Three signs you may strain your finances this holiday

Retailers are expecting a robust shopping season, with November and December sales projected to top $1 trillion for the first time ever.

The flip side of all this holiday cheer? Many consumers could get themselves overextended with their finances.

A big reason for the optimistic holiday-shopping forecasts — such as the one by eMarketer that envisions the greatest gains since 2011 — reflects an economy that’s in good shape, with unemployment near record lows and consumer confidence solid.

Yet against this favorable backdrop, plenty of Americans are struggling with about two in five households living almost paycheck-to-paycheck, according to various surveys.

Here are three warning signs you could become overextended in the coming weeks:

You haven’t adjusted to rising rates

Interest rates have been climbing, which typically happens as the economy expands. This is putting some pressure on household budgets.

Jonathan Smoke, chief economist for Cox Automotive and its used-vehicle operations, estimates that consumer payments on all types of debt is about 16 percent higher than a year ago.

“This is eating into what people spend on other things,” Smoke said. “It’s approaching the point where disposable income won’t keep up.”

A key reason consumers aren’t feeling even more pinched, he said, is because of the paycheck relief from the recent income-tax cuts.

Average credit-card rates over the past year have risen from about 16.7 percent to 17.6 percent, as reported by Bankrate.com. Rates on other loans are also up, with average rate increases of about 1.5 percentage points for used and new vehicles, Smoke said.

Bank credit conditions have been tightening for the past three years making it more difficult for potential borrowers to qualify.

Using the automotive market as an example, the pool of potential new car and truck buyers peaked three years ago and gradually has been shrinking, Smoke said. This is a reason new-vehicle sales have softened, while prices and sales remain solid for used vehicles.

This trend points to higher interest rates ahead, unless the Federal Reserve pushes the economy close to a recession.

You haven’t checked your tax situation

Consumer confidence is high right now because Americans are feeling wealthier due to income-tax reform that was initiated at the start of the year. This led to lower withholding amounts and higher tax-home pay.

However, it’s possible some individuals are overestimating their own tax benefits. In particular, many taxpayers won’t be able to take advantage of deductions like they did in the past, and that could lead to unpleasant surprises.

A Fidelity Investments survey of people who donated to charity and itemized these deductions in 2017 illustrates this potential problem. Some 82 percent of donors who itemized in the past said they planned to maintain or increase their giving in 2018.

Yet the Treasury Department projects that one in five households will switch from itemizing to taking the nowmore-generous standard deduction. Some former itemizers

er, said Rick Rizzuto, northeast regional vice president for Transwestern, a real estate development firm.

Packaging, however, remains the biggest strike against online shopping.

“You do see strong attempts by ecommerce companiesto use greener packaging,” Storch said. “But there’s almost no way to get around the fact that you’re taking something that is already packaged for consumer sale and putting it in an additional package in order to deliver it,” he said.

Just as online retailers are becoming greener by grouping deliveries, store shopping is greener when people combine a shopping trip with other activities at the same mall, such as dining or going to a movie.

“Some make the argument that the consumer gets in their car and drives to the store and picks up one item and drives home, and that leaves a bigger carbon footprint than a delivery vehicle,” Storch said. “The only problem with that is consumers don’t behave that way.”

They consolidate shopping errands with picking up a child from school. They also go to the mall to socialize, and to be entertained, or to dine, Storch said. “To say that it’s just to buy something misses the whole point of why people, as social animals, don’t just stay home all day.”

In the online versus store shopping debate, what and how you buy is becoming more of an environmental factor than whether you buy it online or instore. Making multiple trips to a mall by yourself and buying a single item each time is not green, experts say. Going to the mall in a group, doing all your shopping in a single day, and combining the trip with activities like entertainment and dining is greener.

Making lots of returns, both online and in stores, greatly increases your shopping carbon footprint. The Deloitte-Simon study found that 33 percent of online purchases are returned, compared to 7 percent of store purchases.

Doug O’Malley, director of Environment New Jersey, said the most environmentally friendly option is to walk or take a three-minute drive to your local downtown and then walk from store to store doing your holiday shopping.