The Rich Get… Poorer?

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Key Takeaways:

• A majority of Americans still live paycheck to paycheck… 
• …even people making more than $100,000 a year. 
• Some people who are struggling have turned to increasingly expensive credit card debt to make ends meet.

The Juice likes to regularly update the status of the paycheck-to-paycheck consumer. Increasingly, it appears that U.S. households struggling to make ends meet are in a relationship with debt. 

See what we did there? For the record, Meta (META), which owns Facebook, was down a whopping 18% in September, worse than all but two of the top 10 aforementioned Trackstar stocks. 

Anyhow, 89% of people earning over $100,000 own stocks. They could probably use a good October in the markets to take the edge off.  

• 45% of people making six figures report living paycheck to paycheck in August, up from 38% last year. 
• Some good news: The number of people making $200,000 or more and living paycheck to paycheck decreased from 30% to 28% between July and August. So maybe most of the hardship exists in the $100–$200K range? 
• More bad news: Across the income spectrum, 60% of Americans lived paycheck to paycheck in August, up from 55% a year ago and 59% in July. 

Turning to Debt

• Among households with credit card balances, 60% have been in debt for at least the last year. That’s up substantially from 50% in 2021. 
• 46% of credit card users who carry a balance report using debt to cover emergencies or unplanned expenses. 
• 24% use cards to finance day-to-day living, such as groceries, utilities, and childcare. 

At the same time, overall credit card balances are down 4% from the end of 2019. 

This indicates a consumer economy with the financially strong and stable up top and growing subsets of people occupying the lower rungs of the ladder. 

The Bottom Line: No matter how much money you make, it’s difficult when you can’t make ends meet. Whatever your financial position, it’s rarely a good time to turn to credit cards. And right now might be the worst time. 

When the Fed hikes rates, it doesn’t impact just mortgages. The average interest rate on credit cards stands at just under 18.5%. Of those carrying debt, 46% say if interest rates keep going up, it will be difficult for them to keep up with minimum monthly payments. 

Not good. Because if you make a $127.08 monthly minimum payment on a $5,000 credit card balance at an 18.5% APR, it’ll take you five years and one month to pay off the balance. You’ll shell out nearly $2,750 in interest. 

In this equation, the (relatively) rich definitely don’t get richer.

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