Jeannine Mancini Fri, October 6, 2023, 11:59 AM EDT
When people think of the term living paycheck to paycheck, images of low-income families struggling to make ends meet might come to mind. But new data reveals that a significant portion of high earners, particularly those raking in over $150,000 annually, also find themselves caught in this vicious financial cycle.
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According to CNBC, while three-quarters of individuals earning $50,000 or less are living paycheck to paycheck, 65% of those earning $50,000 to $100,000 are in the same predicament. Of those earning $100,000 or more, 45% reported living paycheck to paycheck.
Moneywise highlighted a new study referencing research from the personal finance software Quicken that indicates that 32% of Americans with a yearly income of $150,000 or more are struggling to make ends meet. To close the gap, they’re turning to credit cards between paychecks.
Recent statistics from the Federal Reserve Bank of New York show a significant rise in borrowing behaviors. By the second quarter, the total credit card debt reached over $1 trillion. Despite escalating interest rates, people across various income brackets are increasingly using credit cards, especially to fill the gaps from one paycheck to the next.
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Why High Earners Struggle
The reasons high earners are ensnared in this cycle are multifaceted. Here are some contributing factors:
High cost of living in urban areas: Many high earners reside in metropolitan areas where the cost of living is exponentially greater. Housing, transportation and daily essentials can consume a significant portion of their income.
Debt obligations: Despite their impressive salaries, many still grapple with debts such as student loans, mortgages and credit card balances.
Societal pressures: There’s an unspoken expectation for high earners to lead lifestyles that reflect their income bracket. This can mean purchasing luxury items, dining at upscale restaurants or indulging in expensive hobbies.
Lack of financial literacy: Earning more doesn’t inherently mean understanding how to manage those earnings. Without proper financial education, high earners can make missteps that diminish their financial stability.
Millennials Feeling The Pinch
The paycheck-to-paycheck phenomenon isn’t restricted to older generations. LendingTree’s findings spotlight that 44% of millennials earning between $100,000 and $149,000 are also struggling. This generation, which finds itself suddenly earning substantial salaries, often grapples with discerning between true necessities and lifestyle luxuries.
Breaking The Paycheck-to-Paycheck Cycle
For high earners living paycheck to paycheck, there’s a silver lining: With the right strategies, they can harness their substantial incomes to break free from this cycle and build lasting wealth. Here are actionable steps to consider:
Budgeting and tracking: The first step toward financial stability is understanding where your money goes. Implementing a rigorous budget and tracking every expense can illuminate areas of wasteful spending. Tools like Quicken or Mint can be valuable assets in this journey.
Reassess lifestyle choices: While it may be tempting to indulge in the finer things, it’s crucial to differentiate between needs and wants. Perhaps it’s time to downsize that luxury apartment or opt for a more modest vehicle.
Investing in startups: Even if you can’t set aside large sums, investing small amounts in startups can be a game-changer. Platforms like StartEnginedemocratize the investment process, allowing people to back promising companies with the potential for significant returns. While there’s risk, the potential upside can be a substantial boost to your financial portfolio.
Educate yourself: Take advantage of financial literacy resources. The more you understand about money management, investments and financial planning, the better equipped you’ll be to make informed decisions.
Emergency fund: Before diving deep into investments, ensure you have an emergency fund. This cushion can be a lifesaver in unexpected situations, ensuring you don’t dip into investments prematurely.
Seek professional guidance: Consider hiring a financial adviser. Their expertise can provide tailored strategies that align with your financial goals and circumstances.
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This article $150,000 Salaries Aren’t Enough Anymore — 1/3 Of High Earners Are Still Trapped Living Paycheck To Paycheck And Can’t Get Ahead originally appeared on Benzinga.com