Nearly Half of Americans Earning Over $100K Now Report Living Paycheck to Paycheck — Here’s the Consequences

Nearly Half of Americans Earning Over $100K Now Report Living Paycheck to Paycheck — Here’s the Consequences

Americans are still dealing with high inflation (the consumer price index was 8.3% in August) and even the rich are teetering on the brink.

About 6 in 10 Americans were living paycheck to paycheck in August, according to a recent report produced by commerce data platform PYMNTS and personal loan website LendingClub.

And even those earning six-figure incomes feel the financial pressure of inflation.

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About 45% of Americans earning more than $100,000 also lived paycheck to paycheck, compared to 38% who were in the same cycle last year.

There are financial consequences ahead for the millions of Americans who barely have enough cash to cover basic expenses.

Purchasing power is declining

Although wages have risen across the board, they haven’t done so fast enough to keep up with inflation, according to an October report from the Federal Reserve Bank of Dallas.

For most employed workers, the average decline in real wages when inflation is taken into account this year is more than 8.5%, the biggest pay cut in 25 years, the researchers said. If you are one of them, this means that your purchasing power is being severely eroded.

Nearly three-quarters of those surveyed in the PYMNTS study noted increases in their monthly bills, with many pointing to the cost of fuel and food.

Credit card debt is increasing

As Americans struggle to keep up with the rising costs of consumer goods, many are turning to credit cards to fill the void.

Credit card balances rose $46 billion in the second quarter of 2022, the Federal Reserve Bank of New York reported in August. This could continue to increase as the check-to-check lifestyle becomes more prevalent.

The PYMNTS study also finds that 67% of people living paycheck to paycheck with no problem paying bills say they made credit card payments in the past 90 days, even though a quarter are unaware of interest rates .

Read more: How much money do I need to earn to be in the top 1%, 5%, and 10% in the US? It may be less than you think

The federal fund rate just got another hike from the central bank in September, which means interest rates on your credit card outstanding balances are rising, too.

According to the most recent data from LendingTree, the average credit card interest rate in the US rose to 21.59%, up from 21.40% the previous month.

Savings are dwindling

Many consumers barely make ends meet, let alone have room at the end of the month to fill their savings accounts.

The most recent data from the Federal Reserve Bank of St. Louis shows that the US personal savings rate fell to 3.5% in August, compared to 9.5% in the same period last year. The rate refers to personal savings as the percentage of income left over after paying taxes and spending money.

And in life insurance company New York Life’s Wealth Watch Survey, respondents said they dipped into their savings just to cover basic everyday expenses, pulling in an average of $616.73.

Americans constantly depleting their cash reserves to offset the effects of inflation are becoming a major concern as experts predict a recession could hit sometime in 2023.

It’s important to have some emergency funds set aside in case of an unexpected financial crisis, such as a job loss or pay cut.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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