here to discuss as a news Mayor, Financial Health
officer at lending club. Thanks so much for joining
us. Tell us more about the main contributors forcing
people to live paycheck to paycheck here. Um,
and of course this is a concern. But where
do you think this trend is initially starting? Does
this start with the pandemic? Good morning. Thank
you so much for having me. Um, it's
a good question. I mean, what you've seen
happen over the last 20 years or so is that
while waited are increasing just a little bit and we've
seen a little bit of a move of that over
the last year or so. The pricing of everyday
things has shut up the pricing of education, the
pricing of housing, the pricing of college medical expenses
. They will shut up. And they basically,
people's paychecks haven't kept, haven't kept pace. And
this is what we're seeing happen right now. I
think when you hear the term paycheck to paycheck,
most people think it's like a low income american and
the reality that we're starting to see now is that
it's the predominant way that people are living in the
United States is just making ends meet. Yeah.
And I think that That is a reason why we
need to circle back to that metric. We mentioned
over 30% of those earning 250,000 or more say they're
living paycheck to paycheck. I know there are a
lot of people out there that are on the lower-income
side, living this lifestyle and really struggling out there
. And they're like if I add$250,000 for my
salary I would make that stretch. But the reason
we mentioned this is because it says something about our
economy, right? So what exactly does it say
when we see this subset of this group of high
earners, living paycheck to paycheck? Yeah, it
totally does. And last month was the first time
that we've actually broken out of that very, very
high metric. Prior to that we looked at only
$100,000 plus. When we did the data, it
was the actual studied him. A few months ago
we did$100,000 plus. Was it was half of
Americans. Only more than$100,000 were like, well
what happens if we break it up further? I
honestly thought we were going to see a huge drop
off and when it comes into almost a third of
americans Who are earning five x. The national median
living paycheck to paycheck. It was a shock to
the lendingclub team too because we thought we thought it
would be a different stat. Speaking to what we
say, we say paycheck to paycheck. What do
we mean? We actually mean um has paid their
bills but has nothing left over at the end of
, at the end of the paycheck period with every
two weeks or every month. There is a subset
that we look at which of those people who are
living paycheck to paycheck and just don't make all the
bills come together? They're struggling to pay their bills
? There's kind of two statues should look at The
30% number was the living paycheck to paycheck, which
means, you know, you're earning$250,000 a year
and you're just making ends meet is kind of nuts
. But the one that really shocked me too is
This is like 12% of them are just not even
making the payments. And a lot of that is
due to the fact as you get more income unfortunately
, I have to carry, you start to carry
more debt, right? I mean, it's just
the fact of life until you reduce certain very,
very high income space. People take more debt on
as they get as they, as they get more
income. And, you know, as you saw
from your previous report, they're talking about, you
know, mortgages and housing and all those other things
. It's like to feed into that environment. I
mean, if you're trying to buy a house today
versus this time a year ago, Uh it's gonna
cost you 67% more than it would have done um
this time last year for the same house, right
? Because You're paying 6% on your interest rates,
You know, the 2%, you were paying just
a year ago, really appreciate you making those distinctions
and also mentioning debt and lifestyle creep, of course
, being behind a lot of this. So what
are some of these higher earners doing to offset their
living expenses right now? Is this sustainable and what
do you think? People who are on the lower
income side as you mentioned living paycheck to paycheck,
but maybe not even able to make bills. What
can they learn here from the higher earners? Yeah
, I mean there's something everybody can do, right
? I mean one of the biggest drivers that we're
seeing is just think like the massive increase in gas
prices. So on average you're paying$5,000 more a
year. That's like$200 a month On gas.
Now that it's, you know, average of national
average of necessary national average of$5 a gallon.
But I mean I live in San Francisco, I've
seen it as high as eight here, right?
I mean that's just, that's just$100 or$20
more. Your gas tank just right away. Um
, that's many people, that's not a discretionary expense
, right? That's what you got to pay something
with food prices are going up. Do you need
to look at your budget if you look at your
budget that you used last year and you're trying to
use it for this year, it's not gonna work
right. There's some other things you can look at
. I know a lot of friends, I started
car sharing right? Just like, hey, as
opposed to everybody driving to work or school or or
an event maybe we can, you know, split
the costs and drive and drive together and those,
those are, some of the things I think a
lot of people do. The other thing has been
a huge movement to, is people as opposed to
buying the brand names for food, is buying the
store brands and you're seeing an increasing number of people
focused on, excuse me, focus on there,
their core expenses and not drive discretionary. I saw
this morning you're talking about the bed bath and beyond
ceo being replaced. I saw last month, you
know, target had pretty disastrous earnings numbers because people
are pulling back on discretionary expenses. Like do I
need this new Kitchenaid mixer? I know I need
to get the food, I need to get the
other things. But can I make do with some
of these other things. Um, to build up
a little bit of a cushion because the one thing
you need to do right now is build a cushion
if you can, to save some money so that
if you get stuck in an emergency, you're not
having to rely on a credit card whose interest rate
is just shooting up month by month as they,
as they match the february. Yeah, I'm glad
that you mentioned kind of the danger of using a
credit card during this time, especially as debt was
one of the main factors that you said was a
problem when people are living paycheck to paycheck. But
is there a way that credit cards can be used
right now to help people out as well. Oh
absolutely, Absolutely. I mean I use my credit
card almost daily right? I mean it's, it's
kind of my primary way to pay for things because
it's massively convenient. But if you're not managing to
pay it off every month, if you're not managing
to a budget, you've basically taken out a personal
loan, it's a pretty bad personal loan, but
you've taken out a personal loan and right now that
cost of that debt is going to increase literally monthly
as credit card rates start to catch up to the
increased Fed rates that are being announced. The next
Fed rate comes I think out in two weeks and
everyone is expecting another, you know, three quarters
of basis points and 30.75% increase that leads directly into
how much all of your debt costs. Right?
And so if you're not paying it off, we
strongly suggest you, all the pundits are saying,
you strongly suggest like lock in a fixed right now
versus letting that credit rate just get out of control
and keep going And there's 30 seconds here, I
have to ask you what you think about the middle
class moving forward, what does it look like if
we see fewer jobs out there and also these prices
and inflation continuing. Yeah, I mean it's gonna
be, it's interesting question like I think what you're
seeing right now is the consumer seems in pretty good
shape still. Like I was I was at the
airport recently and it's packed. I was at a
restaurant, it's packed. But as the stuff continues
through and we thought that the uh you know,
jobs, jobs disappear, what do they say?
It's not, I had a great, it's not
a white collar recession or a blue collar recession,
at least color recession because you're saying it specifically hit
areas like san Francisco with a lot of the tech
activity. Um it's gonna feed into how how people
can live every day and that's obviously gonna feed through
that. But they can spend unusual hair, financial
health officer at lendingclub. Thank you so much for
joining us. Really good perspective there.