How Making $80K A Year Can Still Lead To Financial Distress Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: Rawpixel/Getty Images July 06, 2022 Kelly Anne Smith Aylea Wilkins is an editor specializing in personal and home equity loans. She has previously worked for Bankrate editing content about auto, home and life insurance. She has been editing professionally for nearly a decade in a variety of fields with a primary focus on helping people make financial and purchasing decisions with confidence by providing clear and unbiased information. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our banking reporters and editors focus on the points consumers care about most — the best banks, latest rates, different types of accounts, money-saving tips and more — so you can feel confident as you’re managing your money. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Christina Moss and her husband had a combined yearly income of $125,000. They make more money than the 2020 in the United States–which was $67,521. The reality of their day-to-day finances, however, places them in a much different light. The couple, who shared the details surrounding their finances in 2019, had to cancel a service call for their home’s furnace because they couldn’t afford the $200 fee. Christina said her family is lucky that her husband is handy and could fix the furnace himself, but she still expressed shame when discussing how financially strapped the couple is on a daily basis. “It’s embarrassing to make this much money and still be financially broke,” Christina, a 42-year-old accounting manager in St. Louis, Missouri said. “After a while, you get used to it and just chalk it up.” A higher income does not guarantee financial security
On paper, the Moss family’s income is strong and stable. However, their story illustrates the challenges of making ends meet even with a strong and steady income. It’s a challenge that is especially prevalent at a time when inflation is , and the cost of everything from gas to groceries to housing and healthcare has been climbing. Household budgets are being squeezed as daily living expenses continue climbing and nearly all (93 percent) of consumers say they’ve noticed on the items that they buy, according to a Bankrate poll conducted in March 2022. What’s more, of the adults who say they’ve experienced price increases over the past year, nearly three quarters (74 percent) reported that the increases negatively impacted their financial situations. Another Bankrate survey found that only about 4 in 10 Americans have enough savings on hand to cover an of $1,000. “Just 44 percent of Americans could cover an unplanned expense of $1,000 from savings, a troubling statistic at any time but particularly with monthly expenses marching higher due to inflation at a 40-year high,” said Greg McBride, CFA, chief financial analyst at Bankrate. “Being undersaved for emergencies or lacking savings altogether is not limited to certain income brackets and is a reality for Americans from varied walks of life.” Financial challenges for American families
So how can earning even as much as $100,000 keep families from staying financially afloat? There are so many factors at play — it’s almost impossible to pinpoint just one reason why so many Americans are teetering on the edge of being one surprise expense away from a major financial emergency. Poverty calculations
One hitch in the system is that our perspective of “good money,” or what draws the lines between the middle class — rich and poor — hasn’t changed in over 50 years. The official Federal poverty measure is a calculation used to determine who is poor in America. However, the measure was created in 1963 and is based on 1955 data. Economic analysts pointed out years ago that this measure of poverty is to better serve the public. The calculation is based solely on income and takes into consideration the cost of a minimum food diet in 1963–not 2022. Cost of living
Meanwhile, the cost of living has been skyrocketing and the purchasing power of workers has been significantly diminished by . Consumer prices are up about 8.3 percent over one year ago, and inflation has been increasing at a rate not witnessed since the 1980s. The increased 8.8 percent between March 2021 and March 2022. That figure is the largest 12-month increase since the end of May 1981. While employers have increased wages in recent years to attract employees after waves of resignations amid the COVID-19 pandemic, those increases have not been distributed evenly–and some sectors fared . “Americans and their personal finances have been through a lot over the past few years,” said Mark Hamrick, senior economic analyst and Washington bureau chief at Bankrate. “There’s been the pandemic, an economic recovery and then inflation began to soar, seeming to catch nearly everyone by surprise. Because wage growth has not been sufficient to keep pace with rising prices, many households have been scrambling to adjust, whether tapping funds from savings, cutting back or utilizing credit card debt.” Healthcare costs
Healthcare costs are another substantial challenge for Americans when trying to make ends meet. The U.S. Bureau of Labor Statistics reports that in 2018 (the latest year with statistics), an average of of the U.S. household budget went toward healthcare, which was up substantially from 5.9 percent in 2004. Student debt
Another major expense impacting household budgets is student loan debt, which has reached . Though federal student loan payments were temporarily on hold amid the pandemic, student debt will continue to be a significant financial challenge for many Americans once payments resume. Childcare
Childcare costs in America are also a significant issue that can hardly be overlooked. The costs associated with child care are among the in a family’s monthly budget. In fact, in many parts of the country childcare costs are often more expensive than housing, college tuition, transportation or food. Bad financial habits
All of these factors combine to paint a blurry picture of a struggling working class. At the same time, Hamrick says, some of the challenges may be self-inflicted. “During good times and not-so-good times, one constant is the need for individuals and households to have a budget, attempt to live beneath their means and to continue to prioritize savings for both the short and long terms,” said Hamrick. How debt adds up
When the Moss family adds up their monthly costs, there just isn’t enough cash to cover everything. Their situation is a fairly typical financial scenario: They have student loan debt, credit card debt, a mortgage, kids to care for and monthly bills to pay. Before Christina and her husband met, they were both single parents. Her husband, who makes less than her, was “struggling” to survive, as Christina puts it. After they married, she started helping him manage his debt. Combined, Christina and her husband say they have $200,000 in student loan debt and about $15,000 in credit card debt. Being saddled with debt is a common experience in America — another recent Bankrate survey found that 3 in 10 Americans have more credit card debt than emergency savings. Their mortgage, which eats up 15 percent of the family’s monthly income, is upside down. They say that they cannot afford the $30,000 it would cost them to sell the home. The couple reported spending 33 percent of their monthly income on education-related expenses for their four children. Their oldest daughter only received partial tuition scholarships for college because their “income is considered too high to get the entire tuition covered,” according to Christina. She and her husband cover the remaining $6,000 of their daughter’s tuition and provide her with a stipend for living expenses. Their other three daughters attend private school, something Christina says is unavoidable. “I wish this wasn’t the case, but with the failing school system in St. Louis, this was our only option,” she said. The scholarships each of the three daughters receive doesn’t cover all of their tuition, leaving the family to foot the rest of the bill. On top of that, there are the regular living expenses — groceries, utilities, car payments and vehicle maintenance — that often take the backseat. Christina, who hasn’t paid her vehicle loan since December, recently negotiated a new payment arrangement with her bank. “The irony is that the car has been down for about three months, but we don’t have the money to fix it,” she said. “So, I’m basically paying for a vehicle I can’t drive.” Bit by bit, the Moss family is trying to pay off their debt. But Christina knows financial security won’t happen overnight. “We are slowly working our way up,” Christina says. 4 ways to manage your finances when facing insecurity
Preparing for a financial emergency is one thing. But managing your finances while you’re already facing insecurity is another. Those seeking to break the paycheck-to-paycheck cycle have options, regardless of their income range. Assess your current employment
Hamrick says consumers should take a hard look at their current employment and determine if it’s making ends meet. If it isn’t, he suggests taking a new approach. “Assess whether you need to look for another job (or additional work such as a part-time gig), move to a more robust job market or seek additional training,” Hamrick said. “Most of us aren’t trust fund babies or wealthy because of inheritance. We’re reliant on our work, or a wage earner, for meeting our regular expenses and possibly raise our standard of living.” Live beneath your means
The Federal Reserve has been steadily raising interest rates to help fight inflation. But that means the cost of debt, including credit card balances, is going up and getting more expensive. “With interest rates on the rise, there’s increased urgency to manage debt effectively,” said Hamrick. Instead of charging expenses you can’t immediately cover to a credit card, adjust your budget accordingly. Determine what you re willing to sacrifice
If you’re already feeling strained for cash, consider small changes that can have a large impact on your budget; this can include packing a lunch or skipping a daily coffee run. On a larger scale, Hamrick recommends considering a used auto purchase over buying new. Consumers can also think about cutting down on college costs by encouraging their children to attend a community college for the first two years before diving into a four-year university, he says. Automate your savings
can help consumers be better prepared for a financial emergency, like missing a bill or being evicted. Overall, ending a paycheck-to-paycheck cycle requires constant communication, planning and strategizing. And while initial conversations about struggling may be intimidating, Hamrick says they are of big value in the long run. “For couples and families, having constructive conversations about money, while sometimes challenging, can be very useful,” Hamrick says. “And it shouldn’t be a one-time-only event. What are the goals and what do we have to work with?” Bottom line
The cost of living in this country has been increasing steadily for years. Food prices, housing, gas, the cost of college tuition, health care and child care are all eating away an ever greater share of the household budget. Even Americans who have a strong, stable income find themselves struggling to make ends meet With record inflation sweeping much of the nation, household budget challenges are becoming even more significant. Some of the steps to help manage finances amid such insecurity include living beneath your means, identifying areas to sacrifice and automating your savings to better prepare for emergencies. SHARE: Kelly Anne Smith Aylea Wilkins is an editor specializing in personal and home equity loans. She has previously worked for Bankrate editing content about auto, home and life insurance. She has been editing professionally for nearly a decade in a variety of fields with a primary focus on helping people make financial and purchasing decisions with confidence by providing clear and unbiased information. Related Articles