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\u2019t 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.<\/p>\n
A recent PYMNTS Intelligence report<\/a> 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.<\/p>\n Nearly 4 in 10 U.S. adults have family income of at least $100,000, Federal Reserve data shows<\/a>. In a country of 267 million adults<\/a>, 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.<\/p>\n The implications are twofold for the payments industry. <\/p>\n 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<\/a> on everything from designer clothes to porcelain veneers to vacations.<\/p>\n \u201cMany high net worth folks aren\u2019t that much different from the rest of us,\u201d said John Power, a certified financial planner at Power Plans in Walpole, Mass.<\/p>\n Higher earners tend to favor credit products that let them maximize rewards<\/a>\u00a0on their spontaneous purchases.<\/p>\n More Money, More Problems<\/p>\n 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.<\/p>\n 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. <\/p>\n Obviously, many Americans with lower income fall into the reactive category out of necessity, not choice. They don\u2019t have enough income to pay for the basics and at least some discretionary spending, and credit may be filling the gap<\/a> between take-home pay and still generally resilient spending.<\/p>\n 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<\/a>, according to a July PYMNTS Intelligence report.<\/p>\n But what\u2019s 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\u2013$100,000 annual income) and low-income households (less than $50,000).<\/p>\n Why?<\/p>\n \u2018I SHOULD Be Able to Afford This\u2019<\/p>\n It\u2019s 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:\u00a0a tile roof repair on a vintage, seven-figure house is more expensive than a basic roof on a newer $400,000 one.<\/p>\n Michael Pumphrey, a certified financial planner at Tanglewood Total Wealth Management in Houston, said rising property taxes, homeowner\u2019s insurance, health insurance and medical costs were also causing many high net worth clients to \u201cfeel the pinch.\u201d Other high-income individuals have adjustable-rate mortgages that were cheap when they got them but now much pricier<\/a> due to inflation<\/p>\n Or \u2014 or and \u2014 they may have new spending and consumption patterns that are draining their finances.<\/p>\n Many wealth managers suspect the latter is playing a major role.<\/p>\n Edward \u201cScooter\u201d 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\u2019t 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\u2019s global tariffs regime and inflation, especially on luxury goods. In August, Chanel raised prices<\/a> on its classic Flap Bags by $500, with the Classic Medium Flap Bag now retailing for $11,300.<\/p>\n \u201cThe over-usage\u201d of post-pandemic spending \u201ckept up, and the people who have been squeezed the most by it are the people that could normally afford it to a certain degree\u201d before tariffs, Thomas said. \u201cNow I think there is some level of, \u2018Well I SHOULD be able to afford this,\u2019 and those people are biting off more than they can chew because it is truly out of their current price range.\u201d<\/p>\n 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\u2019t been able to save for a down payment after spending $2,000 a month on shoes. \u201cIt\u2019s a prime example of lifestyle creep when a higher salary was obtained,\u201d he said.<\/p>\n Bigger Incomes, Bigger Bills<\/p>\n Consumer spending makes up roughly 70% of GDP<\/a>, and higher-income consumers drive the bulk of it. An unpublished Moody\u2019s 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<\/a>. In July, revolving credit, including credit card balances, home equity loans and personal lines of credit, spiked an annual 9.7%<\/a>, 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.<\/p>\n Robert Persichitte, a certified financial planner at Delagify Financial in Arvada, Colorado, said some higher-income clients were seeing \u201clifestyle creep\u201d 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.<\/p>\n The story in the PYMNTS report isn\u2019t that Americans with six-figure incomes are struggling. It\u2019s that they\u2019re grappling with spending and financial planning in some ways similar to most everyone else, just at a higher price point. They\u2019ve traded planning for reacting, and in doing so, they\u2019re impacting how money moves through the economy \u2014 and the credit options they seek.<\/p>\n Read more:<\/strong><\/p>\n Consumer Credit Economy: Strategy vs. Spontaneity \u2014 Navigating the Great Credit Divide<\/a><\/p>\n