With inflation at a 41-year high, gas at record prices, and the cost of food and housing reaching record levels, Americans are looking for alternative methods for staying afloat as their resources are dwindling.
Federal Reserve Economic Data (FRED) said in May that Americans had just 5.4% of their paychecks left after paying basic living expenses, leaving very little for savings. This amount is known as the National Personal Savings rate.
The drop in savings is primarily due to the record-setting inflation, which reached 8.6% in May.
Most Americans have to dip into savings to cover increased food, gas, and energy bills. But after more than a year of rising prices, stagnant wages, and shrinking savings accounts, Americans are looking at alternative methods to pay for basics.
According to Bloomberg, Swedish fintech company Klarna Bank has seen a mass of applications for staples such as food and gas.
The finance company provides interest-free, small installment loans that allow people to make purchases when they are short on cash. Klarna makes money by charging retailers a small per-transaction fee.
“I noticed that I could buy essentials with it, and not have to pay everything up front. And it wouldn’t affect my pocket as much,” said Linda Cruz,
The 37-year-old mother of four from Texas told Bloomberg she started using Klarna’s interest-free loans for occasional, large purchases such as a new air conditioner last summer. However, she told the outlet that as prices began to rise for basic needs, she also started using it for groceries.
Cruz said Klarna is a valuable budgeting tool, letting her take care of her bills when needs arise.
Sue Anderson, an official with debt charity StepChange, said their group found that 36% of users say micro-loans have become more appealing amid the record inflation. Anderson shared her insights with international listeners on BBC radio last week and said that the cost of living crisis is putting pressure on families.
Americans are not alone; the economy has been challenging for people across the planet. According to a recent report from The Mirror, Iceland is offering microloans to help families pay for their groceries. However, it carries a steep repayment with an interest level of as much as 45%.
Biden has yet to accept responsibility for the state of the nation’s economy. He no longer denies inflation but continues to show that he has no real plan to alleviate America’s woes.
During a recent press conference, Biden was asked, “Mr. President, a year ago, the administration was saying that inflation was transitory. That’s obviously not the case now. How long do you think it will be until we see prices coming down?”
He responded, “I’m not going to predict that. It ranges depending on which economists you’re talking to. By the end of this year, and some say it’s going to be — it’s going to increase next year.”
Yet still, gas prices sit at record numbers, supply chain issues persist, and the policies being made by the White House have done little to make a difference. The result is that Americans will continue to seek alternative measures to meet their essential needs.
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