LendingClub: Paycheck-to-Paycheck Lifestyle Is Cash-Strapped Americans’ New Norm

Increasing costs on everyday items such as groceries, utilities and insurance continue to strain household budgets across the United States.

More than 60% of Americans were living paycheck to paycheck as of June, a trend that Amber Carroll, senior vice president of membership and lifecycle strategy at LendingClub, said is here to stay.

“The paycheck-to-paycheck lifestyle is beginning to be the norm,” Carroll told PYMNTS in an interview, pointing to data from an ongoing PYMNTS series — now in its third year — that shows that even high-income households with over $100,000 in earnings, not just low-income earners, are feeling the sting of inflation.

Overall, the tough economic climate has led to a decline in consumer purchasing power, regardless of earnings, with more households opting to spend more on essentials than on non-essential goods.

It’s a choice that does little to grow shoppers’ savings, Carroll said.

“Consumers are adjusting their spending behaviors, but this is allowing them to tread water, not get ahead,” she said.

She further highlighted a direct correlation between the impact of household size on financial lifestyle and well-being, with consumers living alone faring better financially with less credit card debt than couples with children and those living with friends or housemates.

As the latest study showed, consumers living with children younger than 18 average outstanding credit card balances that are 50% above those of consumers who live alone. They are also more likely to have recently used installment repayments.

Millennials, many of whom are in their peak child-rearing years, also tend to be more financially vulnerable because they have a higher concentration of households with four or more members, while more than 52% of Generation Z consumers, who can’t afford to live independently, resort to borrowing money to make ends meet.

Ultimately, Carroll said, the higher the household size, the more consumers must find ways to keep their heads above water.

“Families that have more dependents to care for are going to have to rely on other means to manage, especially in these times of rising costs,” she said.

Going Beyond Financial Literacy

Despite the ongoing economic challenges, U.S. consumers have remained resilient, Carroll said, with many finding ways to adapt and change spending habits to make ends meet in an uncertain economy.

But while responsible financial behavior and having financial literacy around debt, budgeting and investing can help weather financial setbacks, she said relying on that knowledge alone will not reduce the number of consumers living paycheck to paycheck today.

Instead, she said her best advice to consumers looking to improve financial stability is to “prioritize paying off high-interest debt such as credit cards and minimize where possible the need to revolve balances on credit cards.”

“And then find opportunities to enhance savings,” she added, pointing to banks such as LendingClub that have lower loan rates and provide access to high-yield savings accounts as the standard.

“If you have money sitting in a savings account that doesn’t yield at least 4.5% [annual percentage yield (APY)], consider changing to one that does so you can passively make more and then, where possible, automatically fuel that account,” Carroll said. “Every little bit helps.”