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What is considered living paycheck to paycheck?

Living paycheck to paycheck refers to someone who spends all or most of their income to cover basic living expenses with little to nothing remaining by the time the next paycheck arrives. It indicates a precarious financial situation where someone struggles to save money or build wealth because nearly all income is allocated towards mandatory costs like housing, transportation, food, utilities, and debt payments. Living this way leaves very little margin for error in case of unexpected expenses or income disruptions. Determining if someone truly lives paycheck to paycheck involves looking at their income, necessary expenses, and ability to save.

What Percentage of Income Goes to Expenses?

A basic definition is that someone lives paycheck to paycheck if most or all of their net income goes towards obligatory living expenses each pay period. Experts commonly cite benchmarks like:

  • Spending 75-100% of net income on necessities
  • Having less than $1000 in liquid emergency savings
  • Having no money left over after paying monthly expenses

So if someone’s paycheck is completely exhausted covering housing, transportation, food, utilities, debt payments, insurance, childcare and other essential costs, this signals living paycheck to paycheck. Even spending over 75% of income on these expenses can qualify based on the difficulty saving money and threat of financial disruption.

How Much Emergency Savings?

A key indicator of living paycheck to paycheck is having very little liquid emergency savings. This refers to funds that could quickly be accessed in the event of unexpected expenses or income loss. Experts recommend having 3-6 months of living expenses saved, but when living paycheck to paycheck even $500-1000 in accessible savings may be unattainable.

Not having at least one month’s worth of expenses in emergency savings means any surprise cost like a car repair or medical bill can be devastating. It forces relying on credit cards or high interest debt that makes the situation worse. Lacking this financial cushion signals that someone is likely living without excess money each month.

Is There Money Left Over?

Another telltale sign is whether or not any money remains after all monthly bills and expenses are paid. When every dollar coming in goes right back out for necessities, this indicates living paycheck to paycheck.

There are fixed recurring costs like rent, car payments, insurance, utilities, etc. When these alone consume someone’s full income, it’s impossible to get ahead financially. Variable costs like groceries and gas on top of these fixed expenses further prevent saving or investing money. No wiggle room in the budget leads to desperation waiting on the next paycheck.

Consequences of Living Paycheck to Paycheck

Life on such a financial edge has many risks and drawbacks:

  • Constant financial stress trying to cover basic expenses
  • Trouble affording surprise costs
  • Reliance on credit cards or predatory lending
  • Missed bill payments and damaged credit
  • Perpetual debt that increases over time
  • Inability to save for retirement, education, etc.
  • Low standard of living

This cycle prevents upward mobility and leaves little room for enjoyment or advancement. It also takes a toll on physical and mental health. Breaking out of living paycheck to paycheck requires either boosting income or reducing living expenses.

What Percentage of Americans Live This Way?

Surveys show just how common it is to live without financial breathing room:

LendingClub (2020) 63% said they live paycheck to paycheck
Charles Schwab (2019) 59% said they live paycheck to paycheck
US Federal Reserve (2020) 40% of US adults would struggle with a $400 emergency expense

It affects all ages and income levels but especially lower income households. Many factors like stagnant wages and the high cost of living contribute to households barely getting by each month. It has become a way of life for millions of Americans.

Who is Most Affected?

While no group is immune, data reveals certain segments of the population are most likely to live paycheck to paycheck:

  • Lower income households
  • Younger workers age 18-34
  • Renters
  • Those without college degrees
  • Minorities like Blacks and Hispanics
  • Single parents

Despite working full time, their incomes lag behind basic living costs in many areas. Certain life circumstances also decrease the ability to save like having student loans, credit card debt, children, unstable jobs, or being single income households.

Geographic Differences

The cost of living based on location influences the struggle to save money. High rent and housing costs in places like New York City and San Francisco make it harder than lower cost regions. Some cities with the highest percentages living paycheck to paycheck include:

  • Miami, FL
  • Los Angeles, CA
  • New York, NY
  • San Diego, CA
  • Phoenix, AZ

Rural areas aren’t immune either as wages tend to be lower but expenses like transportation remain high. Easy access to credit tempts overspending and exacerbates financial instability.

Steps To Improve Finances

It takes intentional effort but there are ways to gradually move off living paycheck to paycheck:

  • Track expenses – Detail where all your money goes each month and look for areas to cut back like eating out, entertainment, etc.
  • Reduce housing costs – Downsize, get a roommate, move to lower cost area.
  • Increase income – Ask for a raise, find a better paying job, monetize skills.
  • Lower debt payments – Pay off highest interest debt first, consolidate loans, ask for lower rates.
  • Save automatically – Have money direct deposited into savings so not tempted to spend it.
  • Build an emergency fund – Make this a priority with savings goals and lump sum deposits like tax refunds.
  • Live below your means – Spend less than you earn and avoid lifestyle inflation as income rises.

It can take years to dig out but each small step creates progress and stability. Eventually the risk of living paycheck to paycheck is removed.

How Long Until Not Living Paycheck to Paycheck?

With focused effort it may take:

  • 6 months to have $1000 emergency fund
  • 1 year to have 1 month of expenses saved
  • 3 years to have 3-6 months of expenses saved
  • 5 years to pay off debt and have savings surplus each month

Having earnings rise faster than expenses accelerates this timeline. Things like eliminating debt and downsizing housing have an immediate impact. Consistency is key as small amounts add up over time into financial freedom.


Living paycheck to paycheck refers to people spending all or most of their monthly income on obligatory living expenses. It leaves little to no wiggle room in the budget for savings or financial goals. Warning signs include having less than one month’s worth of expenses in emergency savings and having no money leftover after paying bills. It affects a large segment of the population but can be overcome with focused effort to control expenses and increase income. Relief comes when finally living below your means allows money to be saved and invested.