'An economic divide that is widening': Almost a third of Americans earning $150,000 a year or more say they're living paycheck to paycheck and many rely on credit cards to close the gap

Moneywise
'An economic divide that is widening': Almost a third of Americans earning $150,000 a year or more say they're living paycheck to paycheck and many rely on credit cards to close the gap
'An economic divide that is widening': Almost a third of Americans earning $150,000 a year or more say they're living paycheck to paycheck and many rely on credit cards to close the gap

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It’s not just low-income Americans drowning under inflation and interest rates — some higher-income folks are feeling the strain on their wallets as well.

Data from a June 2023 survey conducted by personal finance software company Quicken revealed that 32% of Americans earning at least $150,000 a year are currently living paycheck to paycheck, while 36% of folks earning $50,000 to $150,000 and 55% of households earning less than that reported the same.

"Our research shows an economic divide that is widening among Americans — there is a large group of hard-working people who are still struggling financially,” Eric Dunn, CEO of Quicken, said in a press release at the time.

Credit card usage has been escalating amid high costs of living due to inflation. In fact, according to the St. Louis Fed, credit card debt hit $1.7 trillion at the end of 2023.

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With some Americans struggling to make ends meet between paychecks, credit cards may seem like the only tool left at their disposal.

If you’re unable to pay off your credit card bill in full and on time each month, you risk accumulating a massive pile of interest that becomes more difficult to pay off over time, no matter what salary you bring in.

Here’s how to fix up your finances and get out of that cycle ASAP.

Pay down your debts

While you’re making a budget, make sure you’re factoring in all of your monthly bills, including your credit cards.

Consider setting up automatic payments on your cards to make sure you’re never missing any deadlines. Or, if you’re struggling to afford payments in the first place, figure out a strategy to pay off a few of your balances at a time, such as using a debt consolidation loan.

Through Credible’s* online marketplace of vetted lenders, you can browse the best personal loan rates for you and opt to consolidate your debts faster and at a better rate.

Fiona is another online marketplace that connects borrowers with loan options near them, so you receive quotes from multiple lenders at once, and it won’t affect your credit score. Fiona is a great option for paying off a lot of credit card debt because they have virtually no credit score requirements to receive a loan, so anyone can get on track with paying off debt.*

Read more: Retire richer — why people who work with a financial advisor retire with an extra $1.3 million

Build a budget and control your spending

It may be time to revisit your budget — or make one, if you haven’t already.

Make a list of your income and all your fixed expenses and figure out how much you can set aside for things like groceries, dining out and recreational activities, as well as your savings for retirement and emergencies.

You may even be able to cut down on your fixed expenses like car insurance and home insurance.

BestMoney* is dedicated to helping you compare the best financial products in your area. When you fill in a bit of information about yourself, besmoney.com will provide you with a list of the best and most affordable car insurance options near you so you know that you’re getting the best rate possible.

SmartFinancial’s* free online platform can help you find better rates on your home insurance, too. SmartFinancial does the taxing legwork of exploring insurance options for you by sorting through over 200 insurers and compiling a list of the best quotes available in your area within minutes. Before you know it, you can lower your monthly expenses and have more space in your budget to tackle credit card debt.

You should also keep track of how much you’re spending each month. Consider using the cash-stuffing technique to allocate funds to each of your spending categories — and put whatever’s leftover after each month into your savings. You can use Acorns* — an automated savings and investing app — to make this task a little easier.

When you make a purchase on your credit or debit card, Acorns automatically rounds up the price to the nearest dollar and places the excess into a smart investment portfolio.* This way, your spending turns into savings for the future.

Create an emergency fund

The best way to avoid getting caught up in the paycheck-to-paycheck lifestyle is to always prepare for the unexpected.

Whether you’ve just lost your job, are dealing with some pricey car repairs or grappling with a big medical bill, it’s important to have savings set aside to provide some cushioning so you’re not waiting on your next paycheck to cover the expense.

It’s generally recommended to put three to six months’ worth of expenses into an emergency fund.

You can sock the cash away into a high-interest savings account, which can help build your fund. Check out a list of our favorite high-yield savings accounts to find one that works for you.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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