It’s no longer news that Americans are exhausted from dealing with inflation and high interest rates. But when we say “Americans,” what comes to mind are the low-income earners. You know, the 38% of households that make less than $50,000 every year.
But here’s the shocker: according to a recent survey by Quicken, even the higher earners are feeling the brunt of the economic crunch too. In fact, almost 1/3rd (32%) of Americans earning an annual minimum of $150,000 are struggling to pay their bills. The personal finance software company also noted that 36% of peeps earning between $50,000 and $150,000 are living from hand to mouth.
In the words of Quicken’s CEO, Eric Dunn, “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.” He expressed his concern about the increasing financial problems this group has had to face. “Many of them are living paycheck to paycheck and relying on credit cards they may not be able to afford,” he said.
One of the evidence of the dire financial situation befalling the higher-income earners is the uncanny increase in credit card usage. The New York Federal Reserve Bank puts the number of credit card balances for the second quarter of 2023 at a whopping $1 trillion. This is the inevitable result of more Americans maxing out their credit cards as their only tool for survival before the next payday.
Sadly, the unhealthy reliance on credit cards as the last hope for survival comes with severe repercussions. According to the Quicken Survey, the higher-income group depends more on their credit cards than lower and middle-income classes. About a third of them have admitted that they had no concrete plans to settle their credit card balances before the year runs out.
For these people, it’s almost inevitable that they’ll accumulate heavy interest charges and worsen their credit scores. As part of the ripple effects, they’ll also find it more difficult to obtain loans or apply for insurance. In the end, they’ll get plunged into deeper financial rot and be thrown many steps farther from financial stability.
If you can relate to these challenges, it’s clear that you’re not alone. However, it’s important that you start making wise choices from this moment forward if you want to secure your financial future.
Begin by building or revisiting your budget. Calculate your fixed expenses, prioritize the necessities, and keep money aside for emergencies and retirement. Next, cut back on non-essential items like eating out, luxury shopping, relaxation, etc. Don’t forget to track your monthly spending to identify areas where you’re overspending and make the necessary adjustments.
Another important tip when budgeting is to always factor in your credit cards and other monthly bills. Leave nothing out. You can set up automatic credit card payments to ensure that you always pay your debts right on time. However, if you can’t pay down all your debts, try to settle the ones with the highest interest rates first and work your way down.