Americans are still struggling with high inflation – the CPI was 8.3% in August – and even the rich are on the brink.
About 6 in 10 Americans were living paycheck to paycheck in August, according to a recent report by trading data platform PYMNTS and personal loan website LendingClub.
And even those making six-figure incomes are feeling the financial pressures of inflation.
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About 45% of Americans earning over $100,000 were also living paycheck to paycheck – compared to 38% who were in the same cycle last year.
Financial consequences lie ahead as millions of Americans barely have enough cash to cover their basic expenses.
Purchasing power falls
Although wages have generally been rising, they have not risen fast enough to keep up with inflation, according to an October report from the Federal Reserve Bank of Dallas.
For the majority of workers, the average drop in inflation-adjusted real wages this year is more than 8.5% — the largest pay cut in 25 years, the researchers said. If you are one of them, it means that your purchasing power is severely eroded.
Nearly three-quarters of respondents in the PYMNTS study noted increases in their monthly bills, and many cited fuel and grocery costs.
Credit card debt is increasing
As Americans struggle to keep up with the rising cost of consumer goods, many are turning to credit cards to fill the gap.
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 paycheck-to-paycheck lifestyle becomes more widespread.
The PYMNTS study also shows that 67% of those who live paycheck to paycheck with no trouble paying bills say they’ve made credit card payments in the past 90 days — even if a quarter don’t know the interest rates.
Continue reading: How much money do I need to make to be in the top 1%, 5%, and 10% in the US? It might be less than you think
The federal fund rate was hit by another hike by the central bank just back in September, meaning interest rates on your outstanding credit card balances are also rising.
According to the latest data from LendingTree, the average credit card interest rate in the US has risen to 21.59% — up from 21.40% the previous month.
Savings are dwindling
Many consumers are barely making ends meet — let alone having room to top up their savings accounts at the end of the month.
The latest data from the Federal Reserve Bank of St. Louis shows that the US personal savings rate fell to 3.5% in August, down from 9.5% at the same time last year. The rate refers to personal savings as a percentage of income left over after you’ve paid taxes and spent money.
And in life insurance company New York Life’s Wealth Watch survey, respondents said they only used their savings to cover their basic everyday expenses — an average of $616.73.
That Americans are steadily shedding their cash reserves to offset the effects of inflation is becoming a major concern as experts predict a recession could hit sometime in 2023.
It is important in the event of an unexpected financial crisis, such as B. job loss or salary cuts, to have saved some emergency capital.
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This article is informational only and should not be construed as advice. It is provided without any guarantee.
