Over the past few years, persistent inflation has had a significant impact on Americans in various ways. According to Bankrate’s money and mental health survey, 65 percent of individuals who reported that their mental health is affected by money attribute it to inflation.
When prices of goods and services are high, everyone feels the pinch, including those who earn too much to qualify for government assistance but not enough to cover all their living expenses. These individuals are referred to as ALICE: Asset Limited, Income Constrained, Employed.
ALICE refers to individuals whose income is above the Federal Poverty Level, making them ineligible for public assistance, but still insufficient to cover basic expenses like rent, food, and childcare. According to United Way’s United for ALICE program, nearly 29 percent of U.S. households fall into this category.
Determining ALICE’s Survival Budget
Researchers at the United for ALICE program have developed a survival budget tailored to U.S. counties and household types. This budget encompasses the minimum costs, including taxes, of six essential household needs:
- Housing
- Childcare
- Food
- Transportation
- Healthcare
- Technology
Based on this survival budget, researchers have calculated the minimum average household income required to meet these basic expenses, varying by county across the United States.
For example, in 2023, the survival budget for a single adult in Franklin County, Ohio was $30,084, which is considered the median county in terms of income.
ALICE’s Decade of Financial Decline
A recent report from the ALICE program highlights that despite wage increases for low-wage jobs, some workers are worse off financially than they were ten years ago. Factors contributing to this decline include inflation and stagnant wages over the past decade.
Stephanie Hoopes, the national director of United For ALICE at United Way of Northern New Jersey, emphasizes that this economic issue stems from the disparity between job availability and insufficient wages to support families in various locations.
Stagnant or reduced income was a common concern among Americans surveyed in Bankrate’s personal finance outlook, with 32 percent expressing pessimism about their financial situation in 2024.
ALICE Essentials Index: Tracking Inflation
The ALICE Essentials Index measures the average change in the costs of essential goods and services over time, focusing on six core categories: housing, childcare, food, transportation, healthcare, and technology. This index reflects a higher inflation rate compared to the Consumer Price Index (CPI), as it tracks only basic living expenses.
The ALICE-generated inflation rate has consistently exceeded the CPI rate for more than a decade, indicating a greater increase in the costs of essential items. This disparity underscores the financial challenges faced by ALICE individuals.
Director Hoopes notes that ALICE individuals experience a higher rate of inflation, exacerbating their financial struggles over time.
ALICE Statistics Across States
The ALICE Essentials Index, designed by United for ALICE researchers, reveals a national inflation rate of 7.3 percent from 2023 to 2023, with significant variations among states. Arizona recorded the highest increase at 10.4 percent, while Hawaii had the lowest at 1.7 percent.
Nationally, 42 percent of households fell below the ALICE threshold in 2023, with Mississippi having the highest percentage at 52 percent and Alaska the lowest at 33 percent.
Support Options for ALICE
While ALICE individuals may not qualify for government benefits due to their income level, there are non-governmental resources available to assist them during financial hardships. Food banks and 211 call centers are valuable resources for individuals seeking assistance with food, housing, and healthcare.
Additionally, some ALICE individuals engage in the gig economy to supplement their income and bridge financial gaps. Side hustles like rideshare driving or freelance work can provide additional financial support.
Tips for Saving Money During Financial Strain
When facing financial challenges, cutting expenses and building savings are crucial steps to improve your financial stability. Following a budget, reducing unnecessary expenses, and building an emergency fund can help mitigate financial stress.
Follow a budget
Create a budget that outlines your income and expenses, allowing you to identify areas where spending can be reduced. Utilize budgeting tools or apps to track your financial activities effectively.
Find ways to lower expenses
Review your budget to identify expenses that can be trimmed or reduced, such as subscription services or utility bills. Shopping around for better deals on essential services can help you save money.
Build up a savings account
Having an emergency savings fund is essential for unexpected expenses. Even small windfalls like tax refunds can contribute to your savings account, providing a financial safety net during emergencies.
Conclusion
ALICE individuals face financial challenges despite not qualifying for government assistance. Wage increases for low-income workers have not kept pace with inflation, leading to difficulties in meeting basic living expenses. Non-governmental resources like food banks and 211 call centers offer support to individuals in need, while side hustles can provide additional income opportunities.
United for ALICE’s wage tool offers a detailed view of the hourly wage required to support ALICE households’ survival budget across U.S. counties.