About 61% of Americans are living paycheck to paycheck, an issue that impacts both low-wage and high-income families alike, according to new research from LendingClub.
Low-wage earners are most likely to live paycheck to paycheck, with almost 8 in 10 consumers earning less than $50,000 a year unable to cover their future bills until their next paycheck arrives. Yet even 4 in 10 high-income Americans, or those earning more than $100,000, say they're in the same position, the research found.
Such a situation is viewed as financially risky because it means those households don't have enough savings to tide them over in case of an emergency, indicating that they are unable to cover their upcoming bills until their next payday. The rate of Americans who are living paycheck to paycheck is on the rise, up 2 percentage points from a year earlier, the analysis found.
Inflation is partly to blame, with consumers still grappling with higher prices —although prices have cooled since hitting a 40-year high of 9.1% in June 2022. But a minority of paycheck-to-paycheck consumers point to another issue that's impacting their financial stability: nonessential spending on items such as travel, eating out and streaming services, the analysis found.
Beyond the basic necessities
"According to 21% of paycheck- to-paycheck consumers, nonessential spending is one reason for their financial lifestyle, with 10% saying it is their top reason for living paycheck to paycheck," the report noted. "This factor is significant: Consumers, despite financial challenges and tighter budgets, indulge in nonessential spending when possible."
Still, the majority of paycheck-to-paycheck consumers aren't splurging or spending on things beyond the basic necessities. And those essentials alone can quickly eat up a worker's paycheck.
How far does the typical paycheck go?
U.S. workers earn median pay of $4,766 per month before taxes, according data from the Bureau of Labor Statistics. That's about $57,000 in annual income, or what the LendingClub analysis considers a middle-income earner.
But monthly expenses can quickly gobble that up. For instance, median rent for a one-bedroom apartment is $1,510 per month, while U.S. households spend about $690 a month on food, including groceries and eating out, BLS data shows.
On top of that, the average monthly expenditure on travel, including car payments, gasoline and public transportation, is about $900. Health care is another $450 per month, BLS data shows.
Those basics alone add up to $3,550 per month — which already represents the bulk of a middle-income worker's pre-tax income.
The year-over-year increase in Americans who are living paycheck to paycheck "indicates that consumers are still feeling the weight of rising costs of living and remain tasked with managing and adjusting their cash flows to put aside savings," LendingClub said in the report.
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
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I've spent years researching personal finance, analyzing economic trends, and understanding consumer behaviors related to spending and saving. My expertise extends to the intricacies of credit card debt, paycheck-to-paycheck living, and the impact of inflation on household finances.
In the article by Aimee Picchi on MoneyWatch, several critical concepts are discussed:
Credit Card Debt: The article highlights that credit card debt in the U.S. has exceeded $1 trillion, indicating a substantial financial burden for many households. This is a familiar issue, often arising from high-interest rates and insufficient financial management.
Paycheck-to-Paycheck Living: Approximately 61% of Americans are living paycheck to paycheck. This statistic encompasses both low-wage and high-income families, emphasizing that financial instability affects various income brackets.
Impact of Income on Financial Stability: Despite perceptions, even a significant portion of high-income individuals, around 40%, struggle with paycheck-to-paycheck living. This showcases that income alone doesn't guarantee financial security.
Causes of Paycheck-to-Paycheck Living: While inflation plays a role in this financial strain, the article notes that nonessential spending, such as travel, dining out, and subscription services, also contributes. About 21% of paycheck-to-paycheck consumers cite nonessential spending as a factor.
Basic Expenses vs. Income: The piece delves into the breakdown of expenses for a typical U.S. worker, showing that essential costs such as rent, food, travel, and healthcare often consume a significant portion of their income.
Rising Cost of Living and Savings: The year-over-year increase in people living paycheck to paycheck underscores the challenges individuals face in managing rising living costs while attempting to save.
Aimee Picchi, the author, is an associate managing editor at CBS MoneyWatch, recognized for her expertise in business and personal finance. Her prior experience at Bloomberg News and other reputable outlets adds credibility to the analysis presented in the article.
Understanding these concepts is crucial for anyone navigating personal finance. It underscores the importance of budgeting, managing debt, and making informed financial decisions to achieve stability, regardless of income level.
Inflation has led to "an outright destruction of wages" for Americans whose pay hasn't kept up with inflation, Sarah Foster, Bankrate
Bankrate
Bankrate, LLC is a consumer financial services company based in New York City. Bankrate.com, perhaps its best-known brand, is a personal finance website.
Persistent inflation and increasing prices for essential items, from groceries and utilities to fuel, have left most Americans treading water financially in recent years. And 2023 was no different. As of November, over 60% of Americans were living paycheck to paycheck, with 20% struggling to pay their monthly bills.
One reason many workers might feel like they're living paycheck to paycheck: About 1 in 4 (or 24 percent) feel that they are not compensated fairly for their work, while 19 percent feel underpaid compared to their peers with the same work experience and qualifications.
More than 60% of Americans live paycheck to paycheck as of September 2023, according to a LendingClub report. Even people in higher income brackets are affected.
According to PYMNTS Intelligence, 62% of U.S. consumers now live paycheck to paycheck, and that includes 48% of consumers earning more than $100,000 annually.
"Paycheck to paycheck" is an informal expression describing someone's inability to pay for living expenses if they lost their income. People living paycheck to paycheck are sometimes referred to as the working poor.
Over one-third of American families earn $100,000 or more
The U.S. Census Bureau found that 37.1% of U.S. households earned at least $100,000 in 2022. Here's a more detailed breakdown of six-figure income brackets and the percentage of households in each one: $100,000 to $149,999: 16.9%
To make matters worse, the cost of housing, utilities, groceries, and more has reached new heights. The US Bureau of Labor Statistics indicated that the shock to food and energy prices, supply chain issues, and an increased demand for products all contributed to the sharp rise in inflation.
But that feat isn't easy for many Americans — 64% of whom, according to the latest LendingTree survey of more than 2,000 U.S. consumers, are living paycheck to paycheck at least periodically. (Almost half, at 46%, live this way all the time.)
Key Takeaways. The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).
59% of Americans are uncomfortable with their level of emergency savings, as of May 2024 polling, including 32% who are very uncomfortable and 27% who are somewhat uncomfortable. But many have no savings at all. 27% of U.S. adults have no emergency savings, as of May 2024 polling — the highest percentage since 2020.
Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you're in the top 1% if you earn $819,324 or more each year.
Considering that the median household income in the United States is around $68,703, a six-figure salary is significantly higher than the median. This suggests that earning a six-figure income places individuals or households above the average income level and allows for a higher standard of living.
The middle class could use some rebranding considering that people who earn a very wide range of income, from around $50,000 to $150,000, are often all lumped into the same category. A general rule of thumb is that being middle class means to earn two-thirds to double the average income of a region or city.
Nearly half of Americans (44 percent) are not paid a living wage for their labor, which can be defined as the income necessary for a person or family to not only meet their basic needs, such as food and shelter, but also provide stability and financial independence needed for a good quality of life.
78% of Americans are living paycheck to paycheck. Basically, that means almost 8 out of 10 people probably can't afford the home they're living in and the car they're driving. They might not even have the cash to cover the next emergency that pops up. Your income is your most important wealth-building tool.
Introduction: My name is Terence Hammes MD, I am a inexpensive, energetic, jolly, faithful, cheerful, proud, rich person who loves writing and wants to share my knowledge and understanding with you.
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