Share of Americans living paycheck to paycheck jumped in 2022

Shoppers in San Francisco on December 21, 2022.

David Paul Morris | Bloomberg | Getty Images

Month of high inflation have weighed heavy on households.

In December, 64% of Americans were living paycheck to paycheck, according to a recent LendingClub Report – compared to 61% a year earlier and in line with the first historic record reached in March 2020.

For the first time, more than half of all six-figure earners also said they were overstretched, a jump from 42% a year ago.

“The effects of inflation are eating away at every American’s wallet and as the Fed’s efforts to rein in inflation drive up the cost of debt, we’re seeing near-record numbers of Americans living off a paycheck. to another,” said Anuj Nayar, financial health officer at LendingClub.

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For his part, the Federal Reserve is expected to announce its eighth straight rate hike this week political meeting.

Even though wage growth is high by historical standards, it is not keeping up with the increase in the cost of living, which was up in December 6.5% compared to the previous year.

This leaves many Americans in a bind as inflation and rising prices force more people to dip into cash reserves or rely on credit just as interest rates rise at the fastest pace. fastest for decades.

Other reports also show financial well-being is deteriorating overall.

How to get your budget back on track

1. Reduce expenses

Jenkin said some simple financial hacks can help, like grocery shopping less and reducing online shopping.

“Grocery stores are like Las Vegas; they’re there to separate you from your wallet,” he said. Meal planning is a way to narrow down your shopping list to the essentials of the week and save money.

Why U.S. Wages Don't Keep Up With Inflation

2. Boost your savings

The money you put aside should also work to your advantage, he said.

Although deposit rates are rising, even a high-yield savings account will not earn enough to meet the rising cost of living.

Jenkin recommends buying relatively risk-free short-term treasury bonds and stagger them to ensure you get the best rates, a strategy which involves holding bonds until the end of their term.

“It’s not a huge return but you’re not going to lose your money,” he said.

Another option is to buy I’m readingwhich are inflation-protected and virtually risk-free assets.

I bonds currently pay 6.89% annual interest on new purchases through April, down from the 9.62% annual rate offered from May to October 2022.

Still, it will work well as an inflation hedge for long-term savers. The downside is that you can’t redeem the I bonds for a year and you’ll pay the last three months in interest if redeemed before five years.

LendingClub’s paycheck report is based on a survey of nearly 4,000 American adults in December.

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