An inflationary shock is adding to the difficulties of consumers living paycheck-to-paycheck, often with little or no savings, with challenging life events compounding these problems.
For the latest study in a groundbreaking series on the true extent of this widespread economic fact of life, New Reality Check: The Paycheck-To-Paycheck Report: The Financial Distress Factors Edition, a PYMNTS and LendingClub collaboration, looks at these life events — from job loss to retirement and more — to find how such changes further impact consumer financials.
The new data “reveals that 65% of consumers living paycheck to paycheck have experienced at least one financially stressful event in the past three years, with sudden income disruptions, such as losing a job, being the most common,” per this study of over 3,000 consumers.
Get Your Copy: New Reality Check: The Paycheck-To-Paycheck Report: The Financial Distress Factors Edition
Examining the occurrence of life-cycle events including divorce, the birth of a child or retirement, and financially life-altering events, such as job loss, illness, disability or unexpected expenses like lawsuits, we found these stressors common, though their effects can differ widely.
The 65% of consumers living paycheck-to-paycheck underwent events causing financial distress in the past three years, and “paycheck-to-paycheck consumers struggling to pay bills each month are particularly likely to have experienced such occurrences, at 77%,” per the study.
Our research found that nearly half of all paycheck-to-paycheck consumers say their salary “only covers basic expenses and is a reason behind their financial distress, with those without difficulties paying bills slightly more likely to say so at 49%.”
As a result, “19% of consumers living paycheck to paycheck have spent more than what they have made in the last six months, compared to 2.2% among consumers not living paycheck to paycheck. Among those earning more than $250,000 a year, 7% have spent more than what they have made in the last six months” according to the latest findings.
As challenges posed by paycheck-to-paycheck living seep into other areas of a consumer’s finances — like credit usage — the new data show some alarming trends that indicate many consumers need less costly alternatives to making ends meet than using credit cards.
Per the study, “Consumers living paycheck to paycheck with issues paying bills use credit cards less, but they tend to carry higher monthly credit card balances than the average consumer, independent of income. Only 49% of consumers living paycheck to paycheck with issues paying bills have made credit card payments in the last 90 days, while 63% of consumers living paycheck to paycheck without difficulties paying and 74% of those not living paycheck to paycheck have done so.”
See It Now: New Reality Check: The Paycheck-To-Paycheck Report: The Financial Distress Factors Edition
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