As inflation is still near a 40-year high, it is becoming increasingly difficult for workers of all income levels to meet their needs.
The consumer price index, a key inflation metric, rose 8.3% in April from a year earlier, according to the latest data from the US Department of Labor. Although it was slightly below March’s peak, it made the biggest jump since the summer of 1982,
while the salary increase is higher than historical standardsThis is not commensurate with the increased cost of living.
When wages grow at a slower rate than inflation, paychecks won’t go that far at the grocery store or gas pump Two areas of the budget that have been particularly hard hit.
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As of April, 61% of consumers said they are now living paycheck to paycheck, a . According to LendingClub Report,
Even the top earners are pulled thin, the report found. Of those earning $250,000 or more, 36% said they lived paycheck to paycheck.
“Earnings of a quarter million dollars a year are five times the national average and clearly higher incomes,” said Anuj Nair, financial health officer at LendingClub. “The fact that a third of them are living paycheck to paycheck should surprise you.
“The average FICO score of these high earners is 758,” Nair said. “They are creditworthy but have higher financial obligations and are more likely to leverage their capital to finance their lives.”
The survey said that consumers who are struggling to afford their daily lifestyle rely more on credit cards and have higher monthly balances, leaving them financially vulnerable.
I have seen all kinds of families falling into this trap.
Joe Buhrman
Senior Financial Planning Advisor at Fidelity’s Emoney Advisors
“I’ve seen all kinds of homes fall into this trap,” said Joe Buhrmann, a certified financial planner and senior financial planning advisor at Fidelity’s Emoney Advisor.
“If the issue is the result of overspending — or overspending — consider following the 50-20-30 rule,” he advises.
“With this rule of thumb, you allocate your after-tax income as follows: 50% to needs, 30% to wants, and the remaining 20% to savings and/or debt reduction, such as credit Card payment.”
Overall, credit card balances increased year on year, reaching $841 billion According to a separate report from the Federal Reserve Bank of New York, in the first three months of 2022.
At this rate, balances could soon reach record levels amid high prices for gas, groceries and housing, according to Ted Rossman, a senior industry analyst at Creditcards.com.
Anyone with a revolving loan will also see an annual percentage rate on their Credit Card as high head federal Reserve growth Rate of interest Trying to reduce rising prices.