Living paycheck to paycheck makes people vulnerable to accumulating high-interest credit card debt. Almost half, 46%, of Americans said they held a balance on their credit card because of an emergency expense, according to a September 2022 CreditCards.com survey.
What Does Living Paycheck To Paycheck Mean? Living paycheck to paycheck means you spend all your income on your monthly living expenses – like your rent or mortgage, utilities, groceries and transportation – and have little to no money left over.
As of October, 60% of adults said they are living paycheck to paycheck, according to a new LendingClub report. The figure is unchanged from last year.
Financial setbacks made it difficult to achieve milestones
In addition to the plethora of financial challenges consumers faced this past year, 65% of Americans experienced financial setbacks in 2023.
Financial distress, for some, is at Great Recession levels
Millions of U.S. households were flush with cash during the pandemic, thanks to stimulus checks, fatter unemployment checks and the expanded Child Tax Credit. But with those pandemic payouts long gone, some consumers are experiencing more financial stress.
Nearly one in four (22 percent) U.S. adults said they have no emergency savings. Despite economic challenges, the percentage remains relatively unchanged year-over-year. In 2022, 23 percent of Americans had no emergency savings.
"Paycheck to paycheck" is an informal expression describing one's inability to pay for living expenses if they lost their income. People living paycheck to paycheck are sometimes referred to as the working poor. Living paycheck to paycheck can occur at all different income levels.
Living paycheck to paycheck makes people vulnerable to accumulating high-interest credit card debt. Almost half, 46%, of Americans said they held a balance on their credit card because of an emergency expense, according to a September 2022 CreditCards.com survey.
Living paycheck to paycheck can be incredibly stressful when it seems like you're paying more for the same goods and services and your salary hasn't increased to match those higher costs.
For example, there are workers with advanced degrees that could be living paycheck to paycheck for various reasons, including industry downturns and underemployment. Others might earn an above-average salary but pay equally high living expenses.
How many Americans are in debt? The percentage of Americans in debt depends on what type of debt is being reported. According to the Urban Institute, more than 64 million Americans carry credit card debt. The Experian study also found that 340 million Americans are currently carrying some form of debt.
The German Institute for Economic Research in Berlin reveals another alarming statistic: almost half of the population, or 40%, is living paycheck to paycheck. They have little to no financial cushion to fall back on in case of emergencies, let alone for long-term aspirations or retirement.
Yes, many millionaires in the United States live paycheck to paycheck. According to a 2022 survey by LendingClub, 36% of millionaires said they live paycheck to paycheck. This is even though they have enough income to easily save for retirement. There are several reasons why millionaires may live paycheck to paycheck.
I explained the verse in Proverbs 22:7 – “the borrower is slave to the lender”. The Bible says we're enslaved because debt prevents us from being completely free. It's like having a cloud hanging over your head all the time.
54% of Americans have three months of emergency savings
Fifty-four percent of Americans have three months of emergency savings, per data collected by the Federal Reserve in 2022. That's down from 59% in 2021 and is the first year-over-year decline since at least 2013.
A slight majority of all Americans polled (54%) describe their household's financial situation as good, which is about the same as it's been for the last year but down from 63% in March of 2022. Older Americans are much more confident in their current finances than younger Americans.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.
Living paycheck to paycheck is a pain, but often a reality in your twenties. When you do land the "real job," it's not just your bank account that changes. Here's how to shift your perspective as well.
70% of Americans are stressed about finances
Only 45% of adults said they have an emergency fund. For those who do have emergency savings, about 26% polled said they have less than $5,000 saved. That survey found that 58% of Americans are living paycheck to paycheck.
Saving $1,000 per month can be a good sign, as it means you're setting aside money for emergencies and long-term goals. However, if you're ignoring high-interest debt to meet your savings goals, you might want to switch gears and focus on paying off debt first.
Most American households have at least $1,000 in checking or savings accounts. But only about 12% have more than $100,000 in checking and savings.
Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund.
A slight majority of all Americans polled (54%) describe their household's financial situation as good, which is about the same as it's been for the last year but down from 63% in March of 2022.