Despite low inflation, 61% of Americans live paycheck to paycheck

Despite the fact that inflation is at a lower level, 61% of Americans report that they are living paycheck to paycheck.

By many measures, customers who have been squeezed by higher prices should be feeling some relief.

Prices have started to go down, at least compared to a year ago when they went up so quickly. The consumer price index, which tracks inflation, went up 3% from a year ago, the lowest level since March 2021. The personal consumption expenditures price index also hit the lowest annual level in over two years.

A new LendingClub study says that as of June, 61% of adults still say they live from paycheck to paycheck; this is the same number as a year ago.

Studies show that lower-income people have been hurt the most by price increases, especially for food and other necessities, which comprise a significant part of their budgets. LendingClub's numbers show that in June, about three-quarters of people making less than $50,000 a year and about 65% of those making between $50,000 and $100,000 lived paycheck to paycheck.

Fewer high-income people need help making ends meet. The study found that only 45% of those who made $100,000 or more said they lived from paycheck to paycheck.

Your Money Financial Confidence Survey in March found that 52% of adults, including high earners, had felt more financial stress since before the Covid pandemic started in 2020, primarily because of inflation, rising interest rates, and needing more savings.

According to that poll, 58% of Americans live paycheck to paycheck.

"Credit cards are making up the difference."

Still, more than half of all U.S. consumers need help paying for their day-to-day expenses; this is causing some to rely more on credit cards or use their savings, which puts them in the wrong financial position.

Greg McBride, Bankrate's chief financial analyst, said, "Budgets are still very tight, and for many households, credit cards are filling the gap."

"People aren't financing purchases at 20% because they have other options," he said. "That is the only thing left for them to do."

The Federal Reserve, for its part, raised interest rates again last week as part of its efforts to keep inflation in check.

After the rate hike, Fed Chairman Jerome Powell said that future rate changes would be based on new information, not a set policy path.

Central bank officials think that inflation is still too high, even though it has been going in the right direction recently, and they want to see solid numbers from several months before changing direction.