Faced with a clear decline in purchasing power over the past 2 years, the French, particularly those on the lowest incomes, have demonstrated budgetary rigor to avoid payment incidents. Here are the three strategies they deployed.
Associations, public authorities, banks: everyone is on alert! The outbreak of inflationary fever, triggered almost 2 years ago now, led to fears of the worst for the budgets of the most financially fragile households. The worst, undoubtedly, has happened for some of them. However, this did not materialize either through a explosion of cases of over-indebtednessnor by a surge in banking bans related to payment incidents.
Faced with this paradox, the Observation of Banking Inclusion (OIB) decided to carry out the investigation. The body, responsible within the Banque de France for monitoring signs of deterioration in the financial situation of French households, asked Crdoc (1) to ask 3000 individuals around ten questions on the evolution of their financial situation. A qualitative study which allows us to open a window on the strategies implemented by French householdsespecially the most modest (2)to avoid sinking.
Unsurprisingly, in fact, these low-income households were most affected by rising prices. Half of them believe they have been in the red more often than usual, that is to say having experienced times when their income was no longer enough to cover their expenses. However, this did not result in explosion of payment incidents. 30% of them experienced at least one during the past year, but it remained exceptional (13%) or occasional (8%) for two thirds of them.
One in two households dipped into their reserves
How, concretely, did they manage to limit layups? The answer is simple: they were more rigorous in their budgetary managementin order to increase their remaining living in proportion to inflation.
1st phase: they watched reduce their expenses. 71% of low-income households (58% of all households) have postponed or forgo spending: equipment purchases, but also food shopping (42%), medical care (30%), sometimes bills (26%)…
2nd stage: they looked for solutions to increase their income. 46% of French people, all categories combined, have then into their reserves (those notably collected during the pandemic). A small third of them also sought to increase their income from work, by asking for raises (19%), benefits in kind (11%) or by looking for an additional source of income (9%). Among the most modest, we also had greater recourse to aid: social aid (20%), emergency aid (12%) or financial support from loved ones (24%).
3rd time: the French have negotiate arrangements with their banks (36%, 41% of the most modest) or their creditors (9%, 14% of the most modest). Failing that, they resorted to payment in several installments (23%), authorized overdraft (20%) or consumer credit (12%).
Strategies that worked, but for how long?
The question now remains: how long will these strategies keep vulnerable households afloat? In a context at the start of 2024 marked by a deceleration in inflation but also a slight deterioration in unemployment and perhaps a difficulty in reconstituting the leverage of savings spending in 2023, Mark Bguery, director of individuals at the Banque de France, says he is cautiously optimistic: We do not foresee this stage of explosion of incidents (…), perhaps more a slight increase.
(1) Research Center for the Study and Observation of Living Conditions. (2) For the purposes of the study, Credoc isolated the results of the lowest 30% of French people, those whose income is less than 1,347 euros per month and per consumption unit. Or 2828 euros per month, for example, for a family with two children under 14 years old.