Half of Americans earning over $100K per live paycheck to paycheck

Half of Americans earning over $100K per live paycheck to paycheck

Half of Americans earning over $100K per live paycheck to paycheck

Original report from Charlotte Morabito

If you feel your earnings are gone the moment they’re deposited, you’re not alone. A LendingClub study as of September 2023 states over 60% of folks in the U.S. rely on each paycheck to get by, including those earning above $100,000 annually.

As earnings rise, many fall into the trap of gradually upping their spending – this is often termed ‘lifestyle inflation.’

“I think people hold these benchmarks in their mind [of], if I reach this position or I get this promotion or I make it to this age, then I can live this life, or then I deserve to have these things,” Clinical psychologist Sabrina Romanoff said. “Then they kind of go a little crazy or go a little wild on it, and then it becomes like a trade-off, like they only can enjoy their present happiness and they’re not able to save or plan for the future.”

Despite wanting to splurge, numerous Americans struggle as their earnings haven’t matched the increasing living expenses.

“The idea that people save and they just hit a point where they feel like they deserve [to spend more]; I fully disagree with that,” said Saprina Allen, a budgeting coach.

“When most people don’t have $1,000 in the bank like most people cannot handle a tire blowout or they’re going to put it on credit,” she added.

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Understanding Lifestyle Inflation

Allen categorizes lifestyle inflation in two ways. First, it’s about splurging on luxury items like expensive cars and high-end goods. Second, it covers basic necessities that are skipped by those living on a tight budget, such as regular dental visits or car maintenance.

“There was a time in my life when [an] oil change was just like, not even a priority,” Allen said. “I’m trying to keep tires on my car. I’m trying to keep it running. I’m trying to keep the registration paid. I’m not concerned about an oil change.”

Also read: From Home to Fortune: The Wealth Academy Roadmap

Nearly half of Americans (46%) carry credit card debt due to unexpected costs, as reported by a CreditCards.com study in September 2022. Relying solely on each paycheck can lead to this high-interest debt. Advisors suggest saving an emergency fund covering 3-6 months of expenses.

“The goal here is to find balance,” Romanoff said. “It’s about enjoying your life, but not being so focused in a future that hasn’t come yet or too much focus on the present. The idea is having your cake and eating it too. You can have bites of your cake right now and then save some cake for later.”

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