Inflation is stressing people out.
New research shows almost half of American workers are "financially stressed."
Twenty percent regularly run out of money between paychecks.
"In general, people are having to spend more to get the same things," said Dan Macklin, the CEO of Salary Finance, which authored the study. "Although wages are going up, many people have less money coming in."
The research shows financial stress coming from several directions:
- 76% of the general population said the rising price of consumer goods impacted them
- About half of workers between the ages of 22-44 are carrying student loan debt
- 1 in 5 people said they are carrying medical debt of some kind.
In an attempt to cope with the financial stress, people are turning to riskier financial options.
Payday loan use tripled in 2022 compared to 2021.
"The data around payday loans is pretty horrible," Macklin said.
He noted that 15% of people used a payday loan in the past twelve months.
"These are loans that are designed to be paid back quickly. Anyone who can't do it gets into this horrible situation where they're taking loan after loan to repay the last one, and at those kinds of interest rates, it just doesn't work," he said.
A growing number of Americans, 18%, are turning to online installment loans instead of payday loans.
Those loans can appear more friendly to borrowers since they offer a longer-term than a payday loan.
However, interest rates are typically in the double digits, and they often cost borrowers in the long run.
"There are things that we need to do better," said Macklin, whose report indicates almost nine-out-of-ten Americans use a credit card on a regular basis. "We need to borrow more smartly. We need to borrow in a way, at lower interest rates, that doesn't mean most of our money is going to interest costs. And we need to save better."
Businesses are trying to ease the stress.
More than a quarter of U.S. companies offer a loan program as part of a worker benefits package.
Those loans are paid back out of future paychecks and have a lower interest rate than payday loans or other risky options.
In addition, 28 percent of companies are offering emergency savings accounts.
Those accounts save a small portion of each paycheck for employees until the money is needed for an emergency.
It's a strategy people can use even if ESAs are not offered at their job.
"Let's say you get paid $2,000 a month," Macklin said. "For most people, all of that money goes into one account. The simple discipline of separating some of that money into a separate savings account can be extremely powerful. If people don't touch that money, a few months go by, and suddenly it's in the hundreds of dollars."
Macklin said the key is discipline.
People can only save money if they are able to spend less than they make. For many, that's more about habits than income.
"The reality is that financial stress exists among pretty much all income levels," Macklin said. "Most of us spend more than what we earn irrespective of what we earn. Just because you suddenly get more money in your pocket doesn't suddenly wave a magic wand and solve it."
