Despite headline inflation trending downward in recent months, more than half of American adults say that they are now living paycheck to paycheck following a LendingClub report published in June 2023.
A closer look at the report revealed that roughly 58 percent of U.S. adults are now living each month paycheck to paycheck. More surprisingly, three-quarters of consumers earning less than $50,000 annually, and 65 percent earning between $50,000 and $100,000 are having their paychecks stretched thin every month.
With inflation dramatically falling, after reaching a four-decade high of 9 percent in June last year, the Federal Reserve continues to flirt with the idea of initiating further interest rate hikes in the remainder of the year, as they attempt to bring inflation down to their 2 percent benchmark.
American consumers have already witnessed mortgage rates hitting a twenty-year high this summer after the central bank hiked up the Federal Funds Rate to a current target range of 5.25 – 5.50 percent.
While there has been an indication of rising prices beginning to cool, after the Consumer Price Index (CPI) rose to 3.7 percent in August, countless American families are seeking alternatives to combat rising costs, while at the same time trying to stuff their emergency funds.
A look at the national cost of living
Much of the post-pandemic economic recovery has not gone quite as planned, as uncertainty and geopolitical tension around the world are driving market conditions in all sorts of directions.
These developments have filtered through to consumers, with the majority of them feeling the turbulence now shaking their purses, and higher costs take a deeper dive into their disposable income.
Overall, prices for all goods, including energy and other utilities have risen by 13 percent in the two years since 2021. The cost of food at home, including essential grocery items, has swelled by 20 percent, while household costs, including electricity and piped gas, have risen by 21 percent and 26 percent, respectively.
Last year consumers returned to travel and leisure in droves, due to pent-up demand, and delayed pre-planned pandemic vacations. By mid-summer last year, airfares were 45 percent more expensive due to surging demand and skyrocketing gasoline prices. By March this year, the cost of air travel was still 36 percent higher than what they were for the same period in 2021.
Data compiled by the World Population Review estimates that the median American household income currently sits around $67,521 annually, while for individuals, this figure is closer to $35,805 per year.
According to the same estimates, American households spend on average $7,317 on food per year, or around $609.75 per month. Utilities, including electricity, gas, and water cost families roughly $370.16 per month, while healthcare insurance takes more than $5,100 annually from families’ paychecks.
Spending on transportation, including public transport and private vehicles costs the average American household more than an average of $9,826 per year. Last year, gasoline prices surpassed $5.00 per gallon, for the first time, as tension between Ukraine and Russia led to an overall shortage of natural oil, and prices for crude oil were skyrocketing. Since 2021, Americans are now paying 22 percent more for gasoline.
The solution one might think would simply mean paying employees more money, however, even sharply increasing wages has a knock-on effect on inflation and the wider recovery of the economy.
The software and technology company, Payscale, predicts that employers are budgeting to increase wages by 3.8 percent next year, slightly below this year’s average of 4 percent.
Prices, and the overall cost of living have far outpaced wage growth for the average American consumer. Experts warn that these conditions will continue until inflation becomes less of a problem for economists and the Federal Reserve Bank.
Making sustainable choices can save more of your paycheck
Higher prices and the slowing economy isn’t the only thing that has lately been worrying consumers. Worrisome climate change patterns have contributed to the stress of many consumers, businesses, and governments. In an attempt to make more informed financial decisions, many are looking at living a more sustainable lifestyle.
Jordan Binning, founder of the Utah-based solar power company and national solar installer, Nusun Power, believes consumers can make a difference, even if it doesn’t feel like it. “Consumers are now more concerned about the soaring cost of living than ever before. Changes in and around their home can help to significantly lower their monthly expenses, something every American is looking to do right now.”
Choose renewable energy
Renewable energy is quite literally having its moment in the sun. Data by Pew Research Center reveals that renewable energy adoption, more specifically solar power, is seeing increasing investment across the United States, as more families look to switch over from fossil fuels to renewables. Between 2020 and 2021, residential solar installations rose by 34 percent.
Better legislation under the Biden Administration and improved tax provisions for residential solar energy have helped motivate more American households to go solar and ditch traditional energy sources.
As demand for solar power continues to grow, and consumers look to generate electricity through renewable sources, Binning notes that many households are aiming to equip themselves better for the future, and increase their savings over the long-term outlook.
Nusun Power is a national supplier of solar panels, serving households across the country. While many households continue to rely on fossil fuels, and perhaps antiquated energy sources, Nusun Power has noticed that in more recent years that many more consumers are looking to become self-sufficient due to rising energy costs, and environmental concerns.
“The outlook for solar power is looking more and more promising each year. Consumers want to know that they are making a difference, but more importantly, they’re seeking alternatives that will provide them with long-term financial benefits. Going solar has the benefit of reducing household utility bills, something every consumer with a family needs to think about if they have plans with their money, or stocking up their emergency funds,” says Binning.
Switch to solar
Solar energy is perhaps the most used, and readily available renewable energy source that American households have access to. Fossil fuels, including natural gas, coal, and petroleum liquids remain the main sources of energy generation in America., according to the U.S. Energy Information Administration.
One estimate suggests that the typical American household requires roughly 10,000 KwH of energy per year. However, for the typical American household, a 20 to 30-panel system could help meet their annual energy needs.
Where applicable, individual consumers and households will need to begin considering the long-term cost benefits of switching to renewables such as solar energy. There is no upfront investment required. From day one, most homeowners are saving money by investing in solar due to the no upfront costs for the investment. This reflects not only long term benefits, but also immediate ones as well.
What’s more, new legislation now allows consumers, and more importantly, households to be eligible for federal tax credits if they buy or install a solar energy system in their home. Until 2032, consumers can claim 30 percent of the cost, which includes panels, wiring, labor costs such as installation, local permits, and fees.
Binning notes that while many households are initially skeptical over the prospects of solar energy, he’s witnessed that due to soaring costs for ordinary utilities, it is driving consumers to seek out alternatives for energy with the most popular being solar.
Starting with a few solar panels at first, to help power smaller appliances around the house, such as central heating, or water heaters could make a significant difference by the end of the month. While many would enjoy jumping in head first, making smaller, and more cost-effective investments in solar energy over the near-term stretch can help you keep more of your monthly paycheck that would’ve otherwise been spent on exuberant utility costs.
Manage energy use around the house
Another option would be to use integrated network systems that allow you to properly manage energy usage around the house. These systems are often integrated with renewable sources, such as solar energy, allowing you to see how much energy you have generated, and how much is needed to fulfill household capacity demand.
“Residential solar energy has become more advanced than what consumers may think. We’re now able to link the solar panels on their roof, with a highly sophisticated system indoors that allows them to track their usage, how energy is being distributed around the house, and provide them with more accurate data readings,” shares Binning.
On an annual basis, Americans waste roughly $443 billion worth of energy each year, which equates to roughly $1,118 per person per year. Across the U.S. the typical household demand and usage of energy far surpasses that of other developed regions, including Europe, Asia, and the global average.
Installing a sophisticated energy system, that helps to track energy distribution, but further ensures that you or your family don’t unnecessarily waste energy, and blindly throw money away each month.
“Imagine how much more consumers can save, by not only making more sustainable choices, but using advanced technology to help power their homes, and keep track of their usage each month,” says Binning.
Update outdated household appliances
Many American households still make use of outdated, and seemingly antiquated household appliances. From water heaters, fridges, stoves, and central heating, many of these systems consume an exuberant amount of energy each year, leaving Americans to foot the bill for it.
Nowadays, appliance efficiency standards mandate manufacturers to clearly indicate the energy consumption level of each appliance, but furthermore, manufacture appliances that are fitted with updated, and more sustainable components.
The Appliance Standards Awareness Project, a non-profit organization that helps to advocate for improved legislation and provisions regarding the energy use of appliances, estimates that new standards introduced under the current administration have helped reduce the average household’s annual utility bill by roughly $500.
Switch to energy-efficient lighting
For quite some time already, there has been a consumer shift towards LED lights in and around their homes. While these lights tend to be slightly more expensive than traditional bulbs, they not only use less electricity but have a longer lifespan.
According to the U.S. Department of Energy, LED lights can use up to 90 percent less energy, and last nearly 25 times longer compared to incandescent light bulbs. What’s more, the Department of Energy estimates that lighting accounts for roughly 15 percent of the average American household’s electricity usage, and switching to LEDs can save them around $225 in annual energy costs.
From a financial point of view, it would make better sense to consider how switching to more energy-efficient lighting can become a more common practice in households. While these lights not only consume less energy, they are often a more compatible option for homes running on solar energy.
Measure water your consumption
Excessive water consumption is not only wasteful, but in drought-stricken parts of the country, water scarcity has become an increasing reality in more recent years due to climate change, and lower annual rainfall.
Being more conscious of how and when water is being used in and around your home will help you realize how you can cut down on unnecessary usage, which can have a positive impact on your monthly utility bills.
Simple things such as taking shorter showers, using the dishwasher less, or even watering the garden only at night, or replacing invasive plant species with more environmentally friendly alternatives can already make a difference in the long run.
Additionally, renewable energy experts, such as Binning suggest that connecting water heating systems, and treatment plants within a residential setting to renewable power sources could also make a significant difference in terms of monthly utility bills.
Households continue to look at alternatives, especially solar, to provide them with their energy and heating needs. While it’s important to consider how this will reflect in terms of your carbon-footprint, it can bring into focus how finances are being dispersed across a household to pay for things such as water and heating each month.
Install central heating timers
According to data from the Residential Energy Consumption Survey (RECS), central heating around the home accounted for 42 percent of overall energy usage in residential homes, costing households on average $519.
With winter around the corner, and energy prices still higher than what they were several years ago, consumers will need to start looking at alternative methods to keep their homes insulated and warm. One solution, which has proven viable is to install heating timers or update your current heating system.
With this, you will be assured that after several hours of use, the heating will automatically switch off, and not be used in areas of the house where no one is present, or if you forget to switch it off before leaving the house.
Make use of public transportation
Prices at the gas pump remain historically high. The same can be said about auto insurance, maintenance, service, and upkeep of vehicles. For consumers that have access to public transportation in and around their city, keeping the car at home, and paying for monthly or annual tickets can help to significantly reduce your dependency on a vehicle.
Plan meals
Less trips to the grocery store, and eating out less can also be another method to save more of your disposable income. While the average grocery bill will change depending on a person or family’s eating habits, diet, and lifestyle, the average American household spends more than $5,259 annually on groceries or around $438 per month.
Not only will it save more money, but instead of food going to waste, and ending up in landfills, which require copious amounts of water, fertilizer, and other resources to get to your table, planning your meals accordingly will ensure you waste less food, and make more use of what you have at home.
Invest in sustainable companies
For those of you who have already started building a nest egg for your retirement, or have dabbled in the investment market, sustainable investing has now become a major trend among seasoned professionals and multinational companies.
A report by McKinsey and Company, a global consulting firm, estimates that socially responsible investing has increased by 22 percent over the last three years. What’s more, nearly $3.74 trillion of all assets under management in the U.S. are currently classified as ESG or Environmental, Social, and Governance accounts.
For individual consumers, not too concerned about investing in the stock market, an alternative would be to support sustainable companies, such as Nusun Power, which is often more accessible and applicable to their current situation, and provides a real-world product that can positively impact their paycheck.
More active decisions to lower your cost of living, but also make a difference in the long term requires the involvement of every consumer and household, and it often requires the smallest effort, such as choosing solar over traditional energy or buying from sustainable companies.
Investing in companies that have a strong ESG track record will ensure that you’re deliberately putting your money into companies that are looking to make better environmental and social decisions, and in the long term will contribute to the growth of your investments.
Make smaller ethical purchase decisions
Anything we purchase nowadays has gone through a laborious process to get to you. From the raw materials needed, whether it’s for the physical product or even the packaging, to the transportation of goods, and the labor that got put into it – when you begin to consider the ethical life cycle of products, you begin to realize that there are multiple things you can do to decrease your carbon footprint and get more worth for your money.
Being more proactive with your life choices is already a step in the right direction. To make a bigger impact, you will need to start small, at first. Looking to support more transparent brands not only adds value to your life choices but financially, it would make more sense once.
Binning feels that as a business they’ve remained transparent about all their practices, especially in a highly specialized market segment such as solar energy. “Giving consumers a clear indication of the type of business you’re running, can already help them make more informed decisions.”
Consumers are becoming more aware of their purchases, and how making informed decisions can help drive more awareness in terms of sustainability and their finances. While many try to advocate for change in the wider market, often the easiest way to make a difference is to look at how you’re using your paycheck month to month.
Final thoughts
Looking to get more worth for your dollars? Start by looking at how you can live a more environmentally conscious and sustainable lifestyle without having to break the bank first. Making small changes, whether it’s taking shorter showers, or even buying less of certain products can directly help you create more financial awareness, but in the long run make a big difference in terms of living more sustainably.
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