Many cash-strapped Americans feel stung as the cost of living soars
Benjamin Gibson, a pharmacist in San Antonio, Texas, earns over $100,000 a year and owns his own home.
And yet Gibson, 40, struggles to afford basic necessities, including groceries and gas.
“When you’re used to spending a few dollars on fruits and vegetables and then paying a lot more, that stresses you out,” he said. “I actually went to the dollar store to buy some asparagus.”
With about $5,000 in an emergency fund and no 401(k) plan, Gibson says he weighs every purchase, from dinner at a restaurant to a recent oil change.
“I cringe every time I pay by credit card,” he said.
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About 71% of Americans said they felt their wages couldn’t keep up with inflation, according to a report by Experian.
Additionally, 29% of respondents said they barely expect to make ends meet this month and about the same number predict that their spending will likely exceed their budget in the coming months.
“People struggle to understand how to address these challenges,” said Rod Griffin, senior director at Experian. “It’s a huge concern.”
About 62% of the US population lives paycheck to paycheck, according to a separate survey by loan club found.
Even the wealthiest Americans are struggling to get by. Half of workers earning more than $100,000 said they had almost nothing left at the end of the month, according to LendingClub’s survey of 3,250 adults.
“The challenge is that it forces them to drain their savings and their safety net and that can cause other problems,” said Simon Blanchard, associate professor at Georgetown University’s McDonough School of Business.
“They become financially vulnerable,” he said.
A buoyant labor market, low unemployment rate, and historically high savings rate have given many Americans a boost heading into 2022, making them more willing to pay higher prices for goods and services.
But while wages have risen, they have not kept pace with inflation, which is now rising at the fastest annual rate in about four decades.
Real earnings rose 5.6% from a year ago, while real average hourly earnings saw a seasonally-adjusted decline of 0.8% last month, according to data from the Bureau of Labor Statistics.
“There’s a presumption that as the cost of goods goes up, revenue tends to follow, which isn’t always true,” Blanchard said.
Taylor Byers, 29, was recently named director of Boca Communications in San Francisco, but even after the promotion and her pay rise, she said she was still struggling to make ends meet.
Byers, who lives with her fiancé in Orange County, Calif., and works remotely, said all of her income goes toward her expenses.
“I’m not in a position to save at all,” she said, noting that she was trying to save money for her upcoming wedding.
“A big chunk of my paycheck goes to rent – probably 40%. I have a car payment, credit card bills, and now gas. Even Netflix costs more, I feel like that every bill has gone up,” she said.
“How do you follow this?”
Taylor Byers with her fiancé.
Source: Taylor Byer
To rebuild some financial security, Rob Burnette, financial advisor and CEO of Outlook Financial Center based in Troy, Ohio, advises clients to start with a monthly financial plan, listing income and expenses. Then, he advises them to identify problem areas of spending that are not a necessity.
“Eliminate these areas completely until you can afford them again,” he said. “You may even find that you don’t miss them once they’re gone.”
Also, people should start paying off their high-interest credit card debt by switching to a zero-rate balance transfer credit card or consolidating that expensive debt into a higher-interest card. low. home equity loan or personal loan. “Don’t buy items on credit if you can’t pay for them in cash,” he warned.
Plus, ditch the mentality of “keeping up with the Joneses,” Burnette said, even if it means selling an expensive car or downsizing at a smaller house.
Once you’re on track to make these changes, you may be able to start allocating a percentage of your monthly income to savings, including an emergency fund and a retirement plan.