Recent data indicates that nearly 40 million American families, described as ALICE (Asset Limited, Income Constrained, Employed), are facing financial challenges as high inflation and increasing interest rates continue to affect the economy. These households, earning more than the federal poverty level but less than what is necessary to maintain a stable standard of living, represent approximately 29% of the population.

The United Way's United for ALICE program, which coined the ALICE term, has highlighted the struggles of these families, who often work in low-wage jobs and are one emergency away from poverty. “ALICE is the nation’s child-care workers, home health aides, and cashiers heralded during the pandemic," stated Stephanie Hoopes, national director at United for ALICE.

Inflation, which has soared to the highest levels since the 1980s, has disproportionately impacted low-income households, with essentials such as food, rent, and gas experiencing significant price increases. "The ALICE households, in particular, have borne the brunt of inflation," mentioned Greg McBride, chief financial analyst at Bankrate. Despite some wage growth for low- to moderate-income earners, inflation has eroded the purchasing power of these households.

With little buffer in savings and investments, ALICE households are becoming more reliant on credit cards to manage expenses, leading to record levels of credit card debt and a decrease in personal savings rates. Credit card delinquency rates have also climbed, reaching 3.1% at the end of 2023, the highest in 12 years.

The current economic scenario suggests that without a shift in inflation, ALICE families may continue to face financial pressures. Federal Reserve policymakers, including Fed Chair Jerome Powell, have signaled that rate cuts are not anticipated in the near future, reinforcing the economic challenges ahead for these households.

CNBC Article