In February 2023, 62 percent of adult U.S. consumers were living paycheck-to-paycheck, according to a March 2023 report from LendingClub Corporation in partnership with PYMNTS.
Among those living paycheck-to-paycheck are high-income consumers or those earning at least $100,000 a year or more. As of February 2023, 48 percent of high-income consumers reported living paycheck-to-paycheck, according to the report.
As inflation continues to drive the cost of housing, gas, and groceries higher, American consumers have two choices: cut their spending or raise their income. According to the results of LendingClub and PYMNTS’ new survey, Reality Check: Paycheck-to-Paycheck research series, the majority of Americans are choosing the latter.
Although inflation was around 6 percent in February 2023, down from a high of 9.1 percent in July 2022, inflation is still squeezing consumers of all income levels and making it more difficult to save anything once bills are paid.
In other words, a growing number of U.S. consumers are turning to alternative sources of income, including side hustles, to supplement their income from their regular full-time employment in order to improve their financial situation. And it seems to be working. The data collected from LendingClub Corporation and PYMNTS found that even with the growing financial pressures related to inflation and rising interest rates, lower-income consumers reported fewer issues paying their bills, including those living paycheck-to-paycheck compared to a year ago, largely in part due to side hustles.
According to the report, consumers are amassing a collective $52 billion in cash payments related to active side hustles each month, most of which, if not all, is untaxed or unreported.
“While consumers have adjusted to inflationary pressures by budgeting and spending less, many have turned to supplemental income with a side job or alternative income sources to improve their financial standing,” said Anuj Nayar, Financial Health Officer at LendingClub.
Consumers Turn to Side Hustles to Stop Living Paycheck-to-Paycheck
Consumers struggling to pay their bills or afford their pre-inflation financial lifestyle are most likely to report they had a side hustle because their current income is not enough (46 percent). And as the report’s authors acknowledged, as inflation has made life more and more expensive, consumers are realizing they can’t always continue to cut back on spending and had to find other ways to increase their purchasing power.
“As pandemic-related financial benefits were pulled back by the government, more and more people turned to alternative income to make ends meet and manage their cash flow,” Nayar said.
Of the consumers surveyed for the report, 60 percent reported they were employed full-time, and of those full-time employed Americans, nearly half reported holding a side hustle or earning money through some other form of supplemental income, namely from informal tasks via mobile apps like TaskRabbit or selling artisanal or used products on Etsy or eBay.
Specifically, the report found 27 percent of high-income earners had side jobs, while 26 percent of middle-income consumers had side jobs. Even those consumers not living paycheck-to-paycheck are turning to side hustles in the last few years because the income is easy to earn (70 percent), and they enjoy the work (56 percent). However, the report’s authors acknowledged that high-income consumers are more likely to receive supplemental income that does not come from a side hustle, such as passive incomes earned from investments and rental properties.
Lower-income earners and those living paycheck-to-paycheck, however, reported their motivation for earning money from a side hustle was not related to the ability to easily earn money or enjoyment of the work; instead, 46 percent reported extraordinary expenses as their motivation for a side hustle.
“What is clear: no matter your income bracket, having supplemental income greatly impacts financial stability and can often mean the difference between living without difficulty and living paycheck to paycheck and struggling to pay monthly bills,” Nayar said.
Although side hustles are relatively new, with most consumers not having this supplemental income two years ago, nearly a quarter of consumers living paycheck-to-paycheck reported their financial situation would seriously deteriorate without this supplemental income.
“A vast majority of consumers became used to working from home during the pandemic, and after returning to work, many kept flexible hours and turned to alternative income streams to expand their earning potential beyond a 9-to-5 job,” Nayar said.
Given that inflation doesn’t seem to be going away anytime soon, the report’s authors expect side hustles and other supplemental income will only gain importance moving forward.
More than 50 percent of those who have not received a supplemental income in the last three months are at least somewhat likely to seek another income source in the next 12 months. This share is even higher among consumers living paycheck-to-paycheck or those who have issues paying bills, with 64 percent of consumers reporting they are likely to seek better financial stability via additional income. The most popular side hustle options for consumers include finding a second job and selling used items. A little more than a quarter of consumers, 26 percent, reported they would seek to gain profits from investments to make ends meet.