Around 33% of Americans Spend Their Entire Income Before Next Paycheck Every Month, Survey Finds | Credit Raters

Around 33% of Americans Spend Their Entire Income Before Next Paycheck Every Month, Survey Finds

14 Feb 2020
Approx Reading time: 3 minutes
  • The survey, conducted by Salary Finance, has revealed that around 33% of all Americans find themselves having used up their entire paycheck before their next payday.
  • Many have reported suffering from financial stress, which is leading to anxiety and depression.
  • Financial troubles have been reported across all income brackets, which experts believe is due to the increase in living costs.
A recent survey conducted by Salary Finance has found that around 33% of all Americans are finding it difficult to make ends meet towards the end of every month, and out of these, 32% find themselves without any money before their next payday. The survey included more than 2,700 Americans who are currently employed at companies that have an employment base of over 500. For example, one of the respondents stated that although her household income, once combined with that being earned by her husband, amounted to around $50,000 per annum, which is a little less than the average yearly income of US households, the couple still had to make very conscious choices about the way they spent their money. The tax season is especially hard-hitting for them, as they end up with a bill instead of a refund. Seasonal variations in bills due to weather changes also add up to costs that people are finding difficult to afford. According to the data reported in the survey, the percentage of Americans running out of funds before their next paycheck slightly varies with income. For example, this includes 40% of all those earning below $15,000 and between $15,000-$25,000, 37% with income between $25,000-$40,000, 28% with income between $40,000-$55,000 and $70,000-$85,000, 27% with income between $55,000-$70,000 and $85,000-$100,000, and so on. According to Dan Macklin, who is the CEO of Salary Finance in the US, this shortage is not specific to people who are at the lower end of the income spectrum, as around 32% of respondents earning above $200,000 per year also said they found it difficult to manage monthly finances. In many cases, the problem stems from the higher living costs. Only last year, costs associated with basic expenditure, or the Consumer Price Index (CPI) rose by 2.3%, as per data presented by the Bureau of Labor Statistics. One of the steepest increases was witnessed in the cost of medical care, which increased by approximately 4.6% on a YoY basis, the highest since 2007. Other increases included a 3.2% rise in housing costs, 2.1% in education, and 1.8% in food costs. On the other hand, real income for many did not increase in the past year, showing an increase of only 0.2% on a YoY basis, as reported by the PayScale Index. In fact, median income has actually declined by around 9% when compared to 2006 figures, according to PayScale. The Salary Finance survey also revealed that 42% of Americans are currently facing financial stress, which, according to the survey, can lead to other mental health problems such as anxiety and depression. Experts believe that Americans should focus on constructing a financial safety net for themselves by having at least three to six months of their income stashed in an emergency savings account. Automatic monthly deductions out of every paycheck is an effective way of developing such a fund. Also, some savings accounts offer attractive returns, which can help Americans build up their wealth over time. However, saving any money out of regular income is difficult for many Americans, as shown in the survey mentioned above. But, experts still believe that, with proper financial planning, Americans are more likely to find themselves in a better financial position with time.
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Akbar Lashari

Akbar is a talented news editor who follows the consumer finance industry closely and has written for many famous news & educational websites such as Forbes.