Even though inflation is cooling, consumers are still showing signs of stress.
In April, the share of adults feeling too stretched remained almost stable 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% said they live paycheck to paycheck, a jump from 42% last year.
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Alternatively, the percentage of those earning less than $100,000 who reported living paycheck to paycheck either held steady or fell over the same period – dropping slightly to 63% from 64% of those earning $50,000 to $100,000, and falling to 73% from 80% of those earning less than $50,000.
Where you live determines your financial situation
Depending on where you live, earning $100,000 may not go that far, according to Anuj Nayar, financial health manager at LendingClub.
A separate report by SmartAsset analyzed how high six figures will go in the 25 largest US cities. In New York, for example, $100,000 is only $35,791 after taking into account taxes and the high cost of living.
By contrast, a six-figure salary is worth a lot more in Memphis — about the equivalent of $86,444 due to a lower cost of living and no income tax. Here’s a breakdown of how much you need to earn to afford to live in the country’s most popular cities.
Colorful cafe bars in the iconic music and entertainment district of Beale Street in downtown Memphis, Tennessee.
benedict | iStock | Getty Images
Overall, 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 seems to be almost equally important in determining whether a consumer is living paycheck to paycheck,” Nayar said.
Along with soaring mortgage rates and house prices, rents are still higher in many cities across the country, according to the latest data from the rental ad site Rent.com.
As of last month, 29 of the 50 most populous U.S. cities saw year-over-year rent increases, Rent.com found.
Compared to two years ago, rents have jumped more than 16%, equivalent to a $275 increase in monthly rent bills, according to Jon Leckie, researcher for Rent.com.
“This kind of growth over such a short period of time is going to put a lot of pressure on paperbacks.”
How to Break the Paycheck to Paycheck Cycle
High earners and city dwellers are often susceptible to ‘lifestyle creep’, says CFP Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Florida.
As consumers earn more, they spend more, she said, especially on restaurant meals or deliveries through DoorDash, as well as additional subscription services. It’s easy to “fall into the trap of spending too much on convenience”.
To break the cycle, “the first thing to do is look at convenience spending and find ways to reduce spending that doesn’t add value to it,” said McClanahan, who is also a member of CNBC’s advisory board. .
“Immediately divert this money to savings to create an emergency fund.” Once you’ve set aside three to six months of expenses, “start saving more for other goals.”
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