Even if wages are increasing, they are not keeping up with the skyrocketing cost of living.
Prices have been increasing far more quickly than hourly wages, which are up 5.1% from a year ago. The Consumer Price Index, which tracks the average change in prices for goods and services purchased by consumers, increased by a faster-than-anticipated 9.1 percent in June. This is the highest rate in four decades.
More customers are using credit cards to fill the gap, which has contributed to the rise of total credit card debt to $890 billion.
According to a report from the Federal Reserve Bank of New York, credit card balances overall increased by 13 percent in the second quarter of 2022, marking the highest year over year growth in more than 20 years.
Balances have decreased significantly during the course of the pandemic’s first year, but they are still somewhat below their pre-pandemic levels.

The most since 2008, 233 million more new credit accounts were opened in the quarter.
The consumer does not feel ‘financially secure’ during a recession
The Federal Reserve increased its target federal funds rate by 0.75 percentage points for a second time in a row in July in an effort to slow the growth.
According to a recent research by digital wealth management Personal Capital, more than half of consumers, or 56 percent, indicated they are already witnessing a decline in their standard of living amid concerns of a recession and rising interest rates.
The survey, which interviewed over 2,000 adults in April, found that a further 69 percent believe their salary isn’t keeping up with inflation and that less than half feel “financially secure enough” to weather another crisis.
According to the survey, Americans now think they need to earn about $107,800 per year to feel “financially healthy,” which is about twice the national average but down 13 percent over the previous six months.
“If everything is costing more, that may reset your expectations on what you need to feel financially healthy,” said Paul Deer, vice president of advisory services at Personal Capital and a licenced financial planner.
“People are putting a higher priority on simply having a job and lowering their expectations,” he added.
What is the key to feel ‘financially healthy’?
Understanding your net worth and your goals will help you determine how much you need to earn to pay bills and save for the future, according to Deer.

In essence, your net worth is the sum of all of your assets, such as cash, retirement accounts, college savings, a home, a car, investment properties, and valuables like art and jewellery, less any liabilities, or long-term debt, like a mortgage, student loans, revolving credit card balances, and other personal loans.
“First and foremost, is your net worth growing or shrinking over time?” Paul Deer said. You must work on increasing your savings and decreasing your spending if your net worth is negative.
From there, decide what future goals you want to accomplish, such as retiring, purchasing a home, or covering your child’s or grandchild’s college expenses, said Deer.
“Laying those out can really help provide clarity over what you should be prioritizing today.”
The majority of individuals agree that spending must be reduced in order to increase savings, however statistics reveal that consumers have not reduced their consumption of food, entertainment, or vacation.
Prices will continue to rise in the interim as long as customers continue to spend.