Bank of America Institute defines living paycheck to paycheck as a households "where necessity spending is more than 95% of their household income, leaving them relatively little left over for 'nice to have' discretionary spending or saving."
By that measure, around 30% of American households are living paycheck to paycheck, according to Bank of America's internal data. Further, 26% of households spend 95% or more of their income on necessities, the bank reports.
A high cost of living, due to housing and education costs, is among the reasons why some high earners live paycheck to paycheck.
Thirty-three percent of workers earning between $50,000 and $79,999 annually say they're living paycheck to paycheck, compared to 36 percent of workers earning between $80,000 and $99,999 and 24 percent of workers earning $100,000 or more.
Put simply – people spend the money that is in their pockets. The reason that is important is that living paycheck to paycheck makes it significantly more difficult for consumers to cultivate healthy financial behaviors and build wealth.
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.
Living paycheck to paycheck isn't necessarily bad
For many consumers, NerdWallet found that the paycheck-to-paycheck feeling doesn't mean you are broke; you are just “tightly budgeted.” Let's say you manage to live on a 50-30-20 budget, allocating 50% of your income to needs, 30% to wants and 20% to savings.
First, calculate your monthly take-home pay, then multiply it by 0.70 to get the amount you can spend on living expenses and discretionary purchases, such as entertainment and travel. Next, multiply your monthly income by 0.20 to get your savings allotment and 0.10 to get your debt repayment.
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.
An analysis of the living wage (as calculated in December 2022 and reflecting a compensation being offered to an individual in 2023), compiling geographically specific expenditure data for food, childcare, health care, housing, transportation, and other necessities, finds that: The living wage in the United States is ...
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.
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.
For some, a combination of strategies may be most effective, like creating a strict budget and using a balance transfer card or debt consolidation loan to accelerate progress. Others may find that a more structured approach, like a debt management program, provides the support and accountability needed to succeed.
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%.
Trends show that in 2024, households with outstanding credit card debt were less frequently Financially Healthy and more frequently Financially Vulnerable than those without credit card debt.
While the size of your emergency fund will vary depending on your lifestyle, monthly costs, income, and dependents, the rule of thumb is to put away at least three to six months' worth of expenses.
While this figure can vary based on factors such as location, family size, and lifestyle preferences, a common range for a good monthly salary is between $6,000 and $8,333 for individuals.
Here's an example: If you make $3,000 each month after taxes, $1,500 should go toward necessities, $900 for wants and $600 for savings and debt paydown. Find out how this budgeting approach applies to your money.
Quick Take: The 75/15/10 Budgeting Rule
The 75/15/10 rule is a simple way to budget and allocate your paycheck. This is when you divert 75% of your income to needs such as everyday expenses, 15% to long-term investing and 10% for short-term savings. It's all about creating a balanced and practical plan for your money.
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.
According to the Federal Reserve's Survey of Consumer Finances (SCF) for 2022 (the most recent study released publicly), the average savings balance for people ages 64 and younger ranged from $20,540 to $72,520, with median balances ranging from $5,400 to $8,700.
More than a quarter of US adults are struggling financially. 72% of Americans reported “living comfortably” or “doing okay,” according to December 2023 data from the Federal Reserve.