**Even Americans Earning Over $150,000 Are Cutting Spending and Concerned About Making Ends Meet**
Americans earning comfortably into the six-figure salary range are increasingly worried about how they’ll make ends meet this year. Surprisingly, they are panicking about it more than employees earning between $40,000 and $99,999. This is according to a report from the Federal Reserve Bank of Philadelphia, which interviewed around 5,000 people for its Labor, Income, Finances, and Expectations (LIFE) Survey released this month.
The survey found that 32.5% of people earning $150,000 or more are worried about paying their bills in the six months following their responses. Similarly, 30.8% of people earning between $100,000 and $149,999 expressed the same concern. In contrast, those bringing in between $40,000 and $99,999 were far less concerned, with an average of 26.4% saying they were worried about their finances in the immediate future.
Those on the lowest end of the income ladder—earning less than $40,000—were the most concerned about how they would fare financially in the next half a year. Four in 10 people said making ends meet in the next six months was a concern. However, this figure has decreased from previous iterations of the survey: in January, approximately 43% raised concerns, and in October 2023, the figure stood at 43.2%.
The opposite is true of the wealthier end of the spectrum, who are only getting more concerned as time goes on. For example, in the $150,000-plus bracket, only 20.4% said in July last year they were worried about their immediate money situation. That percentage has increased in every LIFE survey since: 24.3% in October 2023 and 29.6% in January 2024.
Responses across the spectrum give insight into how different demographics are responding to a slew of economic data. On the one hand, inflation is falling, down from 9.1% to 3.3% since its peak in June 2022. However, prices are still going up, albeit at a slower pace, with new factors now also influencing the market. These range from increasing global geopolitical tensions to a looming presidential election and an ever-increasing national debt bill.
Those earning $150,000 or more have also acted on their fears. The Fed’s data showed approximately 17% of those in the top bracket had cut back on essential spending, while 37.1% added they had cut back on discretionary spending in the past 12 months. Scaling back their spending was by far the wealthy’s preferred method of managing financial fears, as a lower 15% said they’d taken an extra job, and 10% said they’d borrowed from more formal sources.
Indeed, cutting discretionary spending was—perhaps unsurprisingly—the favored method across all income groups. Those with less discretionary income were more likely to do so; for example, 46.6% of those earning $40,000 or less were using this coping strategy.
So, what’s got the wealthy so worried? As the saying goes: “Mo’ money, mo’ problems.” When presented with seven points of concern by the Philly Fed, those earning $150,000 or more were more worried than anyone else on the earnings spectrum, except for one point: transportation. Around four in 10 people earning more than $150,000 said they were worried about finding and keeping childcare, finding and keeping elder or senior care, getting laid off, or their employer going bust.
Approximately 37% said they were worried about another shutdown affecting their employer, and 35% were worried about being exposed to an illness at work. In each of these scenarios, the fear factor largely decreased the lower down the income ladder the respondent was, except for an uptick at the end of the scale in the less than $40,000 category.
Those on the lower end of the income spectrum have also been more consistent in their concerns about the economy. When comparing outlook now to the same question a year prior, 30.5% of respondents said they felt more positive, while 34.6% said they felt more negative. The outlook is only marginally better the next rung up, with those in the $40,000 to $69,000 bracket netting a more optimistic outlook of just 4% when compared to a year ago.
At the wealthier end of the scale, there is a more dramatic turnaround, with 55% of high-earners feeling more positive than a year ago versus 18% who feel more negatively—netting an overall outlook uptick of 37%. That being said, consumer sentiment, particularly relating to higher prices, has stayed fairly consistent over the past year. The University of Michigan’s latest consumer sentiment index hit 65.6 in June.
Joanne Hsu, director of surveys of consumers, added: “Consumer sentiment was little changed in June; this month’s reading was a statistically insignificant 3.5 index points below May and within the margin of error. Sentiment is currently about 31% above the trough seen in June 2022 amid the escalation in inflation. Assessments of personal finances dipped, due to modestly rising concerns over high prices as well as weakening incomes. Overall, consumers perceive few changes in the economy from May.”
The Philly Fed survey found a “large and significant” increase in the past year of people who are currently able to pay their bills but are concerned they won’t be able to in the next six months. That increased from 20.7% a year ago to 26.2%.
The mood wasn’t all gloomy, however. A growing share of wealthier consumers expect higher incomes this year, including 40.8% of those making $150,000 a year or more, up from 20% a year ago. And consumers reported feeling more optimistic than they did a year ago. Perhaps that helps explain why Americans continue to spend aggressively on travel.
The Transportation Security Administration screened a record 2.99 million people at airports on Sunday. The agency is bracing for a record-setting summer of air travel, peaking over the Fourth of July holiday. TSA expects to screen more than 32 million people from June 27 through July 8, 5.4% more than last year.
Still, to manage financial stress, 43.1% of consumers indicate they are cutting discretionary spending for things like entertainment and dining out. More than a third (37.1%) of those making more than $150,000 a year say they are doing the same. Some consumers are even cutting spending on essentials like food or medical care, with 23.5% of all Americans saying they are doing that, compared with 17.1% of high-earners.
Other steps include taking an additional job (15.3% of higher earners), borrowing more (10.2%), and taking money out of retirement savings early (14.3%).
Source: Federal Reserve Bank of Philadelphia, University of Michigan
