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. They always need their next paycheck to pay upcoming expenses.

In fact, those living paycheck to paycheck devote ๊their salaries pre𓆉dominantly to expenses.

The phrase may also mean living with limited or no savings and refer to people who would be at greater financial risk if they suddenly became unemployed orཧ faced some other financial emerge🎃ncy.

Understanding Paycheck to Paycheck

Who Lives This Way?

Persons living paycheck to paycheck are often referred to as the working poor. However, this is not entirely accurate because the working poor are defined as people who work but whose income falls below the poverty level.

While l𓃲iving paycheck to paycheck may signify someone in the working poor category, it also may refer to people living somewhat above the poverty l🥃evel as well as those who earn middle and high incomes.

In addition, those living paycheck to paycheck are said to have limited skills and earn low wages. Despite this perception🎃, such individuals can have advanced degrees in highly technical fields.

Mitigating factors, such as industry downturns or limited success in securing regular employment c♈ommensurate with their skills, can contribute to a situation where one lives paycheck to paycheck. 

The Need for More Than One Job

Individuals who live paycheck to paycheck are more likely to work multiple jobs to 澳洲幸运5官方开奖结果体彩网:generate enough income to meet their regular living expenses.

These can include people with high-paying jobs w꧒ho are part of the upper-middle and middle classes if outgoing expenses equal or exceed their incoming salary.

Paycheck to Paycheck and the Pandemic

In 2020, 63% of Americans reported that they were cutting back on spending and were cautious about their finances due to the pandemic.

By February 2021, 41.5% of those who were unemployed had been without jobs for over half a year. And statistics showed that 4.1 million Americans fit the long-term unemployed category, according to Pew Research Center's analysis of government data.

The pandemic threw light on the economic struggles and inequities in the United States that forced millions of Americans, including 澳洲幸运5官方开奖结果体彩网: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's 2019 Modern Wealth Index Survey.

Paycheck to Paycheck Trend Persists

The problem of full-time workers in the U.S. 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 related to student loans, credit cards, and rising childcare costs continue to increase, even for individuals earning salaries 澳洲幸运5官方开奖结果体彩网: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 earned over $100,000 per year.

According to data from Experian, U.S. consumer debt balances increased by🌼 2.4% to  $17.57 trillion from 2023 to 2024 (less than thไe 4.4% increase from 2022 to 2023).

Mortgages, HELOC, auto loan, and credit card debt all increased during this period. Credit card debt specifically grew by 8.6%.

The growth of debt, stagnant wages, lingering pandemic effects, and continu🌞ing inflation related to food and other necessities have hit hard.

In 2024, 65% of Americans said they were living paycheck to paycheck. Of those, 69% cited inflation as the reason.

How to Stop Living Paycheck to Paycheck

Personal accountability can play a role in balancing one's budget to avoid ꦬliving paycheck to paycheck. It also may allow for the possi꧃bility of savings.

Examine all your expཧenses to see if there are non-essential items that you can forgo. You may need to alter your personal spending habits until inflationary prices fall to b🧸reak 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 how much money is coming in and how much is going out. 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 save. 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 the transfer through your bank so that when your paycheck is deposited, that 1% immediately goes into a separate savings account. That way you won't be as likely to spend it.
• Pay off your debt. One downside of having no financial cushion is turning to 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 澳洲幸运5官方开奖结果体彩网:debt snowball strategy to pay off the smallest debt first. Alternately, you might use a balance transfer from a credit card at 0% interest for a year or more to pay off debt. Or you might take out a personal loan or a 澳洲幸运5官方开奖结果体彩网: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 off your debt faster.

Of course, stopping paycheck-to-paycheck living is not as simple🦹 for millions of Amer♚icans 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 if the economy is strong and inflation moderates, you should find opportunities to move on from l🍰iving paycheck to paycheck.

The Bottom Line

Many Americans have found themselves living paycheck to paycheck, either since the pandemic or going back even further. Some of those earning over $100,000 a year find themselves without 💎a financial cushion.

To try and break the cycle, you can commit to a 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 thඣe cost of living.