Ranks of Paycheck-to-Paycheck Consumers Expected to Swell in 2022

The data is sobering.

Research by PYMNTS and LendingClub found that 61% of consumers were living paycheck to paycheck in December, a figure that has been rising steadily since May and is now approaching pre-pandemic levels.

The impact cuts across all demographics.

Anuj Nayar, financial health officer at LendingClub, told PYMNTS in an interview that the numbers are likely to grow as macro-economic factors — especially inflation — continue to stymie attempts to save money for the proverbial rainy day.

“It’s not good news,” Nayar said.

Incomes, in a real sense, have been stagnant, and raises aren’t keeping pace with the cost of living tied to healthcare, housing and education. Food, gas and basic services are eating up more income than ever (the latest inflation readings from the government came in at 7.5%, the highest rates in decades).

“There’s a lot of pressure as people are just trying to get back to normal,” he said.

And it’s not just lower-income cohorts who are being affected. The latest paycheck-to-paycheck stats show that 43% of consumers making more than $100,000 struggle to make ends meet, up from about 39% in the summer of 2021.

Money’s Getting Stretched Thin

“The reality is for a lot of Americans, the more money you make — it’s a huge factor in how complex your financial life becomes,” said Nayar, who observed, too, that earning $100,000 a year means something different depending on whether you live in New York City or Boise, Idaho.

At the end of the day, most people are just trying to pay their bills, take care of their loved ones and have enough to save for an emergency, Nayar said.

As for savings? Well, savings are serving as a cash management solution — a buffer against shocks, albeit a solution that dwindles a bit when pitted against such an inflationary environment.

Millennials, according to the PYMNTS data, had saved up more than three times the amount saved by Generation Z consumers. It may seem like an odd incongruity that two groups so close together in age should have such a wide savings gulf.

Gen Z consumers who live paycheck to paycheck and have problems paying their monthly bills report the lowest average savings at just $1,158, while millennials living paycheck to paycheck with issues paying their monthly bills report the highest savings, with an average of $3,731.

But as Nayar said, “these cohorts hide a huge amount of complexity. The oldest millennials (the bridge millennials) are 41. Your life experiences in your 30s are very different from your life experiences in your 20s.”

Many millennials, he said, were just entering the workforce during the financial crisis in 2008 and are now hitting their peak earnings years. In an age where the overwhelming majority of crypto is owned by the youngest generations, and “casino capitalism” is evident through platforms like Robinhood, the need for financial literacy is urgent.

“People are living into their 80s or 90s and stopping their savings in their 60s or 70s,” Nayar said. “To stop putting away money for the last several decades of your life eliminates the power of compound interest.”

Looking ahead, Nayar predicted that inflation will continue to be a key concern. As that happens, consumers will look toward alternatives to help them build some insulation from economic shocks. (LendingClub’s platform, he said, can help.)

“I hate to say this, but that 61% number that we reported as the percentage of consumers living paycheck to paycheck — well, I think that is going to increase,” Nayar told PYMNTS, “and the savings cushion is going to go down.”