Millennials are Making Six Figures, Yet Still Live Paycheck-to-Paycheck
- The millennial generation is out-earning every other generation as many of them are earning a six-figure salary.
- Although many millennials are making six figures in income, more of them live paycheck-to-paycheck than any other generation.
- Student loans, credit card debt, and medical debt, as well as recent economic events may be deterring millennials from saving and investing.
More millennials than ever are making at least $100,000 per year. However, a survey by PYMTS and LendingClub found that 60% of them were still living paycheck-to-paycheck, despite their high income. The rate is higher than expected, as overall, only 40% of those who make six figures or more live paycheck to paycheck.
According to PYMTS and Lending Club, "53% of upper-income Americans are living" paycheck-to-paycheck. Upper-Incomers are classified as those who earn between $50,000 and $100,000 annually. This percentage equates to 125 million American adults who do not have money left over after paying their bills each month.
One of the most surprising parts of the PYMTS survey was that 70% of millennials find themselves in this situation. Despite many millennials having college degrees and six-figure salary jobs, the reality is that their net worth and credit scores do not reflect that. Many millennials are deep in student loan debt, credit card debt, and medical debt.
Recommended Read: Millennials Are Experiencing Financial Burnout. Here's Why.
How Millennials Compare
Compared to other generations, millennials are earning more in annual salaries at higher rates. As a result, more and more of them are earning at least $100,000. But, despite them earning $100,000 or more, they are still unable to save or invest money during each pay period.
On the other hand, only 40% of baby boomers and seniors are living paycheck to paycheck. This is the least amount in any other generation. The gap is evident and alarming, as millennials make more money on average yet struggle the most. In addition, as shown in the survey, older generations have more control over their finances than younger generations.
Of all the people living paycheck-to-paycheck, $3,928 is the average amount they each have in savings, according to PYMTS and Lending Club. Age and family status are some of the most significant factors affecting the financial situation of those living paycheck-to-paycheck. Those who are turning 25 to 40 this year will be the most negatively affected.
One of the most significant factors causing such a large economic disparity is debt. Many millennials have an increasing amount of debt due to high amounts of student loans, high credit card bills, and medical expenses. With incredibly high interest rates on debt balances, saving money is out of the question for many.
Countless millennials have also had to turn to debt consolidation to get their financial situations in order. Many have also found themselves creating multiple income streams to keep up with their expenses and lifestyle.
How to Prevent Lifestyle Creep
Lifestyle creep, or lifestyle inflation occurs when you begin to earn more money. When you start making more money, it is easy to believe that you can also spend more money. However, with a new pay raise comes more responsibility. Although you are now earning more, it does not mean you should spend more, especially if it's not necessary.
To prevent lifestyle creep, you should create and stick to a budget to keep track of your dollars. By knowing exactly where your money is going, you will be able to manage your money with clear intentions.
Recommended Read: Three Tips to Manage Your Money with Clear Intentions
Another way to balance your lifestyle and income is to avoid overspending on things that will not bring any value into your life. Therefore, it is essential to manage your money wisely and make sure you are enjoying your hard-earned dollars. However, it is also necessary to plan for the future or in case of an emergency, so if you can, saving and investing your money can help you be financially prepared for any situation.
An Affordability Crisis
One particular economic event that millennials have had to face in current times is the United States' affordability crisis. Living costs are through the roof, while income increases have not kept up. As a result, compared to the '70s, a college education is now costing double or more. This crisis has caused many millennials to take out large amounts of student loans to attain higher education degrees.
A million dollars is not what it used to be. The affordability crisis has prevented millennials from buying homes, starting families, and building generational wealth. In addition, the problem has delayed many millennials from amassing wealth through traditional methods such as purchasing a home.
The number of setbacks that millennials have had to manage does not stop there. COVID-19, a housing crisis, and a car chip shortage are examples of recent hurdles that many millennials are still trying to overcome.
Recommended Read: The U.S. Economy is in a Housing Crisis. Here's Why.
Are you surprised by the results found in this survey? Let us know in the comments below.
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