The Paycheck-to-Paycheck Struggle is Real
Despite a decline in inflation rates, many Americans are still living paycheck to paycheck. According to a recent Bank of America survey, almost half of respondents agreed with the statement, “I am living paycheck to paycheck.” This financial struggle affects households across various income levels, from those earning less than $50,000 to those with incomes exceeding $150,000.
The Numbers Don’t Lie
A closer look at the data reveals that 26% of households are indeed living paycheck to paycheck, based on their spending on necessities such as gas, food, and utilities. This percentage has increased since 2019, with 35% of households earning less than $50,000 and 20% of households with incomes over $150,000 struggling to make ends meet.
The Vibecession Effect
Prolonged negative feelings about the economy, dubbed the “vibecession,” have contributed to this financial strain. Inflation remains a top concern for voters, and the pressure is felt across the board. As David Tinsley, senior economist at Bank of America Institute, notes, “It’s not surprising that everyday necessity spending is swallowing up almost some people’s entire income.”
Wage Growth Isn’t Enough
While higher wage growth has helped offset higher prices for essential items, it’s not enough to counter the inflation faced by many individuals and families. Average hourly earnings may have increased, but the benefits aren’t evenly distributed. As Peter Traphagen, managing director at Traphagen CPAs & Wealth Advisors, explains, “Those of us who weren’t asset holders really felt the squeeze on the paycheck, because you didn’t get the asset appreciation and you got cost of living increase.”
The Middle-Class Squeeze
Maintaining a middle-class household has become increasingly difficult. Nick Roth, a financial planner at Foster & Motley, notes that “the American Dream of sending your kids to a good school and taking care of your family and living even in a modest home requires a potentially significantly larger income than it did even 10, 20 years ago.”
Finding Wiggle Room
To alleviate the financial strain, experts recommend paying off debt balances and building a cash cushion through automatic savings transfers. By prioritizing long-term goals, such as retirement investing, individuals and families can work towards a more stable financial future. As Roth advises, “While it may not feel like a savings item, you are improving your net worth by paying off debt.”
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