With inflation still hovering near its highest levels in 40 years, it is becoming increasingly difficult for workers at all income levels to make ends meet.
The Consumer Price Index, a key inflation measure, rose 8.3% in April from a year ago, according to the latest data from the US Department of Labor. Although it is slightly lower than the peak of March, it is still the biggest jump Since the summer of 1982.
While wage growth High by historical standardsIt is not keeping pace with the rising cost of living.
As of April, 61% of consumers said they now live by paying paycheck to paycheck, according to a LendingClub Report.
The report found that even high-income earners are under severe stress. Among those earning $250,000 or more, 36 percent said they live off their paychecks for a wage.
“Earning a quarter of a million dollars a year is more than five times the national average and clearly a high income,” said Anuj Nayar, LendingClub’s financial health officer. “You should be surprised by the fact that a third of them live on paycheck to paycheck.
“Those high-income earners have an average FICO score of 758,” Nayar added. “They are creditworthy but have higher financial commitments and are more likely to leverage their capital to finance their lives.”
The survey said that consumers who struggle to meet the expenses of their daily lifestyle tend to rely more on credit cards and carry higher monthly balances which puts them at financial risk.
“I’ve seen families by all means fall into this trap,” said Joe Borman, certified financial planner and senior financial planning advisor at Fidelity’s eMoney Advisor.
“If the problem is caused by spending – or overspending – consider following the 50-20-30 rule,” he advised.
“Using this general rule, you allocate after-tax income as follows: 50% on needs, 30% on wants, and allocate the remaining 20% to savings and/or debt reduction, such as paying off a credit card.”
Overall, credit card balances increased year-over-year, reaching 841 billion dollars in the first three months of 2022, according to a separate report from the Federal Reserve Bank of New York.
At that rate, balances could soon reach record levels amid soaring prices for gas, groceries and housing, among other essentials, according to Ted Rossman, senior industry analyst at CreditCards.com.
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