As rising prices continue to weigh on households, more families are feeling stretched thin.
As of November, 63% of Americans were living paycheck to paycheck, according to LendingClub’s monthly report, up from 60% the previous month and near an all-time high of 64% in March.
LendingClub found that even high earners are under pressure. Of those earning more than six figures, 47% reported living paycheck to paycheck, up from 43% last month.
“Americans are strapped for cash and their daily expenses continue to outstrip their income, affecting their ability to save and plan,” said Anuj Nayar, LendingClub’s chief financial health officer.
More than personal finance.
Here is inflation in November 2022
401(k) ‘hardship’ withdrawals hit record high, Vanguard says
“Risky behavior” leads to lower credit scores
Although consumer prices rose less than expected in November, persistent inflation led to a decline in real wages.
According to the latest reading from the US Bureau of Labor Statistics, real average hourly earnings fell 1.9% from last year.
This leaves many Americans in a bind, as inflation and higher prices force more people to dip into their cash reserves or rely on credit just as interest rates are rising at their fastest pace in decades.
Already, credit card balances are rising, rising 15% in the last quarter, the biggest annual jump in 20 years.
Meanwhile, credit card interest rates are now over 19% on average, an all-time high, and still rising.
Compared to a year ago, 32% of all consumers are saving less than they used to, LendingClub found. Of those who said they were struggling financially, half were unable to save and had no savings at all.
A third of working adults, 33%, feel somewhat or very uncomfortable about their ability to pay $400 in emergency expenses, a separate survey by the Bipartisan Policy Center also found. Almost 8% will not be able to afford it at all.
“With average savings stagnating, if not declining, setting financial goals for the new year will become increasingly difficult for many consumers,” Nayar said.
How to get your finances on track
“These challenges won’t go away as we turn the calendar, so it’s best to put a plan in place to mitigate ongoing risks to financial stability, such as inflation and market volatility, in the year ahead,” said Kelly Lavin, Vice President of Consumer Affairs. insights into Allianz Life.
“It helps to have a documented strategy for your money, especially one developed with the help of a financial professional, to review when you’re feeling financially overwhelmed,” Lavigne said.
Thomas Racca, manager of the personal finance team at Navy Federal Credit Union, offers these four tips to keep your finances in check:
- Do your own audit. Start with a list of all your assets and liabilities, Rakka advised. “You won’t be able to make decisions for next year if you don’t consider where you are now,” he said.
- Create a savings plan. Prioritize a plan to put money aside each month. Even putting a little money into your savings account, emergency fund or tax-advantaged retirement account “will make a huge difference in the long run,” Rakka said.
- Reassess your budget. Check your proposed budget regularly to see how close you are to it. “You’ll be more on track with your financial goals if you’re honest about what you have and can spend,” Rakka added.
- Make changes if necessary. Finally, don’t be afraid to make adjustments. “If you thought you’d spend $50 a week on groceries, but you’re actually spending more than $70, find ways to re-prioritize your spending to make up the $20 difference,” Rakka said.
In turn, the Federal Reserve raised its target federal funds rate by half a point to its highest level in 15 years.
The US central bank also indicated that further growth is expected in 2023 before inflation shows clear signs of slowing.
During a news conference, Chairman Jerome Powell said it was important to continue the fight against inflation so that expectations of higher prices did not deepen.
LendingClub’s Paycheck Report is based on a November survey of nearly 4,000 US adults.
Subscribe to CNBC on YouTube.