Residing “paycheck to paycheck” is a phrase usually used time period to explain households which can be beneath monetary pressure. However what does it actually imply, and the way many individuals discover themselves depleting their paychecks shortly after incomes them?
Financial institution of America Institute defines residing paycheck to paycheck as a households “the place necessity spending is greater than 95% of their family earnings, leaving them comparatively little left over for ‘good to have’ discretionary spending or saving.” to be residing paycheck to paycheck.
“Many of those spending pressures are seemingly unavoidable, as they relate to household and housing prices,” Financial institution of America Institute senior economist David Tinsley advised CBS MoneyWatch.
In a Financial institution of America Institute survey of customers within the third quarter of 2025, roughly half mentioned they thought of themselves to be residing paycheck to paycheck.
Financial institution of America Institute additionally checked out its personal clients’ spending patterns to find out that near one-quarter of Individuals truly reside paycheck to paycheck, with most of their month-to-month earnings going straight towards necessities.
“The share of households which can be residing paycheck to paycheck has been rising barely over the previous few years, which isn’t terribly shocking, as a result of costs have risen for lots of important items — groceries are dearer, the price of automobile insurance coverage is up, and baby care is up, too,” Tinsley mentioned.
Greater earnings, larger housing prices
Whereas lower-income households have a better share of people that reside paycheck to paycheck, some households which can be larger up on the earnings ladder additionally fall into the identical class.
Round 35% of households with incomes under $50K a yr live paycheck to paycheck, up from 32% in 2019, based on inside Financial institution of America information. In the meantime, about 20% of households incomes $150,000 live paycheck to paycheck, based on Financial institution of America Institute’s findings. That is largely as a result of they’ve excessive, fastened housing prices, based on Tinsley.
“Individuals with larger incomes are likely to have high-priced houses, and lots of could have giant month-to-month mortgage funds. So it is completely attainable somebody with a excessive earnings may have lots of it swallowed up by necessities,” he mentioned.
Onerous cycle to interrupt out of
It is financially straining to reside paycheck to paycheck. “It is normally regarded as a nasty factor, that provides stress and is detrimental to an individual’s sense of economic well-being,” Tinsley mentioned.
It is a exhausting cycle to interrupt out of, too. Housing prices, which are sometimes a family’s biggest expense, might be exhausting to attenuate.
“For most individuals, they can not do a lot about the place they reside and the way a lot they pay for his or her house, if they’ve children at a college in a specific neighborhood,” Tinsley mentioned. “Quite a lot of these prices are sticky, and there is not a lot to do about it.”
Within the longterm, such households find yourself with little in financial savings, and are uncovered to monetary shocks.
“If there have been one other inflation shock, or a sharper downturn to economic system than anticipated and a few folks lose jobs, then folks residing paycheck to paycheck are most instantly pressured to make sharp reductions in spending to steadiness the books,” Tinsely mentioned. “And that impacts the general economic system.”
