Living paycheck to paycheck isn't necessarily bad
“If you are putting that savings away, if you have emergency funds in place, if your debt is not out of control, then even if you are living from paycheck to paycheck, you are probably doing pretty well,” said Ayoola, the finance expert at NerdWallet.
Among those with salaries and other income totaling $75,000 to $100,000, 23% are just scraping by, up from 19% in 2019. For those earning $101,000 to $150,000, 22% are spending nearly all their money on basics, up from 18%.
The expression, “living paycheck to paycheck,” generally refers to having little or no money for savings left over from your paycheck after covering your regular expenses. You might be unable to pay your bills if you suddenly become unemployed or don't receive the next paycheck.
Additional insights to know:
People of all income levels are living paycheck to paycheck: 55% who usually have no money left over earn less than $50K (household income) per year, but 28% earn between $50-$100K and 17% earn more than $100K.
According to the US Census, about 16% of American households make between $100,000 and $149,999, 9% of households make between $150,000 and $199,999, and another 12% earn $200,000 or more.
Necessities are 'swallowing up' income
Around 35% of households earning less than $50,000 per year are living paycheck to paycheck, up from 32% in 2019. Higher-income households also report struggling, with around 20% of households with more than $150,000 living paycheck to paycheck, the research found.
Others say it means spending all of your income on monthly living expenses – like rent or mortgage, utilities, groceries and transportation – with little to no money left over each month. And, still others say it means basically having zero in checking or savings at the end of each month.
You should only pay yourself from your profits and not overall revenue. So, if your business is doing well, you might be able to increase your compensation. Business funding: You need to leave enough capital in the business to operate, so consider that before you take a draw.
Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you're in the top 1% if you earn $819,324 or more each year. The top 5% of income earners make $335,891 per year.
A high cost of living, due to housing and education costs, is among the reasons why some high earners live paycheck to paycheck.
$520,000. That's how much income Americans think they would need, on average, to feel rich, according to Bankrate's Financial Freedom Survey published in July. That salary would put you comfortably among the top 2% of American earners, according to Census data.
When considering who is living paycheck to paycheck, households with an income of six-figures or more likely aren't the first to come to mind. But, as it turns out, about a fifth of US households that earn more than $150,000 a year are in that situation.
Of all U.S. adults surveyed, 18% said the largest emergency expense they could handle right now using only savings was under $100. What's even scarier? Only 14% said they could handle an expense of $100 to $499 and only 10% said they could handle an expense of $500 to $999.
The $1,000 per month rule is a guideline to estimate retirement savings based on your desired monthly income. For every $240,000 you set aside, you can receive $1,000 a month if you withdraw 5% each year. This simple rule is a good starting point, but you should consider factors like inflation for long-term planning.
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
Other answers revealed that 15 percent had between $1,000 to $5,000, 10 percent with savings of $5,000 to $10,000, 13 percent boasted $10,000 to $20,000 of cash in their bank accounts while 20 percent had more than $20,000.
A majority of Americans (59 percent) report that they live paycheck to paycheck. Stressing about finances can go far beyond the wallet. It can seep into every aspect of your life and manifest itself as generalized anxiety, guilt, panic attacks, or trouble sleeping at night.
You can still live a fulfilling life as a retiree with little to no savings. It just may look different than you originally planned. With a little pre-planning, relying on Social Security income and making lifestyle modifications—you may be able to meet your retirement needs.
It's financially straining to live paycheck to paycheck. "It's usually thought of as a bad thing that adds stress and is detrimental to a person's sense of financial well-being," Tinsley said. It's also a hard cycle to break out of. Housing costs, which are often a household's greatest expense, can be hard to minimize.
According to the data, the middle-class household income averages across the U.S. ranged between $52,000 and $98,000 in 2024. Income levels required to be considered middle-class varied significantly depending on where a person lived.
Job openings remain high, and the unemployment rate has held below 4% for more than two years straight. But Americans are also grappling with the highest interest rates in two decades and chronically high inflation that has made the cost of everyday necessities like groceries, rent and gasoline far more expensive.
Only 18% of individual Americans make more than $100,000 a year, according to 2023 data from careers website Zippia. About 34% of U.S. households earn more than $100,000 a year, according to Zippia.