Inflation Is No News To 60% Of Americans Who Live Paycheck To Paycheck

Although prices have risen, consumption is still rising, even though it isn't as high as it was a year ago, which is giving consumers some breathing room in their budgets because of the increased prices.

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Approximately 60% of all U.S. adults were living paycheck to paycheck as of January, including almost half of all high-income earners, according to a new report by LendingClub. This is a drop from 64% a year earlier, suggesting that some consumers' financial situations have improved as a result of last year's spending cutbacks.

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“Consumers are accepting that inflation is part of their everyday lives and they are actively making behavior changes in order to adjust their spending, particularly during the holiday shopping season of 2022, so that they can better manage their cash flow,” said Anuj Nayar, a financial health officer for LendingClub.

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The latest inflation reading from the core personal consumption expenditures index released last Friday was much hotter than expected, indicating some spending habits are hard to break. It was estimated that consumer spending would rise by 1.4% for the month, but instead, it rose by 1.8%.

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It is estimated that almost half of Americans believe we are already in a recession.

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In order to make ends meet, more Americans are relying on credit cards as prices rise, according to other reports.

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TransUnion reports that credit card debt reached a record $930.6 billion at the end of 2022, an increase of 18.5% over a year ago, and average balances climbed to $5,805, up from $5,803 two years ago.

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There was also an increase in total household debt by 2.4% to $16.9 trillion in the fourth quarter of last year, according to a report by the Federal Reserve Bank of New York.

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Alternatively, you can invest in a federal bond, which is inflation-protected and have a low-risk profile.

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From May through October 2022, the rate of interest on new purchases of I bonds is currently 6.89%, which is lower than the rate of 9.62% offered on new purchases between May and October 2022.

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Nevertheless, this will be a good hedge against inflation for those who are planning to save for the long term. The downside of these bonds is that they can't be redeemed for one year, and if you want to cash them in before five years, you will need to pay the last three months of interest.

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This report from LendingClub is based on the results of a survey of more than 4,000 U.S. adults conducted in January by the financial services company.

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