Wealth

Amid high inflation, 36% of employees earning $100,000 or more say they are living paycheck to paycheck

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More than a third of high-earning American workers feel strapped for cash — a share that has risen dramatically in recent years.

Thirty-six percent of U.S. employees with salaries of $100,000 or more are living paycheck to paycheck — twice as many who said they were in 2019, according to a survey conducted by Willis Towers Watson, a consulting firm.

This is more than the 34% who earn $50,000-100,000 a year and are living paycheck-to-paycheck, but lower than the 52% who have incomes below $50,000, according the survey.

The only group to have seen an increase in their paycheck-to-paycheck ratios in the past three years is the high-earners.

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Mark Smrecek, Willis Towers Watson’s North American market leader in financial wellbeing, stated that “employees with higher pay levels don’t have to live paycheck to paycheck.”

Willis Towers Watson surveyed 9,658 full time employees from large and middle-sized private employers in December and Jan 2022, before the most recent inflation readings.

These findings are similar to those of a LendingClub survey, which found that 36% of people who earn at least $250,000 per year live paycheck-to-paycheck.

Inflation could make it more difficult to live paycheck to paycheck

Smrecek explained that the rapid rise in food and transportation costs could put additional stress on families’ ability save money.

The Consumer Price Index rose 8.6% in May compared to a year ago, marking the highest inflation reading in over 40 years. The Federal Reserve raised its benchmark interest rate by 0.75 percentage points on Wednesday — the largest increase since 1994 — as part of an ongoing effort to rein in consumer costs.

Smrecek spoke out about people who live paycheck-to-paycheck and said that “these numbers are likely to rise if we see these inflation results continue.”

Budget problems include housing costs and debt

Financial stress is influenced by income. Smrecek stated that the most pressing challenge for high-earners was housing expenses, while those with lower incomes were more likely to mention difficulties with debt.

Smrecek explained that while the survey does not break down housing expenses, employers have anecdotally cited increased rents or mortgages as a result of workers moving to new areas during the pandemic. Higher income employees are more likely to be able to work remotely than those with lower incomes.

To help Americans in cash crunch, financial planners recommend that they adopt the 50-20-30 rule. This will allow them to control their spending. This means you allocate 50% of your after-tax income for essential expenses, 30% for discretionary expenses, and 20% to savings, investments, and debt reduction.

Source: CNBC

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