It’s not just low-income Americans who are drowning in inflation and interest rates; some higher-income Americans are feeling the strain on their wallets as well.
June survey data conducted by a personal finance software company Quicken 32% of Americans with annual incomes of $150,000 or more currently live paycheck to paycheckMeanwhile, 36% of people earning between $50,000 and $150,000 and 55% of households earning less reported the same.
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“Our research shows that economic inequality is widening among Americans. There are large groups of hard-working people who are struggling financially,” said Quicken CEO. (CEO) Eric Dunn said in the paper. press release.
“I am troubled by the complex issues facing this group, many of whom live paycheck to paycheck and rely on credit cards they cannot afford.”
High-income Americans rely on credit cards more than ever
Credit card usage is on the rise high inflation.
In fact, according to new york fed bankCredit card balances exceeded $1 trillion in the second quarter of 2023.
As some Americans wait for their next payday to cover their daily expenses, credit cards may be the only tool at their disposal. But relying too much on them comes at a cost.
A Quicken study found that 46% of high-income households are relying more on credit cards than ever before. This compares to just 40% of middle-income people and 39% of low-income people. About a third of people making more than $150,000 a year also admitted they wouldn’t be able to pay off their balances by the end of the year.
If you can’t do that pay off your credit card bill If you repay your loan on time and in full each month, you risk accumulating huge amounts of interest, which will become harder to repay over time.And you’re hurt your credit scorewhich lenders and other companies look at when applying for things like loans and insurance.
Here’s how to rebuild your finances and get out of this cycle as quickly as possible.
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make a budget
Maybe it’s time to take another look budget — If you haven’t created one yet, please create one.
Make a list of your income and all your fixed expenses and calculate how much you can set aside for things like groceries, eating out, and recreational activities, as well as how much you can save for retirement or emergencies.
Keep track of how much you spend each month. Please consider using . cash stuffing techniques Allocate funds to each spending category and put the rest of the month into savings.
Let’s pay off the debt
When creating your budget, take into account all your monthly bills, including credit cards.
Consider setting up automatic payments on your card to avoid missing deadlines. Or, if you are, struggling to pay First, develop a strategy to pay off several balances at once.
For example, you can use: Avalanche method Start with the debt with the highest interest rate and gradually lower the interest rate (so you pay less interest over time).
Create an emergency fund
The best way to avoid getting caught up in a paycheck-to-paycheck lifestyle is to always be prepared for the unexpected.
Whether you’ve just lost your job, are dealing with an expensive car repair, or are struggling with a hefty medical bill, we want to give you some cushion so you don’t have to wait for your next paycheck to cover your expenses. It’s important to save.
Generally, we recommend that you allocate 3 to 6 months worth of expenses to: emergency fund.
You can stuff cash inside High interest savings accountThis will help you build your funds, but keep in mind that there are penalties for early withdrawals.
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This article is for information only and should not be construed as advice. PROVIDED WITHOUT WARRANTY OF ANY KIND.