Many penniless Americans feel a pang when the cost of living soars

Benjamin Gibson, a pharmacist in San Antonio, Texas, makes more than $100,000 a year and owns his own home.

And yet Gibson, 40, struggles to afford basic necessities like groceries and gas.

“When you’re used to spending a few dollars on fruits and vegetables and then paying a lot more, it stresses you out,” he said. “Actually, I went to the dollar store for asparagus.”

With about $5,000 in an emergency fund and no 401(k) plan, Gibson says he weighs every purchase, from dinner to the recent oil change.

“I always cringe when I pay by credit card,” he said.

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About 71% of Americans say their paychecks have not been able to keep up with inflation, according to a report by Experian.

In addition, 29% of respondents said They expect to barely make ends meet this month, and about the same number predict their spending will likely exceed their budget in the coming months.

“People are struggling to figure out how to address these challenges,” said Rod Griffin, senior director at Experian. “It’s a big concern.”

About 62% of the US population lives paycheck to paycheck, according to a separate survey by LendingClub.

Even wealthier Americans have a harder time making ends meet. According to a LendingClub survey of 3,250 adults, half of workers earning more than $100,000 said they had little to nothing left at the end of the month.

“The challenge is that they have to use their savings and their safety net to do that, and that can create other problems,” said Simon Blanchard, associate professor at Georgetown University’s McDonough School of Business.

“They become financially vulnerable,” he said.

A tight labor market, low unemployment, and historically high savings rates buoyed many Americans into 2022 and made them more willing to pay higher prices for goods and services.

But while wages have risen, they have not kept pace with inflation, which is now rising at the fastest annual pace in about four decades.

Real wages rose 5.6% from a year earlier, while real average hourly wages fell a seasonally adjusted 0.8% last month, according to data from the Bureau of Labor Statistics.

“There’s an assumption that as the cost of goods increases, so does income tend to follow, which isn’t always true,” Blanchard said.

There is a presumption that income tends to follow as the cost of goods increases, which is not always the case.

Simon Blanchard

Associate Professor at the McDonough School of Business at Georgetown University

Taylor Byers, 29, was recently appointed director at Boca Communications in San Francisco, but even after the promotion and her raise, she said she’s still struggling to make ends meet.

Byers, who lives in Orange County, California, with her fiancé and works remotely, said all of her income goes to expenses.

“I can’t save at all,” she said, noting that she’s trying to put some money aside for her upcoming wedding.

“A big chunk of my paycheck goes toward rent — probably 40%. I have a car payment, credit card bills, and now gas. Even Netflix costs more; it feels like every single bill has gone up,” she said.

“How are you holding up?”

Taylor Byers with her fiance.

Source: Taylor Byers

To rebuild some financial security, Rob Burnette, a financial advisor and CEO of Outlook Financial Center based in Troy, Ohio, advises clients to start with a monthly financial plan that details income and expenses. He then advises them to identify problem spending areas that aren’t a necessity.

“Close those areas completely until you can afford them again,” he said. “You might even find that you don’t miss them when they’re gone.”

In addition, people should begin paying off high-interest credit card debt by switching to an interest-free money transfer credit card or consolidating that expensive debt into a lower-interest home equity loan or personal loan. “Don’t buy items on credit if you can’t pay for them with cash,” he warned.

Also, let the mentality “keep up with the Joneses,” Burnette said, even if that means selling an expensive car or downsizing into a smaller house.

Once you get on track with these changes, you may find that you can start saving a percentage of your monthly income, including an emergency fund and a retirement plan.

Subscribe to CNBC on YouTube. Many penniless Americans feel a pang when the cost of living soars

Chrissy Callahan

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