Marcus Satterfield has a good job in Virginia Beach and makes decent pay, and he has never really had to fret about providing for his young daughter – especially around the holidays.
Normally, the living room would be flush with presents and toys. He’d host Christmas breakfast and dinner.
This year, holiday gatherings were scrapped, the single father’s Christmas budget was slashed in half, and his credit cards were glutted from months of futile efforts to keep up with the rising cost of living.
In Surprise, Arizona, retiree Helen Nerviano has had a heck of a time getting her fixed income to stretch. She lives with her 80-year-old husband who has late-stage Parkinson’s and requires full-time care.
The cost of everyday goods and services is still higher than usual, and managing unexpected expenses – especially additional hospital visits and medical bills – has become all the more difficult.
A new year typically offers opportunities for fresh intentions and financial goal-setting.
However, for a growing swath of US households, economic pressures have hit like a punishingly stiff wind. Many Americans are heading into 2026 worse off, and their financial game plans have shifted.
“I was thinking about driving for Uber on the side, just to be able to get the extra income and so I can buy more groceries,” said Satterfield, 38, conceding that the trade-off would be sacrificing time with his 8-year-old daughter.
Nerviano, 76, said she will try to find employment in 2026 to help bring in some extra income. She also hopes to win the lottery. Otherwise, one path forward is a potential bankruptcy.
“I don’t know of any other way out,” she said.
On paper, the US economy doesn’t look too shabby.
It grew at a robust 4.3% clip during the third quarter, powered in part by strong consumer spending. Interest rates are edging down, inflation hasn’t breached 3% this year, the jobless rate is hovering within those “full employment” bounds of 4% to 5%, wages are still outpacing inflation, households are keeping up with their debt payments on aggregate and stocks keep hitting record highs.
For many Americans, however, it sure doesn’t seem like boom times.
The economic gains have been uneven. The Federal Reserve’s interest rate cuts haven’t completely lowered borrowing costs. Inflation is still rising faster than usual. The vast majority of industries are in a “hiring recession,” and it’s taking months to find a job. Wage growth is slipping. Consumer loan delinquencies are on the rise. And the bulk of the stock market gains are further enriching the wealthiest of US households.
Call it what you will – a K-shaped, two-lane, or windchill economy – but Americans haven’t felt this poorly about present economic conditions since early 2021, when the country was still in the shadow of a worldwide pandemic.
“The more well-to-do households are powering spending; they’ve been able to deal with the higher inflation over the last couple of years,” said Justin Begley, an economist at Moody’s Analytics. “Whereas, the lower end of the income spectrum and middle-income households are still spending, but they’re finding it harder to do so – given the fact that only just now are their wages starting to catch up with inflation.”
And household debt is mounting: It hit a fresh record high of $18.59 trillion earlier this year, data from the Federal Reserve Bank of New York shows.
However, the eye-popping figure tells only part of the story. The levels of credit balances can be influenced by a variety of factors (including population growth and increased digital commerce), and they don’t show how people are managing that debt.
On the aggregate, US households are keeping up with their bills. The closely watched debt service ratio, which is debt payments as a percentage of disposable income, has climbed from historic lows in 2020 but still sits just below pre-pandemic rates, Federal Reserve data shows.
However, the latest debt and credit data also shows there are plenty of pockets of financial pain.
During the third quarter, the share of credit card balances that became seriously delinquent rose to 12.41%, the highest rate in more than 14 years, according to the latest available data from the New York Fed.
That report also showed that consumer bankruptcies rose to the highest level in five years, that the share of new delinquencies across all loan products inched up to an 11-year high and that student loan delinquencies continue to hit record highs (with borrowers 50 and older accounting for the largest share).
The student loan delinquencies – a nasty side effect of pandemic relief programs expiring and loan forgiveness efforts falling short – have started to level off in recent months.
“But they’re leveling off near an all-time high,” Begley said. “So, it’s not particularly encouraging. We could see as many as 4 million defaults in the next 12 months.”
Past-due loans can trigger a Rube Goldberg-like cascade of consequences: Tumbling credit scores, diminished opportunities to buy a home or get a loan, garnished wages or reduced federal benefits and a further pullback in spending or increased reliance on credit cards.
The crippling debt isn’t happening in a vacuum. The cost of living continues to grow – utility bills, insurance, housing, groceries … you name it – while safety nets have been cut back.
Prices aren’t rising as quickly as they did in the aftermath of the pandemic, but they’re rising faster than normal — and the costs of some goods are higher because of President Donald Trump’s wide-scale tariffs.
Satterfield sees it in the toys he bought his daughter for Christmas, the rent that’s due every month, the trips to the grocery store, and the sharply higher electric bill.
“I’m used to my electricity bill being $130 to $150, and I just got one this month that was $252,” he said. “Essentially, $100 more than previous years. And that extra $100 could have gone to providing more groceries or household items for me and my daughter, or just a nest egg to save for emergencies and things like that.”
When Helen Nerviano retired at the age of 62, her monthly health insurance costs were $170.
“I thought, ‘Well, that’s doable,’ and I did all my math and made sure I could afford where I moved,” said Nerviano. “Had no clue what was on the horizon – the prices of food, insurance, clothing, and I adopted my granddaughter. It was just like a storm of events that I wasn’t planning on when I retired.”
And in recent years, it’s only intensified.
“It’s just a constant, never-ending struggle,” she said. “I go to the grocery store, I put things in my cart; by the time I get to the checkout, I turn back around and start taking things out, because I tell myself, ‘You can’t afford this.’”
“It’s perpetual. There’s no end in sight,” she added.
Satterfield, Nerviano and a host of other Americans still consider themselves optimists, and there are some glints of hope for the glass-half-full camp in 2026.
If the recent slate of consumer-focused companies’ earnings calls is any indication, prices could start moving lower for certain products, said Adam Josephson, a longtime paper and packaging sell-side analyst who now authors an economics newsletter.
“An increasing number of consumer related companies are cutting prices to try to stimulate demand: You’re seeing it with the homebuilders. You’re seeing it with the [consumer packaged goods] companies,” Josephson said. “The reasons why they’re cutting is because people cannot afford their products.”
Many of those companies “raised prices on the order of 20% to 40% during the pandemic, depending on the company,” Josephson said. Still, a 4% trim here and an 8% cut there would be welcome to cash-strapped consumers.
But even if some prices do inch down, that could be happening at a time when income growth is projected to slow further as a result of the continued weakening labor market, said Moody’s Analytics economist Begley.
Further relief could potentially come from the Fed further reducing interest rates, as well as potential benefits from new “One Big Beautiful Bill”-related tax cuts, he said.
“So that ‘no tax on tips,’ ‘no tax on overtime,’ and, of course, the higher deduction for Social Security taxes plus expansions for the child tax credit, those should help lower-middle-income households weather any storm that comes their way,” Begley said. “It won’t replace a job if unemployment meaningfully rises, but it will help.”
The biggest boost, however, would come from a reduction in tariffs, he said, noting ongoing negotiations increase the probability for a lower effective tariff rate as well as the potential for the Supreme Court to overturn some of the duties.
“If the Trump administration does indeed pull back on tariffs, that would just be a real boon for the economy, because it’ll materially increase certainty,” he said. “It’ll take the pressure off of businesses to bear the majority of these, and it’ll limit the inflationary impact.”
