3 Reasons Americans Can’t Stop Living Paycheck to Paycheck

Many Americans struggle to save money, don’t have an emergency fund, and don’t have cash left over at the end of the month to make it to payday. This way of life is known as “living paycheck to paycheck.”

Living paycheck to paycheck is nothing to be ashamed of, but it can be stressful. If you are in this situation, take heart: you are not alone Recent research from PYMNTS Intelligence found that by April 2024, 62% of Americans were living paycheck to paycheck.

And barely having enough money in your checking account to make it to payday isn’t just for lower-income earners or young adults still learning financial literacy. PYMNTS also found that higher earners are vulnerable: 48% of people making $100,000 or more, and 36% of people with incomes over $200,000 a year, live paycheck to paycheck.

Let’s look at some reasons why Americans can’t stop living paycheck to paycheck and how to improve your personal finances in the long run.

1. Income is too low

PYMNTS intelligence research found that among people living paycheck to paycheck, one of the main reasons was a lack of income.. And it’s not just people with lower incomes who feel their income is too low. Even the highest earners (earning more than $200,000 a year) feel underpaid.

This is the percentage of people living paycheck to paycheck, at each income level, who said the main reason for their situation is “insufficient income“:

• 40.1% of people earning less than $50,000 a year
• 25.3% of people earn between $50,000 and $100,000
• 16.4% of people earning between $100,000 and $200,000
• 21.4% of people earn more than $200,000

Sometimes people with higher incomes still struggle to save. “Lifestyle” (buying a bigger house, a nicer car, newer clothes, more expensive vacations) can add to your income, and if you’re not careful, you could end up with nothing in your checking and savings accounts. savings

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2. Inflation is (still) too high

During the last months of 2024, official economic data have shown an encouraging trend: inflation is falling. The skyrocketing price hikes that left so many Americans feeling stressed and provoked at grocery stores and restaurants appear to be abating. Lower inflation data gave the Federal Reserve confidence to cut interest rates by half a percentage point in September 2024.

Unfortunately, many Americans don’t feel happier about inflation. Another recent survey by PYMNTS Intelligence in August 2024 found:

• 70% of US consumers (and 77% of Americans living paycheck to paycheck) said their incomes have not kept up with inflation
• Nearly 75% of Americans believe restaurant prices will continue to rise
• 71% believe that gas prices will continue to rise

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3. Too much non-essential spending

Some people experience financial stress due to high fixed monthly living costs that are out of their control, such as rent and car insurance, or emergency expenses such as car repairs and medical bills. But PYMNTS Intelligence’s research also found that a surprising number of people who live paycheck to paycheck find themselves in this situation because of the decisions they made about how to spend their money.

Here’s the percentage of people living paycheck to paycheck, at each income level, who said the main reason is “non-essential expense”:

• 7.3% of people earning less than $50,000 a year
• 12.1% of people earn between $50,000 and $100,000
• 16.1% of people earning between $100,000 and $200,000
• 12.3% of people earn more than $200,000

Chances are, even if you’re on a lower income, you can find some ways to make different decisions about your spending each month. Don’t fall into a self-sabotaging pattern of “fatal spending,” where you mindlessly spend money even if you can’t afford it. Higher income earners should also reevaluate their spending choices. Ask yourself:

• How much could I save if I canceled my streaming subscriptions and cooked all my meals at home for two months?
• Would you rather go on a weekend trip with friends or have $2,000 in the bank?
• Could you buy a cheaper car, take a vacation closer to home, or delay a major home renovation?

Sometimes a few small choices add up to a big number in your savings account.

bottom line

You don’t have to get stuck on the paycheck to paycheck to life treadmill. Getting a decent return on your savings can help inspire you to cut back on your expenses and save more money. Find a high-yield savings account and see where your money can grow; you might be excited to save more and build an emergency fund!