LendingClub and PYMNTS Research Shows a
Majority of Consumers Purchase "Nice-to-Have" Grocery and Retail
Items, Whether or Not They Live Paycheck to Paycheck
SAN
FRANCISCO, Aug. 30, 2023 /PRNewswire/ -- LendingClub
Corporation (NYSE: LC), the parent company of LendingClub
Bank, America's leading digital marketplace bank, today released
findings from the 25th edition of the New Reality Check:
Paycheck-To-Paycheck research series, conducted in partnership with
PYMNTS. The Nonessential Spending Deep Dive Edition examines the
impact of nonessential spending on consumers' ability to manage
expenses and put aside savings. The series draws on insights from a
survey of 3,443 U.S. consumers conducted from July 5 to July 20, as well as an analysis of
other economic data.
The Paycheck-to-Paycheck Landscape
In July 2023, 61% of U.S. consumers lived paycheck
to paycheck, unchanged from June
2023, but 2 percentage points higher than July 2022. Among these individuals, the number
struggling to meet bill payments remains at 21% since June 2023, which represents an increase of 2
percentage points from a year ago but is consistent with the 2021
and 2020 data. Generally, more consumers of all income brackets
reported living paycheck to paycheck in July
2023 than last year. The data indicates the persistent
financial challenges and inflationary pressures a significant
portion of the U.S. population faces.
Nonessential Spending Emerges as a Top Reason for Living
Paycheck to Paycheck
A staggering 16 million U.S. consumers
— slightly over 10% of the paycheck-to-paycheck U.S. population —
claim that nonessential spending is the primary reason they are
trapped in the paycheck-to-paycheck cycle. Twenty-one percent of
paycheck-to-paycheck consumers cite nonessential spending as one
reason — but not the top reason — for their financial lifestyle.
This means that about 6% of the U.S. adult population can be
considered "discretional" paycheck-to-paycheck consumers, as their
financial lifestyle is due to nonessential spending, while 13% of
U.S. consumers live paycheck to paycheck at least partly because of
nonessential spending.
Nonessential spending is not limited to those living paycheck to
paycheck. The data finds that 74% of consumers admit to including
"nice-to-have" items in their grocery carts at least some of the
time, and 70% say the same for their retail purchases.
Gen Z Feels the Most Impact
Nonessential
spending emerges as a prominent issue for younger consumers,
particularly among members of Gen Z. A notable 29% of Gen Z
consumers living paycheck to paycheck cite nonessential spending as
one of the factors contributing to their financial distress, with
15% citing it as the top factor, marking them the most affected
demographic. In contrast, only 12% of baby boomers and seniors in
similar financial situations attribute nonessential spending as a
factor for their struggles. The likelihood of citing nonessential
spending as a reason for living paycheck to paycheck decreases with
age, making younger consumers more vulnerable to its adverse
effects. The study also finds that male consumers are slightly more
likely than female consumers to attribute their financial strain to
nonessential spending.
"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. "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. If not careful, this type of frequent spending behavior
can quickly snowball into bigger and lasting debts."
Nonessential Grocery Items and Clothing Top the List for
Splurges
The research also examines the categories where
consumers splurge on nonessential items. The data suggests that
those not living paycheck to paycheck tend to engage in more
nonessential spending, with 85% and 78% admitting to such behavior
during grocery and retail shopping, respectively, in contrast to
59% and 58%, respectively, for paycheck-to-paycheck consumers with
issues paying their bills and 72% and 69%, respectively, for those
living without issues paying their bills.
For grocery shoppers, desserts, candy, and sodas were among the
most common indulgences, with 41% citing this as their latest
grocery splurge. Premium goods — such as imported foods or seafood
— and snacks rank further down. Consumers not living paycheck to
paycheck are nearly 50% more likely to splurge on niche or imported
goods. Clothing emerged as the top non-grocery splurge, followed by
health and beauty. Outside grocery and retail stores, the research
found that younger consumers were more likely to spend on a broad
range of discretionary services, including leisure activities,
travel, and personal services, than were Gen X, baby boomers, and
seniors.
In addition to nonessential spending, the research looked at
areas where consumers overspent in the last 30 days. For instance,
37% of consumers not living paycheck to paycheck who spent money
dining out at table-service restaurants overspent compared to
approximately 30% of paycheck-to-paycheck consumers. Similarly,
financially stable consumers were more likely to indulge in
higher-cost categories such as airfare, at 40%, compared to 24% for
consumers living paycheck to paycheck with issues paying their
bills and 19% for consumers living paycheck to paycheck without
issues paying their bills. In addition, streaming services and
quick-service restaurants are areas where paycheck-to-paycheck
consumers with issues paying bills allow themselves indulgent
spending.
Shoppers who say they engage in indulgent spending are also more
likely to say they made payments related to credit cards, personal
loans and buy now, pay later plans in the 30 days prior to the
survey. Overall, credit product usage is 11 percentage points
higher for consumers who cite indulgent spending than those who do
not cite such spending. Higher credit usage among indulgent
spenders suggests that credit usage on nonessential categories,
such as clothing or travel, is more common than on essentials, such
as groceries or household supplies.
To view the full report, visit:
https://www.pymnts.com/study/reality-check-paycheck-to-paycheck-indulgent-spending-financial-distress/
Methodology
New Reality Check: The
Paycheck-to-Paycheck Report — The Nonessential Spending Deep Dive
Edition is based on a census-balanced survey of 3,443 U.S.
consumers conducted from July 5 to July
20, as well as an analysis of other economic data. The data
in this report is not intended to be a representation of
LendingClub's core member base. The Paycheck-to-Paycheck series
expands on existing data published by government agencies, such as
the Federal Reserve System and the Bureau of Labor Statistics, to
provide a deep look into the core elements of American consumers'
financial wellness: income, savings, debt and spending choices. Our
sample was balanced to match the U.S. adult population in a set of
key demographic variables: 51% of respondents identified as female,
33% were college educated and 38% declared incomes of more than
$100,000 per year.
About LendingClub
LendingClub Corporation (NYSE: LC)
is the parent company of LendingClub Bank, National Association,
Member FDIC. LendingClub Bank is the leading digital marketplace
bank in the U.S., where members can access a broad range of
financial products and services designed to help them pay less when
borrowing and earn more when saving. Based on more than 150 billion
cells of data and over $85 billion in
loans, our advanced credit decisioning and machine-learning models
are used across the customer lifecycle to expand seamless access to
credit for our members, while generating compelling risk-adjusted
returns for our loan investors. Since 2007, more than 4.7 million
members have joined the Club to help reach their financial goals.
For more information about LendingClub, visit
https://www.lendingclub.com.
Contact:
For Investors: IR@lendingclub.com
Media Contact: Press@lendingclub.com
PYMNTS Contact: information@PYMNTS.com
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SOURCE LendingClub Corporation