LendingClub and PYMNTS Intelligence's Research
Shows One-Third of Consumers Cite Costs of Events and
Celebrations During the Holiday Season Spending as the Key Driver
of Financial Distress; Credit is a Top Coping Mechanism
SAN
FRANCISCO, Sept. 27, 2023 /PRNewswire/
-- LendingClub Corporation (NYSE: LC), the parent company
of LendingClub Bank, America's leading digital marketplace bank,
today released key findings from the 26th edition of the
Reality Check: Paycheck-To-Paycheck research series, conducted
in partnership with PYMNTS Intelligence. The Seasonal Financial
Distress Deep Dive Edition examines the impact of seasonal spending
on consumers' ability to manage expenses and put aside savings.
This edition draws on insights from a survey of 4,218 U.S.
consumers conducted from Aug. 2 to Aug.
15, supplemented by analysis of other economic data.
The Paycheck-to-Paycheck Landscape
In August 2023, a substantial share (60%) of
consumers grappled with living paycheck to paycheck, which is
unchanged since August 2022.
Strikingly, living paycheck to paycheck cuts across all income
brackets, with three-quarters of consumers earning less than
$50,000 annually and 45% of those
with higher incomes — those earning $100,000 annually or more — reporting this
lifestyle. Among consumers annually earning between $50,000 to $100,000, 62% lived paycheck to paycheck as of
August 2023.
Additionally, the share of struggling paycheck-to-paycheck
consumers remains practically unchanged year over year as well. As
of August 2023, 19% of consumers
lived paycheck to paycheck with issues paying bills. The share of
consumers living paycheck to paycheck without issues paying monthly
bills is 41%, also unchanged compared to last year.
"The data underscores the pervasive nature of financial
challenges affecting a majority of consumers," said Alia Dudum, LendingClub's Money Expert. "With
ongoing inflation, U.S. consumers remain resilient by adjusting
their spending to service their financial obligations. However, the
problem is that there is more month at the end of the money, and
seasonality is affecting consumers' financial distress."
Consumers' Perception of Seasonal Impacts on
Finances
Compounding the hardships of living paycheck to
paycheck are the seasonal impacts on consumers' financial
well-being. Nearly half of all consumers say their financial
standing fluctuates seasonally. At 60%, millennials are the
generation most likely to say that their financial situation is
particularly tight at specific times of the year. Similarly, 57% of
consumers living in a household of four or more report the
same.
The factors that introduce seasonal financial distress vary
significantly throughout the year. When grouping distressing
factors by quarter, no factor was the top-cited factor more than
once. At 18%, changes in utility bills topped the list of reasons
cited for Q1. Tax payments led in Q2, with 40% of consumers
reporting this as a reason for seasonal financial distress. In Q3,
school expenses topped the list, with 18% citing this factor as
contributing to their financial stress. Events and celebrations
topped the list in Q4, with 47% of respondents citing this as the
top reason they felt financially stressed.
Surprisingly, seasonal financial swings can lead 30 million
consumers not living paycheck to paycheck to think and act as if
they do live paycheck to paycheck.
Holiday Spending Takes Its Toll
December is the most
cited month for experiencing financial distress for 36% of
consumers, followed by November and January for 19% and 15% of
consumers, respectively.
With December and November most cited as times of financial
stress, it is little surprise that 55% of consumers facing seasonal
swings cite events and celebrations as a reason for financial
distress, with 32% saying this is the top factor for such stress.
In fact, consumers in large households and bridge millennials, at
36% and 41%, respectively, were the groups most likely to cite
events and celebrations as the top reason for financial
distress.
Nonessential spending also emerges as the main reason many live
paycheck to paycheck, and many that live paycheck to paycheck due
to nonessential spending say their financial situation changes
significantly throughout the year. Although these changing
financial situations could be explained by seasonal incomes or
general splurges, holiday spending, while often expected, is
technically a nonessential expense. In contrast, consumers that
live paycheck to paycheck and cite insufficient income as the main
reason for their financial lifestyle are less likely to say their
financial situation changes significantly throughout the year.
"Whether a consumer is living paycheck to paycheck or not,
seasonal fluctuations can seriously impact financial livelihood and
cause individuals to feel the strain," continued Dudum. "With the
holiday season rapidly approaching, it's crucial for consumers,
especially those prone to nonessential spending, to consider
establishing a holiday budget now. Spending that follows a plan can
help reduce and possibly eliminate a consumer's overall debt burden
later."
Consumers Turn to Credit to Cope
While nearly half of
consumers report cutting back on nonessential expenditures to deal
with seasonal financial challenges, the most frequently cited
coping strategy across all financial lifestyles is using credit.
Over one-third (36%) of consumers experiencing seasonal stress
employ credit products, with 21% citing this as their primary
coping mechanism. Consumers also cite spending less on basic needs
and using available savings as strategies for managing financial
distress. Furthermore, the likelihood of skipping payments due to
seasonal financial distress increases within the
paycheck-to-paycheck population, as does the chance of spending
less on necessities.
Interestingly, half of credit users believe that their level of
debt does not adversely affect their financial standing, although
this perception diminishes significantly among paycheck-to-paycheck
consumers. That said, many are not prepared for the unexpected. For
example, while 78% of credit users believe they could accommodate
an unexpected monthly payment of $500, 1 in 4 say it would cause significant
financial stress. Generation X consumers and bridge millennials, at
28% each, were the most likely to say they could not cope with a
sudden increase in debt payments of $500, which is unsurprising as many in those
generations face other financial responsibilities, such as
household expenses, child or elder care expenses, mortgage payments
and car loans due to their stage of life.
Dudum continued, "Since there are key factors that increase
financial stress among U.S. consumers each quarter, many consumers
could benefit from identifying their peak spending months and
proactively budgeting for these major quarterly expenditures."
To view the full report, visit:
https://www.pymnts.com/study/reality-check-paycheck-to-paycheck-seasonal-consumer-spending-financial-stress/
Methodology
New Reality Check: The
Paycheck-to-Paycheck Report — The Seasonal Financial Distress Deep
Dive Edition is based on a census-balanced survey of 4,218 U.S.
consumers conducted from Aug. 2 to Aug. 15, 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
For Media: Press@lendingclub.com
PYMNTS: information@PYMNTS.com
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SOURCE LendingClub Corporation