More than 60% of Americans are living paycheck to paycheck, a two-percentage-point increase from July 2022, according to a report from LendingClub.
In addition to inflationary pressures, non-essential spending is reportedly a top reason for people living paycheck to paycheck.
Non-essential spending appears to be a bigger issue for younger adults.
The LendingClub study says people born between 1997 and 2012, known as Generation Z, cite non-essential spending as “one of the factors contributing to their financial distress.”
By contrast, fewer older Americans cite non-essential spending as a reason they are living paycheck to paycheck.
“With ongoing inflation requiring consumers to tighten their belts, nonessential spending can mean the difference between living paycheck to paycheck or not,” said Alia Dudum of LendingClub.
Non-essential spending can be anything from buying unnecessary items at the grocery store to buying a new pair of expensive shoes.
The LendingClub survey shows that desserts, candy and sodas were the top purchased non-essential items at grocery stores. Outside of groceries, younger Americans were more likely to spend their money on leisure activities, travel and personal services than their older counterparts. A major concern about indulgent spending, according to the survey, is how people are paying. The study notes that people who admit to buying indulgent items use credit cards more than those who are more careful about their non-essential spending.
While there can be benefits to using a credit card, such as accumulating points or getting cash back, they also can cause a person to fall deeper into debt, especially as interest rates continue to rise.