Home Financial consultant The richest Americans are living paycheck to paycheck after inflation spike

The richest Americans are living paycheck to paycheck after inflation spike

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With inflation still near 40-year highs, it is increasingly difficult for workers at all income levels to make ends meet.

The consumer price index, a key measure of inflation, rose 8.3% in April from a year ago, according to the latest data from the US Department of Labor. Although it fell slightly from the peak in March, it still marked the biggest jump since the summer of 1982.

Although wage growth is high by historical standards, it is not keeping pace with the increase in the cost of living.

When wages are growing at a slower rate than inflation, paychecks won’t go as far to the grocery store or the gas pump — two areas of the budget that have been particularly hard hit.

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In April, 61% of consumers said they now live paycheck to paycheck, according to a LendingClub Report.

Even the highest earners are under strain, the report says. Of those earning $250,000 or more, 36% reported living paycheck to paycheque.

“Earning a quarter of a million dollars a year is more than five times the national median and that’s clearly a high income,” said Anuj Nayar, financial health manager at LendingClub. “The fact that a third of them are living paycheck to paycheck should surprise you.

“These high-income individuals have an average FICO score of 758,” Nayar added. “They are creditworthy but they have higher financial obligations and are more likely to leverage their capital to fund their lives.”

Consumers who struggle to afford their daily lifestyles tend to rely more on credit cards and have higher monthly balances, making them financially vulnerable, the survey found.

I have seen households of all means fall into this trap.

Joe Buhrman

Senior Financial Planning Consultant at Fidelity’s eMoney Advisor

“I’ve seen households of all means fall into this trap,” said Joe Buhrmann, certified financial planner and senior financial planning consultant at Fidelity’s eMoney Advisor.

“If the problem is the result of spending — or overspending — consider following the 50-20-30 rule,” he advised.

“With this rule of thumb, you divide your after-tax income as follows: 50% needs, 30% wants, and allocate the remaining 20% ​​to savings and/or debt reduction, such as paying down of a credit card.”

Overall, credit card balances grew year-over-year, reaching $841 billion in the first three months of 2022, according to a separate report from the Federal Reserve Bank of New York.

At this rate, sales could soon reach record highs amid rising prices for gas, groceries and housing, among other necessities, according to Ted Rossman, senior industry analyst at CreditCards.com.

Anyone with revolving debt will also see the annual percentage rate on their credit card head higher as the Federal Reserve raises interest rates in an attempt to rein in rising prices.

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