After relying a lot on them salary when prices skyrocketed last year, family finally feel relieved.
As of May, 57% of consumers said they were living on a paycheck, down from 61% the month before, according to a new report. LendingClub . report.
Workers last month saw them purchasing ability improve for the first time in two yearslike inflation easing out of the peak of the pandemic.
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57% of people are uncomfortable with their emergency savings
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The Consumer price indexmeasures the average change in prices for consumer goods and services, reduced to an annual rate of 4% in May after reaching 9.1% in June 2022, a four-decade high.
However, a year of high costs took a toll on household finances, according to the report. The Federal Reserve Board’s Economic Welfare Report of American Households. The report found that the percentage of adults who were at least financially okay fell sharply in 2022, to the lowest level since 2016.
During that time, many consumers dipped in savebased credit or turn to Personal loan for daily expensesa separate survey by LendingTree found.
High borrowing costs are putting pressure on households
Americans now nearly $1 trillion in debt credit card debt, a record high, according to the most recent data from Federal Reserve Bank of New York. Credit card interest rates are also at historical level, at more than 20%. Although much lower than credit cards, even personal loan interest rates are in the double digits.
“While these personal loans can help people expand their budgets in the short term, the interest rates and other costs associated with them can keep people stuck in debt,” says LendingTree. “. Head of Credit Analysis Matt Schulz.
So far, 73% of consumers say higher prices have affected their ability to cover monthly expenses, including cell phone bills, utilities, auto insurance and cable service and the internet, according to a report from Doxo on how Americans pay bills.
Saving is a stepping stone against economic hardship
There is a cash cushion can avert a financial disaster in the event of unexpected expenses or job loss. However, most Americans are uncomfortable with the amount of money they have in their hedge fund, according to one study. recent Bankrate survey.
“Despite their best efforts to live within their means, consumers are frequently faced with unexpected expenses that put their budgets on hold,” said Alia Dudum, money expert at LendingClub. stress and affect their ability to meet their financial obligations, leaving many people’s financial situation very fragile.”
Fewer than half of Americans have enough emergency savings to cover at least three months of expenses, which is the minimum amount most financial experts recommend. About 22% have no emergency savings at all, according to Bankrate.
Reese Harper, a certified financial planner and CEO of financial planning software company Elements, advises: “Set a goal to set aside 6 months’ worth of proof of personal expenses. securities or risk-free cash.
To get there, he says, save at least 10% of your income each month into an after-tax brokerage or high-interest savings account, which will “boost your financial confidence.” yours and relieve stress.”
