Two-thirds of Americans live paycheck to paycheck as inflation soars

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Inflation shows no signs of abating, making it harder for workers to make ends meet.

The consumer price index rose 8.3% from a year ago, above the estimate of 8.1%, according to the US Bureau of Statistics.

Although down slightly from the peak in March, inflation continues to grow at the fastest annual rate in about four decades.

Rising prices put household budgets in a vice.

Greg McBride

Chief Financial Analyst at Bankrate.com

“Rising prices are putting household budgets in a vice,” said Greg McBride, chief financial analyst at Bankrate.com. “The price increases are broad-based, but look at food and shelter – which together account for 40% of the CPI’s weight and more than that for many households.”

Food prices rose at the fastest pace in more than 41 years and the housing index, which accounts for about a third of the CPI’s weighting, rose 5.1% on an annual basis, its gain fastest since March 1991.

Although wage growth is high by historical standards, it is not keeping pace with the increase in the cost of living.

When wages are growing at a slower rate than inflation, those paychecks won’t go as far to the grocery store and the gas pump — two areas of the budget that have been particularly squeezed.

Learn more about personal finance:
Credit card debt hits record high
More Americans are running out of money as the cost of living rises
Americans say inflation could have a ‘significant negative impact’

In March, nearly two-thirds, or 64%, of the U.S. population was living paycheck to paycheck, just shy of a 2020 peak of 65%, according to a report by LendingClub.

“The number of people living paycheck to paycheck today is reminiscent of the early days of the pandemic and it has become the dominant way of life across all income brackets, said Anuj Nayar, manager. the financial health of LendingClub.

Consumers struggling to afford their daily lifestyle tend to rely more on credit cards and have higher monthly balances, leaving them financially vulnerable, according to the survey of more than 2,600 adults.

Overall, credit card balances grew year-over-year, reaching $841 billion in the first three months of 2022, according to a separate report from the Federal Reserve Bank of New York.

At this rate, sales could soon reach record highs amid rising prices for gas, groceries and housing, among other necessities, according to Ted Rossman, senior industry analyst at CreditCards.com.

Anyone with revolving debt will also see the annual percentage rate on their credit card head higher as the Federal Reserve raises interest rates in an attempt to rein in rising prices.

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