SAN FRANCISCO – According to the latest report, more than 60% of U.S. consumers are living paycheck to paycheck, but a large number of those consumers claim it’s their nonessential spending that has them so strapped.
LendingClub Corp. released its findings from the New Reality Check: Paycheck-to-Paycheck research series, a series involving data from 3,443 U.S. consumers. And according to that data, 16 million American consumers – just over 10% of those living paycheck to paycheck – say nonessential spending is the primary reason they can’t get out of their current financial cycle. In addition, 21% of paycheck-to-paycheck consumers say nonessential spending is one of the reasons for their struggles, but not the top reason.
“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, LendingClub’s Money Expert.
Whether it’s the primary reason or not, data shows about 6% of the U.S. adult population can be considered “discretional” paycheck-to-paycheck consumers, meaning their financial lifestyle is because of nonessential spending, while 13% live on a tight budget at least partly because of their nonessential spending.
While the problem of nonessential spending isn’t isolated to just one generation, it does impact younger consumers more. Twenty-nine percent of Gen Z consumers living paycheck to paycheck say nonessential spending is one of the factors; 15% say it’s the top factor. That’s a stark contrast to the 12% of Baby Boomers and seniors who attribute their financial situations in part to nonessential spending.
“It’s prudent for all consumers — especially those in younger generations who are more apt to indulge in nonessential spending — to regularly assess their spending habits and remain mindful of the compounding effect nonessential spending can have on their overall financial stability,” Dudum said. “If not careful, this type of frequent spending behavior can quickly snowball into bigger and lasting debts.”
But nonessential spending doesn’t affect only those in tight financial situations. At least 74% of consumers admit to having “nice-to-have” items in their grocery carts sometimes; 70% say the same thing about retail purchases.
Candy, desserts and sodas were noted as the most common splurge while grocery shopping. Clothing, followed by health and beauty topped the list outside of groceries. Younger consumers were found to be more likely to spend on activities, travel and personal services than Gen X, Baby Boomers and seniors.