60% of Americans are living paycheck to paycheck, Report says

60% of Americans are living paycheck to paycheck, Report says
Photo by Blake Wisz / Unsplash

As we approach the holiday season, a recent report from LendingClub shines a light on the financial challenges that Americans are grappling with. The findings reveal that 60% of the population is living paycheck to paycheck, and those earning less than $50,000 annually are feeling the impact the most, with a significant 76% rate. Despite these economic hardships, 77% of consumers are expected to participate in holiday shopping, although there's a slight decrease compared to the previous year.

This study, part of LendingClub's Reality Check series, underscores the economic pressures faced by consumers. A noteworthy 38% of respondents express feeling financially worse off than the previous year, and 58% of Americans acknowledge that inflation is outpacing wage growth. Millennials, in particular, are feeling the pinch of inflation, and many are anticipating overspending during the holiday season.

In response to these concerns, spending plans suggest a cautious approach. Credit card usage for holiday purchases is expected to be 27%, while projections for Buy Now, Pay Later (BNPL) services stand at 20%. Interestingly, credit-financed purchases have dropped to just 13%.

Despite an overall reduction in credit usage for holiday expenses, credit cards remain the favored financing option. However, there's a growing trend of combining credit with savings to fund festive spending. Generation Z consumers, in particular, are inclined to dip into their savings, with 53% planning to use more than half for holiday expenses.

Alia Dudum, Money Expert at LendingClub, urges consumers to be mindful of overspending and to adopt responsible budgeting practices to avoid financial strain after the holidays. With 37% of consumers planning to dip into their savings and heightened anxiety about the economic outlook, it's clear that, while the festive spirit remains strong, many will approach this season with financial caution and uncertainty.

Americans are running out of emergency savings

A recent survey by CNBC Your Money in August found that a whopping 74% of Americans are feeling stressed about their finances. This stress is fueled by factors like inflation, rising interest rates, and a general lack of savings.

In November last year, a survey by the finance website MagnifyMoney painted a concerning picture. Out of over 1,000 U.S. adults surveyed, two-thirds couldn't add any money to their savings for that month, and a significant 23% had no savings at all.

The CNBC survey highlighted a worrying trend - 61% of Americans are now living paycheck to paycheck, a jump from 58% in March.

Reports from sources like LendingClub indicate that many households have been dipping into their savings in recent months. Interestingly, more than one-third of consumers are planning to dig even deeper into their savings to cover holiday spending, according to LendingClub's findings. It seems the financial landscape is proving challenging for a significant portion of the population, reflecting the impact of economic factors on individual financial well-being.

Smart money moves you'll attempt to save more

Just as it gets harder to juggle job losses and pay cuts with bills and other expenses, it’s becoming more vital than ever to store money in an emergency account, experts say.

The general rule of thumb is to line aside 3 to six months’ worth of living expenses for an unexpected layoff, medical scare, or an upscale issue together with your car or home.

But the less stable your job, the more you ought to save: “Now is that the time to pay close attention,” Aaron Ansel, the chief military officer of Puraka Masks, told Grow in October. “Is demand for your skill set waxing or waning? If it’s waning … now could be an honest time to pivot.”

Assuming you’re still employed, a method to seek out extra money is by curtailing on the small things: Consider trimming right down to only one or two streaming services at a time and cancel the other subscriptions you aren’t using. Don’t splurge on pricey gifts for the vacations . Budget and resist the urge to shop for belongings you don’t need.

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