to in the immediate forecast than negatives. But we can make the tougher times that will inevitably come much easier to manage by preparing now, before things get stormy.
“We can’t predict the future but we can prepare for times of economic uncertainty,” said Laura Hendrix, an associate professor of personal finance and consumer economics with the University of Arkansas Division of Agriculture. “Consumers who follow recommended financial management practices are better able to survive frightful economic times. Live within your income. Build an emergency fund. Save and invest for the future.”
Jessa Claeys is a writer, editor and graphic designer.