Supplemental Incomes Make Household Finances More Manageable for Millions

Americans have a way of overcoming financial adversity, and this is borne out by the rising number of employed consumers taking on side hustles to make ends meet, and then some.

It’s also supported by the latest entry in the long-running survey series “New Reality Check: The Paycheck-to-Paycheck Report — Supplemental Income Edition,” a PYMNTS and LendingClub collaboration. The series gauges the financial health of working U.S. consumers, over 60% of whom live paycheck to paycheck along a continuum of struggling to not struggling to meet expenses.

Reviewing the new data in a conversation with PYMNTS, LendingClub Financial Health Officer Anuj Nayar was taken by the sheer scale of the money being generated by employed people adding side gigs, and the ripple effects created, suggesting a new normal is emerging.

“The thing that jumped out to me is they’re generating over $50 billion a month from these cash-based side gigs, which is a huge amount,” he said.

Looking just at those with full-time jobs, the new report found that 29% have started picking up extra income in a variety of ways in a trend that first kicked in strongly in early 2022 as COVID malingered and inflation began running amok.

This intersected with another pandemic trend — remote work — which took people out of offices and into home-based settings where many felt comfortable earning money “after work.”

“The data shows that this is going to continue,” Nayar said. “Even those who are not currently deriving an additional income, when asked if they plan to in the next three months, 51% said they did. You can see that some of those people are starting to shift, and it makes sense.”

As layoffs rip through parts of the economy and the next three quarters remain a recessionary question mark, more people are taking control by supplementing stretched paychecks.

One Person’s Work Is Another’s Play

A surprise in the latest survey is the high number of people without issues meeting expenses from their main paycheck doing supplemental work anyway. Nayar linked that to a few factors, from taking control of personal finances to simply earning money doing things they enjoy.

“Over half, 56%, said their motivation was enjoying doing these side jobs,” he said. “You’re starting to see people take their hobbies and turn them into a side hustle. You may be making something and just putting it up on Etsy. We saw a lot of people selling products from their closets and wardrobes. So, eBay, or if you’re on the more affluent side, The RealReal. If you can make $700 selling that Gucci handbag that’s been sitting in your closet for a year, why not do it?”

“I have some friends who are doing things like TaskRabbit,” he said. “They love to fix things. Personally, the idea of taking a piece of IKEA furniture and putting it together is my hell on a Saturday morning. But some people get an intense amount of pleasure from that. If they can connect with me and I’ll pay them 60 bucks to come over to my house and do something that they’re going to enjoy, why not do it?”

While this report is perhaps the most hopeful of the entire series in its outlook, the fact remains that 2022 sapped savings and credit card open-to-buy for millions who need that extra income — if they can find it. Others are turning to personal loans to lower their monthly expenses.

“If the last month or so showed us anything, it’s that rising interest rates have affected both personal finances and the entire industry’s finances,” he said. “If you’ve got a variable rate credit card and your interest rate has gone up 600 basis points or 500 basis points in the last year, you’d be nuts not to think, ‘Is there a better way to be doing this?’”

In short, rolling up the balances of variable-rate credit cards into fixed-rate installment loans to manage finances with a paid-in-full date just three years out is appealing to more U.S. workers.

See also: Consumer Confidence up Slightly as Recession Looms

Silver Linings in a Bleak Year?

While the Supplemental Income Edition noted that 38% of struggling workers said their financial situation would decline seriously without extra income, as it would for 22% of those not struggling, the latest study proved that there are ways to overcome the paycheck panic.

“There’s more silver lining now than there was a year ago,” Nayar said. “A year ago, we were in the depths of, ‘What is going to happen?’ The best thing we’re seeing is consumers are really starting to take control of their finances. They’re fully understanding that they’re in control of how they manage their financial lives,” from both an expense and income perspective.

“I’m very positive about this,” he added. “It’s great to see more consumers realizing that they’re in the driver’s seat for their financial lives and starting to drive more income streams and reduce expenses and build up the savings cushion, which will affect them whatever happens.”