Living Paycheck to Paycheck: Definition, Statistics, How to Stop (2024)

What Is Paycheck to Paycheck?

"Paycheck to paycheck" is an expression that describes an individual who would be unable to meet their financial obligations if they were unemployed. Those living paycheck to paycheck devote their salaries predominantly to expenses. The phrase may also mean living with limited or no savings and refer to people who are at greater financial risk if they were suddenly unemployed or faced another financial emergency.

Understanding Paycheck to Paycheck

Persons living paycheck to paycheck are often referred to as the working poor, but that may not accurately describe the full scope of this phenomenon because it cuts across multiple income levels.

The "working poor" have been described as typically having limited skills and being paid low wages. Despite this perception, individuals living paycheck to paycheck can have advanced degrees in highly technical fields. However, mitigating factors, such as industry downturns or limited success in securing regular employment commensuratewith their skills, can nonetheless contribute to living paycheck to paycheck.

Individuals who live paycheck to paycheckare more likely to work multiple jobs to generate enough income to meet their regular living expenses. But individuals with high-paying jobs who are part of the upper-middle and middle classes may also be in a similar situation if outgoing expenses equal (or even exceed) their incoming salary.

Paycheck to Paycheck and the Pandemic

In 2020, 63% of Americans reported that they were living paycheck to paycheck since the start of the pandemic, according to Highland Solution, an information technology company. Slightly half of the survey's respondents were not living paycheck to paycheck until the pandemic hit. By February 2021, 41.5% of those who were unemployed had been without jobs for over half a year and long-term unemployment totaled 4.1 million Americans, according to a Pew Research Center analysis of government data.

The pandemic threw light on the economic struggles and inequities in the U.S. that forced millions of Americans, including middle and upper-middle-class workers, to live paycheck to paycheck without adequate savings. But the difficulty of making ends meet predates the pandemic. In 2019, 59% of adults in the U.S. were living paycheck to paycheck, according to Charles Schwab's2019 Modern Wealth Index Survey.

Paycheck to Paycheck Trend Persists

The problem of full-time workers in the United States living paycheck to paycheck persists. One contributing factor is that salaries have not increased enough over the years to keep up with the cost of living.

Personal debt levels incurred by student loans, credit cards, and rising childcare costs continue to increase, even for individuals earning salaries over $100,000. Hence, more Americans are adding part-time work and "side hustles" to their full-time jobs to increase their income, or they become full-time workers in the gig economy if they're able to make more money that way. Data from Zippia, a career-focused website, showed that 63% of Americans were living paycheck to paycheck as of September 2022, including 40% who earn over $100,000 per year.

According to data from Experian, U.S. consumer debt balances increased by 4.4%, to $17.1 trillion in the third quarter of 2023, a $720 billion increase from 2022. That growth rate was slower than the 7% increase from 2021 through 2022, but almost every major debt category increased over the 12 month period, with auto loans becoming the second largest debt category. Credit card debt also grew by 17.4%, thanks in part to rate increases from credit card issuers.

This growth of debt, stagnant wages, lingering effects from the pandemic, and continuing inflation on food and other necessities have hit hard. In 2023, 65% of Americans said that changes in the prices they paid compared with 2022 had made their financial situation worse, including 19% who said price changes had made their financial situation much worse, according to the Federal Reserve. All of these factors unfortunately contribute to more Americans living paycheck to paycheck.

How to Stop Living Paycheck to Paycheck

Personal accountability can play a role in balancing one's budget to avoid living paycheck to paycheck,and it may allow for the possibility of savings. Examine your regular expenses to see if there are items that you can forgo that are not necessities. You may need to rein in your personal spending habits until inflationary prices come down in order to break the paycheck-to-paycheck cycle. Here's what else you can do:

• Review your budget. Budgeting relies on tracking your expenses against your income. Especially if something has changed—food and gas prices are higher, you're transitioning from remote work to several days in the office—it's a good idea to review where your money is going. Look at every dollar you spend over a month to see if you can find out what may have increased your spending.
• Make sure you are saving. Living paycheck to paycheck often precludes saving. If you have little to no savings, start small—set aside 1% of each paycheck ($10 for every $1,000 you earn). And automate it so that you aren't tempted to spend it.
• Pay off your debt. One downside of having no financial cushion is relying on credit cards with high APRs to cover emergencies of varying sizes. Depending on your situation, there are numerous ways to pay down credit card debt, including using a debt snowball strategy to pay off the smallest debt first, using a balance transfer on a credit card with 0% interest for a year or more, or getting a personal loan or a debt consolidation loan.
• Increase your income. Whether that means starting a side hustle, asking for a raise or a promotion, or finding a better-paying job, the extra cash can help you start setting aside more savings and/or pay of your debt faster.

Of course, avoiding living paycheck to paycheck is not as simple for millions of Americans as balancing a budget or forgoing luxuries. Consumer debt, low and stagnant wages, student loans, an increase in the cost of food, and the high cost of childcare are just some of the factors that contribute to living without a financial cushion. But as the economy has recovered from the pandemic and inflation moderates, there may still be opportunities for more Americans to move on from living paycheck-to-paycheck.

The Bottom Line

Many Americans have found themselves living paycheck to paycheck, either since the pandemic or going back even farther. Some of those earning over $100,000 a year find themselves without a financial cushion. To try and break the cycle, you can review your budget, address your debt, and take small steps to start saving.

Correction-Nov. 9, 2023: This article has been updated to indicate that salaries have not historically kept up with the cost of living.