With inflation driving up the cost of almost everything, workers in all income levels — including those who make more than $250,000 a year — report they are living paycheck to paycheck and devoting almost all their salaries to expenses with little or nothing left at the end of the month.
Paycheck to paycheck generally describes people who mostly devote their salaries to expenses and would be unable to meet financial obligations if unemployed. They may also have limited or no savings and are at more financial risk if suddenly unemployed than those who have a cushion of savings.
Although average hourly earnings are up 5.1 percent from a year ago, prices are outpacing salaries, especially for groceries and lodging, so paychecks are falling short.
The Consumer Price Index, which measures the average change in prices for consumer goods and services, jumped a higher-than-expected 9.1 percent in June, the fastest pace since 1981.
Financial distress is more typically associated with lower-income earners, but more than one in three survey respondents who earn $250,000 or more annually (36 percent) said they live paycheck to paycheck, according to a new “Reality Check: The Paycheck-To-Paycheck Report,” a collaboration between PYMNTS and the loan-trading platform LendingClub.
Researchers polled 4,048 U.S. consumers from April 6 to April 13 and analyzed other economic data related to the financial lifestyle of high-income U.S consumers who live paycheck to paycheck and the impact on their ability to access credit and other expense management.
The research found that 61 percent of survey respondents lived paycheck to paycheck in April 2022 compared to 52 percent in April 2021.
“This increase means approximately three in five U.S. consumers devote nearly all their salaries to expenses with little to nothing left over at the end of the month,” Pymnts said in a press release.
On the same survey, other data found that as of April 2022, 36 percent of consumers earning $100,000 to $150,000, 31 percent earning $150,000 to $200,000, 26 percent earning $200,000 to $250,000 and 24 percent earning more than $250,000 were living paycheck to paycheck.
Another recent survey from consulting firm Willis Towers Watson estimated that 36 percent of those earning $100,000 or more said they were living paycheck to paycheck, CNBC reported.
A key inflation gauge, the Personal Consumption Expenditures Price Index, which measures the price change in goods and services consumed by all households, jumped 6.8 percent, the biggest 12-month increase since 1982.
All in all, the data shows Americans are spending more on monthly expenses, dipping into savings, relying more on credit cards and going deeper into debt, making them financially vulnerable, the survey said. Average savings among all consumers dropped from $11,274 in May to $10,757 in June, LendingClub found.
“We don’t have a good agreed-upon definition for what living paycheck to paycheck really means,” Peter Coy wrote in an opinion piece for the New York Times.
Coy cited other surveys with less dire results including one conducted by MagnifyMoney, a unit of LendingTree, that found “50 percent of working Americans say they live paycheck to paycheck, meaning they have no money left after all expenses are paid.”
Twitter users seemed in agreement that a better definition is needed for “paycheck to paycheck.”