According to recent surveys, nearly half of Americans live paycheck to paycheck as of the third quarter of 2024. This figure represents a slight improvement from the second quarter but remains higher than the under 40% reported in 2022. Economic pressures continue to affect American consumers, with many households opting for deals out of economic necessity during Black Friday shopping.
The cable TV industry has also seen price hikes, further straining consumer budgets, with major providers like Comcast and Spectrum increasing fees by up to $20 per month. However, living paycheck to paycheck isn’t always a sign of financial distress. Experts generally agree that living paycheck to paycheck isn’t necessarily a sign of financial trouble if you’re saving aggressively and keeping your debt under control.
“If you are putting money into savings, have emergency funds in place, and your debt is not out of control, then you are probably doing quite well,” said Dana Ayoola, a finance expert at NerdWallet. You live on a 50-30-20 budget, allocating 50% of your income to needs, 30% to wants, and 20% to savings. You spend the other 80% on your needs and wants throughout a pay period while your checking account balance gradually drops to zero.
But your savings accounts remain flush. “One hundred percent of your budget is spent, so it doesn’t look like there’s anything left over,” said Melissa Cox, a certified financial planner in Dallas. “But you are not living paycheck to paycheck as long as you’re putting money aside.”
Researchers found that low-income Americans weren’t the only ones living from one paycheck to the next.
Paycheck-to-paycheck insights and tips
One-fifth of households earning more than $150,000 a year met the strict definition of living paycheck to paycheck. One possible reason is that higher-income households are more likely to own expensive homes with high mortgage payments.
If you feel you’re living paycheck to paycheck, here are some expert tips on how to gauge your financial health:
Is your debt under control? If you have unsecured debt, such as a credit card balance, and you cannot reduce it with monthly payments, that could be a sign your finances are stretched. Are you saving money every month?
Regular contributions to a retirement account are a good sign that you’re not living from paycheck to paycheck. Keeping an emergency savings account, ideally one with sufficient funds to cover three to six months of expenses is also a marker of financial stability. Are you spending on nonessentials?
In a recent survey, many consumers who said they lived paycheck to paycheck also spent on luxuries, such as subscription services, gym memberships, and salon treatments. Reducing spending on nonessentials can help you have more money in the bank by your next payday. Living paycheck to paycheck isn’t always a sign of financial distress.
You can maintain financial stability and peace of mind by budgeting wisely and saving regularly.
