Americans Living Paycheck to Paycheck

Americans Living Paycheck to Paycheck
(Shutterstock)
Anne Johnson
11/24/2023
Updated:
11/24/2023
0:00

Money flows in November and December as Americans prepare for the holiday season. But many are finding themselves cash-strapped going into the shopping season. Still, high prices are stretching paychecks.

A large percentage of Americans are finding themselves living paycheck to paycheck under normal circumstances, let alone the holiday season. But how bad is it?

Living Paycheck to Paycheck Common

When a person lives paycheck to paycheck, they cover basic living expenses, but no funds are left over for savings or retirement. Some people can’t cover the basics.

According to a Lending Tree poll, 60 percent of Americans live paycheck to paycheck. This is two points higher than in 2022.

The Federal Reserve’s Economic Well-Being of U.S. Household report found that more than one-third couldn’t afford to cover a $400 emergency.

Income or education level doesn’t necessarily indicate living paycheck to paycheck. Many high-income individuals struggle with the basics, and people with advanced degrees may also be in a financial bind.

High-Income and Low-Income Earners Struggle

Both low-income and high-income earners are being hit.

Sixty-five percent of high-income consumers, earning $50,000 to $100,000, live paycheck to paycheck. This is compared to 63 percent in 2022.

Low-income or those earning less than $50,000 annually increased from 74 percent in 2022 to today’s 78 percent.

But not everyone’s paycheck even covers the monthly bills. In the high-income category, 13 percent struggle to pay the basics. That’s up from 8.8 percent in 2022.

Approximately 34 percent of low-income individuals need help paying their living expenses. It was 31 percent in 2022.

Paycheck to Paycheck Differs With Generation

Millennials are the most likely to live paycheck to paycheck. They come in at the highest, with 21.7 percent having no savings and barely able to pay expenses.

The lowest are baby boomers, at 14.4 percent. Gen Z is slightly behind at 15.4 percent.

How did Americans fall into living paycheck to paycheck?

Hyper-Consumption and Living Paycheck to Paycheck

Nonessential spending has contributed to living paycheck to paycheck. Twenty-six percent of high-income consumers cite non-essential spending as the reason they’re in financial straits. While 17 percent of low-income consumers said they were living paycheck to paycheck due to hyper-consumption.
Millennials in particular indulged in non-essential spending.

Reasons for Living Pay-Check to Paycheck

Many who live paycheck to paycheck have chronic health problems. Forty-three percent of those living paycheck to paycheck have a health condition or disability. Medical bills, medication costs, and specialized care make it hard to save money.

Acting as a caretaker for a loved one is also a reason for financial stress. Many Gen Xers must take care of their aging parents while also raising small children.

Unseen expenses also contribute to living paycheck to paycheck. The average American has roughly $200 in savings. Meanwhile, the average unexpected expense is $760. With about 2.5 unplanned expenses a year, this is a financial setback to already strained budgets.

Without a backup savings account, many must turn to buy now pay later plans, payday loans, subprime credit cards or other alternatives to come up with cash.

Dealing with stagnated earnings and higher debt burden contributes to financial woes.

Servicing High Credit Card Debt

In the third quarter of 2023, Americans’ total credit card debt was $1.079 trillion. This is the highest since the Federal Reserve Bank of New York began tracking in 1999.

The average consumer is carrying a $6,365 credit card balance. And credit card interest has been rising. The average is 22.16 percent.

Those with higher incomes have the highest credit card debt. But middle- to lower-class consumers are most likely to have credit card debt.

Paycheck to Paycheck and Credit Score

Living paycheck to paycheck doesn’t directly affect a credit score. But using credit cards for excess spending or emergencies can have an effect. You'll likely turn to credit cards if you don’t have savings. This can lead to being overextended and carrying large balances month-to-month.

In a January 2023 survey by Bankrate, 35 percent of consumers carry a credit card balance month to month.

And those who don’t make timely payments on credit cards will see their credit scores drop. Even worse, credit scores will plummet if the minimum payment isn’t made.

The result is increased costs for future borrowing if borrowing is still an option.

Break the Paycheck-to-Paycheck Cycle

The two ways to break the paycheck-to-paycheck cycle are to reduce expenses and increase income. Once this is done, an emergency fund can be established.

It may be necessary to take on an additional job. Side hustles are becoming increasingly popular. From a ride-share driver to childcare and pet care, there are jobs to be had. Some will resell goods online.

Create and stick to a realistic budget to reduce expenses. Tackling credit card debt should be the first goal.

Living Paycheck to Paycheck Challenging

When you live paycheck to paycheck, you’re constantly robbing Peter to pay Paul. It’s an endless circle. Many Americans are continually juggling paying expenses and debt.

Take steps to increase income, reduce expenses and break the paycheck-to-paycheck cycle.

The Epoch Times copyright © 2023. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
Anne Johnson was a commercial property & casualty insurance agent for nine years. She was also licensed in health and life insurance. Anne went on to own an advertising agency where she worked with businesses. She has been writing about personal finance for ten years.