It seems logical: The more income you have, the more you can control your financial life by strategically planning spending and saving and avoiding playing catch-up with monthly bills. Only it doesn’t always work that way. Higher earners with more than $100,000 in annual household income are increasingly using the opposite approach to managing their cash flow.
A recent PYMNTS Intelligence report details how millions of higher-earning Americans have shifted from a planning mindset to a reactive mindset, now juggling bills as they pop up and frequently relying on credit. More than half of all individuals in $100K+ households are now reactors, a 25% plunge in the share of planners since February 2024.
Nearly 4 in 10 U.S. adults have family income of at least $100,000, Federal Reserve data shows. In a country of 267 million adults, that means roughly 139 million consumers, or 52%, are in six-figure or higher households that lack strong habits for spending prudently, saving consistently and stockpiling emergency funds.
The implications are twofold for the payments industry.
Wealthier consumers who keep spending despite economic headwinds and rely on credit for discretionary purchases fuel higher interchange and processing fees for payment processors like Stripe and PayPal and the four payment networks, Visa, Mastercard, Discover and American Express. That in turn leads higher-income consumers to seek credit products with rewards, perks and flexible payment plans, such as credit card split installments and buy now, pay later (BNPL). Prior PYMNTS Intelligence data shows that more than 6 in 10 Americans making more than $100,000 a year use BNPL to splurge on everything from designer clothes to porcelain veneers to vacations.
“Many high net worth folks aren’t that much different from the rest of us,” said John Power, a certified financial planner at Power Plans in Walpole, Mass.
Higher earners tend to favor credit products that let them maximize rewards on their spontaneous purchases.
More Money, More Problems
Planners and reactors, two personas established in the PYMNTS report, exhibit very different financial mindsets. Planners take a forward-looking approach to their finances, spending within their means, prioritizing retirement and savings. They typically pay off monthly credit card balances, maintain balances below $2,000 and have cash savings of at least $2,500. They prioritize building long-term financial security, putting on average 12% of their monthly budget to savings and investments. Almost 3 in 10 consider saving for retirement their top priority.
Then there are reactors. Such consumers only occasionally or rarely pay off their monthly credit card balances, typically hold balances exceeding $2,000 and have less than $2,500 in savings. If faced with an emergency, a reactor might not be able to cover the expense or would resort to using revolving credit, payday loans or other forms of lending. Their focus tends to be on the present, with 30% prioritizing debt repayment and only 12% citing saving for retirement as their top goal. They allocate a much smaller portion of their budget, 5.6%, to savings and investments.
Obviously, many Americans with lower income fall into the reactive category out of necessity, not choice. They don’t have enough income to pay for the basics and at least some discretionary spending, and credit may be filling the gap between take-home pay and still generally resilient spending.
Six in 10 of all U.S. consumers deal with their finances reactively, a financial management approach that makes sense when you consider that three-quarters of lower- to middle-income households now live paycheck to paycheck, according to a July PYMNTS Intelligence report.
But what’s surprising in the recent PYMNTS data is how a growing number of people in high-income households have shifted out of planning mode and into reactive mode to a greater degree than consumers in middle-income households ($50,000–$100,000 annual income) and low-income households (less than $50,000).
Why?
‘I SHOULD Be Able to Afford This’
It’s possible that even some people with substantial earnings face new financial pressures from inflation, especially due to tariffs, and rising living costs tied to a higher base: a tile roof repair on a vintage, seven-figure house is more expensive than a basic roof on a newer $400,000 one.
Michael Pumphrey, a certified financial planner at Tanglewood Total Wealth Management in Houston, said rising property taxes, homeowner’s insurance, health insurance and medical costs were also causing many high net worth clients to “feel the pinch.” Other high-income individuals have adjustable-rate mortgages that were cheap when they got them but now much pricier due to inflation
Or — or and — they may have new spending and consumption patterns that are draining their finances.
Many wealth managers suspect the latter is playing a major role.
Edward “Scooter” Thomas III, a certified financial planner at Savant Wealth Management in Birmingham, Alabama, said many of his high-end clients had amassed extra cash during the COVID-19 pandemic, when they couldn’t travel, renovate their homes or shop as usual. The economy reopened in the second quarter of 2021 and consumers unleashed their spending. Now they are facing higher prices due to the Trump administration’s global tariffs regime and inflation, especially on luxury goods. In August, Chanel raised prices on its classic Flap Bags by $500, with the Classic Medium Flap Bag now retailing for $11,300.
“The over-usage” of post-pandemic spending “kept up, and the people who have been squeezed the most by it are the people that could normally afford it to a certain degree” before tariffs, Thomas said. “Now I think there is some level of, ‘Well I SHOULD be able to afford this,’ and those people are biting off more than they can chew because it is truly out of their current price range.”
Financial planner Nathan Mueller at Colorado-based Blackbird Finance recalled a Florida client who was making $250,000 a year as a doctor after 10 years yet still rented her high-rise condo. The reason: She hadn’t been able to save for a down payment after spending $2,000 a month on shoes. “It’s a prime example of lifestyle creep when a higher salary was obtained,” he said.
Bigger Incomes, Bigger Bills
Consumer spending makes up roughly 70% of GDP, and higher-income consumers drive the bulk of it. An unpublished Moody’s Analytics reported cited by The Wall Street Journal in February says that the top 10% of earners, meaning households making at least $250,000 a year, account for 49.7% of all consumer spending. In July, revolving credit, including credit card balances, home equity loans and personal lines of credit, spiked an annual 9.7%, the most in three years, Federal Reserve data shows. In other words, despite higher interest rates, uncertainty over the impact of tariffs on the economy and overall gloomy consumer sentiment, some people are still opening their pocketbooks.
Robert Persichitte, a certified financial planner at Delagify Financial in Arvada, Colorado, said some higher-income clients were seeing “lifestyle creep” amid tighter compensation packages. He cited one client whose imported fireplace insert now costs $2,000 more, a 20% spike due to tariffs. The client, he added, was also dealing with more restrictive bonuses and restricted stock units, crimping his cash flow.
The story in the PYMNTS report isn’t that Americans with six-figure incomes are struggling. It’s that they’re grappling with spending and financial planning in some ways similar to most everyone else, just at a higher price point. They’ve traded planning for reacting, and in doing so, they’re impacting how money moves through the economy — and the credit options they seek.
Read more:
Consumer Credit Economy: Strategy vs. Spontaneity — Navigating the Great Credit Divide
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