61% of Americans Live Paycheck-to-Paycheck, Up from 55% a Year Ago: Report

By LendingClub Corporation

Cover Image Attribute: Image by Ali Vidler from Pixabay.

On August 1, 2022,  LendingClub Corporation released findings from the 12th edition of the Reality Check: Paycheck-To-Paycheck research series, conducted in partnership with PYMNTS.com.

This edition of Consumer Savings analyzes the financial lifestyle of consumers in the United States who live paycheck to paycheck, the reasons that generate financial hardship, and the influence of financial pressures on the ability of consumers to control their costs and put money away for savings.

Summary of the Report;

• In June 2022, 61% of Americans were living paycheck to paycheck, up from a low of 52% in April 2021 and 55% in June 2021.

• Average savings dropped $517 from $11,724 in May 2022 to $10,757 in June 2022.

• The most significant rise in paycheck-to-paycheck consumers was in consumers earning between $100,000 and $150,000, up 11 percentage points from May 2022 to 52% in June 2022.

• The average consumer stores 11% of their savings in either stocks or bonds, yet half of all stockholders reported that their portfolios recently lost value in the last three months.

• An estimated 33.5 million — or 13% — of U.S. consumers spent more than they earned in the past six months.

"What a difference a year makes. Last summer we were all worried about how quickly the economy would recover. Now, as inflation continues its upwards swing, consumers are finding it more difficult to manage spending and are eating into their savings as financial pressures mount," said Anuj Nayar, LendingClub's Financial Health Officer. "That said, consumers are not yet slowing down their spending habits, despite the rise in the cost of living. Not only is it going to be difficult for them to handle future emergency expenses, but even foreseen payments like education, student loans, or housing expenses may be harder to balance for the everyday American consumer."

Current Paycheck-To-Paycheck Landscape

In the US, the financial lifestyle of "living paycheck to paycheck" is the most prevalent option. And, a growing number of Americans with high incomes are also adopting this method of financing their lives.

According to the reports' findings, between May and June of 2022, there was a considerable uptick in the percentage of people living paycheck to paycheck who were in the top income groups. Since May 2022, there has been an increase of 11 percentage points among consumers earning between $100,000 and $150,000, bringing the total number of consumers living paycheck to paycheck to 52 percent. In June 2022, among people whose annual income fell between $150,000 and $200,000, the percentage of people who lived paycheck to paycheck rose to 41%, an increase of six percentage points from the 35% who did so in May. In addition, the percentage of consumers who earned more than $200,000 but still lived paycheck to paycheck increased by six percentage points, from 30 percent in May to 36 percent in June 2022.

Figure: Consumers living paycheck to paycheck in last three months; Share of consumers who live paycheck to paycheck, over time, and by annual income.

How inflationary pressure influence savings

In the past six months, an estimated 33.5 million or 13% of U.S. consumers spent more than they earned. Average consumer savings decreased from $11,274 in May to $10,757 in June, indicating that inflation has affected the ability of all consumers to save.

Paycheck-to-paycheck individuals are more likely to store 70 percent of their savings in banks, digital wallets, or cash. Conversely, preference for more diversified portfolios increases significantly among high-income consumers. 

When deciding how to save money, the typical consumer keeps half their savings in a traditional financial institution or a digital wallet such as PayPal or Venmo. In addition, regular customer invests 11 percent of their assets in either equities or bonds; and 20 percent of their savings are placed in either education or retirement accounts. In the meantime, individuals who fall into the top income band invest an average of 58% of their savings in assets that are not cash or money held in a financial institution. Consumers who earn between $100,000 and $200,000 annually put 14 percent of their available savings in the stock market. In contrast, consumers who earn more than $200,000 annually spend 28 percent of their available savings in the stock market.

The ease with which customers can access their funds is the primary influencing factor affecting how consumers manage their savings; this factor was cited by 46% of consumers. Comparatively, only 8.7 percent of consumers earning less than $50,000 annually said that having a diversified portfolio is the most important reason for choosing how they store their savings, whereas 31 percent of consumers earning more than $200,000 annually said that having a diversified portfolio is the most important reason for choosing how they store their savings. Also, recent stock market volatility and inflation have made ease of access to funds more of a priority for financially struggling consumers than for those with higher incomes who may be more able to have a longer-term horizon on their savings portfolios.

Methodology

The findings of this report are based on a census-balanced survey of 3,583 U.S. consumers conducted from June 8 to June 27, 2022. 

The sample was balanced to match the U.S. adult population in a set of key demographic variables: 51% of respondents identified as female, 31% were college-educated, and 35% declared incomes of over $100,000 per year.

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