| May 6, 2016

Research of the Week: Getting Emotional About Money

Americans aren’t feeling good about the cost of living.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

What are the emotional costs when the cost of living rises? Everyone knows the financial cost – your paycheck comes up just a little bit short. With all the news about an economic recovery, the cost of living hasn’t been seen as a major problem – yet. But new research by the Allianz Life Insurance Company reveals this is one of America’s major fears.

 

The big result

It turns out the fear of an increasing cost of living has less to do with living now – and a lot to do with living later. When Allianz polled more than 1,000 adults, they were worried about their retirement savings…

Nearly half of Americans (47%) report being either “very concerned” (36%) or “terrified” (11%) that the rising cost of living will affect their retirement plans. Additionally, 47% of respondents note they are either “very worried” (36%) or “panicked” (11%) that they won’t be able to afford the lifestyle they want in retirement due to rising costs.

The fascinating details

Allianz researchers were a little perplexed by these results, calling these fears “overestimated.” Why? Because the average inflation rate over the past two decades is a very modest 2.24 percent – yet many respondents told Allianz they believe the cost of living will skyrocket in their retirement.

In fact, 19 percent “expect to see an annual increase of 5-6 percent, and almost one in 10 (8 percent) feel there could be an increase of more than 10 percent each year during their retirement.”

So, in a nutshell, Americans are expecting inflation to suddenly take off in the next couple decades. Indeed, it might, but researchers say this belief is based on emotion, not information.

What you can do

More than inflation decades from now, the biggest drain on retirement savings is credit card debt right now, says Gary Herman, president of Consolidated Credit.

“Credit card debt is nearing $1 trillion in this country, and at an average interest rate hovering around 15 percent, that far outweighs any cost-of-living jump now or in the future,” he says. “If you can get rid of your credit card debt, you can ease your mind about any inflation issues.”

Of course, getting rid of those of high credit card balances isn’t easy. That’s why Herman suggest consulting an expert – for free. Consolidated Credit has certified credit counselors standing by to give you a free debt analysis. Even the phone call is free. Call now.

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