KEY POINTS
- Overall, 61% of Americans now say they are living paycheck to paycheck, according to a recent report.
- Aside from income, where you live is the most important factor in determining whether you are stretched too thin.
- City dwellers are much more likely to feel financially strained.
Even as inflation cools, consumers still show signs of strain.
As of April, the share of adults feeling stretched too thin held nearly steady at 61%, according to a new LendingClub report.
However, high-income earners are increasingly under pressure, LendingClub found. Of those earning more than six figures, 49% reported living paycheck to paycheck, a jump from last year’s 42%.
Alternatively, the percentage of those earning less than $100,000 who reported living paycheck to paycheck remained steady or fell over the same period — moving slightly to 63% from 64% of those earning $50,000 to $100,000, and dropping to 73% from 80% of those earning less than $50,000.
Where you live determines your financial standing
Depending on where you live, a $100,000 income may not stretch that far, according to Anuj Nayar, LendingClub’s financial health officer.
A separate report by SmartAsset analyzed how far six figures will go in America’s 25 largest cities. In New York, for example, $100,000 amounts to just $35,791 after accounting for taxes and the high cost of living.
In contrast, a six-figure salary is worth much more in Memphis — roughly the equivalent of $86,444 due to a lower cost of living and no state income tax. Here’s a breakdown of how much you need to earn to afford to live in the country’s most popular cities.
In general, 69% of city dwellers live paycheck to paycheck, 25% more than their suburban counterparts, LendingClub found.
“While income is obviously a major factor, where you live appears to be almost equally important in factoring whether a consumer is living paycheck to paycheck,” Nayar said.
Along with surging mortgage rates and home prices, rents are still higher in many cities across the country, according to the latest data from rental listings site Rent.com.
As of last month, 29 of the 50 most populous U.S. cities notched year-over-year rent increases, Rent.com found.
Compared with two years ago, rents have jumped more than 16% — that’s the equivalent of a $275 increase in monthly rent bills, according to Jon Leckie, researcher for Rent.com.
“That kind of growth over such a short period of time is going to put a lot of pressure on pocket books.”
How to break the paycheck-to-paycheck cycle
High earners and urbanites are often susceptible to “lifestyle creep,” said CFP Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Florida.
As consumers earn more, they spend more, she said, particularly on eating out or deliveries through DoorDash, as well as additional subscription services. It’s easy to “fall into the trap of too much convenience spending.”
To break the cycle, “the first thing to do is look at convenience spending and figure out ways to cut the spending that is not bringing them value,” said McClanahan, who also is a member of CNBC’s Advisor Council.
“Immediately divert that money to savings to create an emergency fund.” Once you have three to six months of expenses set aside, “start saving more for other goals.”