Individuals in the United States who earn a comfortable six-figure salary are experiencing an increased level of concern regarding their ability to meet financial obligations this year. Interestingly, their level of panic is even higher than that of employees who earn between $40,000 and $99,999.
A recent report by the Federal Reserve Bank of Philadelphia has revealed that its Labor, Income, Finances, and Expectations (LIFE) Survey, which interviewed approximately 5,000 individuals, suggests that…
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According to the survey, individuals who earn $150,000 or more are concerned about paying their bills in the six months following the survey, with a percentage of 32.5%. Similarly, 30.8% of individuals who earn between $100,000 and $149,999 share the same worry.
Only a minority of individuals earning between $40,000 and $99,999 expressed concerns about their ability to make ends meet, according to a survey. Specifically, 29.8% of those earning between $40,000 and $69,999 reported being worried about their financial stability, while only 23% of those earning between $70,000 and $99,999 expressed the same concern.
People earning less than $40,000 annually are the ones most worried about their financial situation in the next six months, according to a recent survey. About 40% of respondents expressed concerns about making ends meet in the next half a year. However, this figure has slightly decreased from the previous surveys. In January, around 43% of people were worried, and in October 2023, the number stood at 43.2%.
As time passes, the wealthier individuals seem to be growing more anxious about their financial status. A prime example is the $150,000-plus bracket, where only 20.4% of the individuals expressed their concern about their current financial situation in July of last year.
The percentage has consistently risen in every LIFE survey, with a recorded increase from 24.3% in October 2023 to 29.6% in January 2024.
Different demographics are reacting to various economic data, providing valuable insights. Inflation, which had peaked at 9.1% in June 2022, has since dropped to 3.3%. However, it is important to note that prices are still increasing, albeit at a slower pace, and new market factors are also coming into play.
The world is currently facing a multitude of challenges, from rising global tensions to the upcoming presidential election and the mounting national debt.
Cutting spending
According to the data provided by the Fed, individuals earning $150,000 or more have not been immune to financial insecurity, and it appears that they have taken action in response to their concerns. The data reveals that approximately 17% of those in the top income bracket have reduced their essential spending, while 37.1% have cut back on discretionary spending over the past year.
The majority of affluent individuals preferred to cut back on their spending as their primary method of managing their finances. Only 15% of them opted to take on additional jobs, while 10% resorted to borrowing from formal sources.
It comes as no surprise that cutting discretionary spending was the most popular method for coping with financial difficulties across all income groups. However, those with lower levels of discretionary income were found to be more likely to adopt this strategy. In fact, 46.6% of individuals earning $40,000 or less reported cutting discretionary spending as a way to manage their finances.
What’s got the wealthy so worried?
According to the popular saying, having more money means having more problems. As per the Philly Fed’s seven-point survey, individuals earning $150,000 or more expressed more concern than others across the earnings spectrum, with the exception of one point: transportation.
Approximately 40% of individuals earning over $150,000 expressed concern about securing and maintaining childcare, elder or senior care, and the possibility of being laid off or their employer going bankrupt.
In the same vein, around 37% expressed concern about the potential impact of another shutdown on their employer, while 35% shared worries about the possibility of contracting an illness while at work.
As per the findings, the level of fear decreased as we moved towards the lower-income group, in each of the given scenarios. However, an increase in the fear factor was observed at the end of the scale in the category where the income was less than $40,000.
Individuals with lower incomes have consistently expressed more concerns about the state of the economy. In a comparison between current outlooks and those from a year ago, 30.5% of respondents reported feeling more positive, while 34.6% stated feeling more negative.
Those earning between $40,000 to $69,000 per year have a slightly better outlook than the previous group, with only a 4% increase in optimism compared to last year.
Among the affluent segment, there has been a significant shift in attitude, as 55% of high-income earners now have a more positive outlook than they did a year ago. This is in contrast to the 18% who feel more negative, resulting in a net increase of 37% in overall sentiment.
Consumer sentiment regarding higher prices has remained relatively stable over the past year, despite fluctuations in the market. In fact, the University of Michigan’s most recent consumer sentiment index, which was released in June, recorded a score of 65.6.
According to Joanne Hsu, the director in charge of consumer surveys, the sentiment among consumers remained largely the same in June. The reading for this month was only 3.5 index points lower than May, which is statistically insignificant and falls within the margin of error.
As of June 2022, sentiment has risen by approximately 31% since hitting its lowest point. This increase occurred amidst the ongoing inflation escalation. While evaluations of personal finances have slightly decreased, primarily due to rising concerns regarding high prices and dwindling incomes, consumers overall have not noticed significant changes in the economy since May.
