Forty nine percent of Americans are living paycheck to paycheck according to a goBankingRates survey.
How’s that for scary?
Surprisingly (for me), the older generations are most likely to be living paycheck to paycheck. More than half of respondents in three different age groups (starting at 35 and ending at 64) said that they’re living on that edge.
Perhaps this shouldn’t be surprising. Those are arguably the groups most likely to have mortgages, and that often eats up a big chunk of one’s salary.
The youngest generation surveyed (18 to 24) was the least likely to say they’re living paycheck to paycheck. On the other hand, that’s the generation most likely to be students and, therefore, potentially getting help from their parents.
Even so, more than 1/3 (34.54% if you want to get technical) of that age group admitted to living from paycheck to paycheck. That’s a pretty large chunk of the population — especially as the lowest number.
The real issue(s)
So what’s the biggest issue? Thirty seven percent cited a high cost of living (especially for housing and utilities). It looks like my theory about high mortgages seems to be playing out here.
But even rents are skyrocketing. Here in Phoenix, they went from around $500 for a one-bedroom to about $800/900. Granted, that’s in the span of nine years, but that’s still quite a jump. Especially since $1,000 isn’t that uncommon anymore, if Apartments.com/the folks I talk to at parties are any indication.
But the cost of living isn’t the only issue. Another 29% of respondents said they don’t make enough at their job. If you don’t have enough money, then obviously you’re going to live paycheck to paycheck.
Perception is everything
Of course, we have to allow for the fact that all of these answers are perception-based. And surveys are often taken quickly, where knee-jerk reactions are what you go by. And it can be easy to feel like you live paycheck to paycheck even when you don’t.
For example, part of me still thinks I do. Why? Because I keep only enough in the account for my monthly spending, which obviously dwindles as the month wears on.
By the end of my financial month, the funds are low indeed and I’m anxious to get my check. So it’s easy to feel like I’m living paycheck to paycheck, even when I have substantial savings to fall back on.
But I suppose that’s not the case for a lot of respondents. After all, 44% of the people surveyed said they have $0 in savings. Another 20% have less than $500!
And if one survey isn’t enough to convince you, one done by LendEDU found that 55% of respondents have $1,000 or less in savings, with 32% of respondents saying they had $0 in savings.
The amounts were so low in the LendEDU survey that the median savings was $712. (I think they meant “mean,” not median, because I kind of doubt anyone answered $712 exactly. But either way, that’s not a heartening amount.)
No money = no savings
While concerning, this once again shouldn’t be surprising. Two thirds of the nearly 4,500 people in the goBankingRates survey said they make less than $50,000 a year.
Now, lest you think I’m in an ivory tower here with my high income, I freely acknowledge that $50,000 can allow you to put a fair amount of money in the bank. Though it helps greatly if you have a reasonable mortgage (ha!) and no daycare expenses.
But there’s still cause for concern because 42% of that two-thirds I mentioned said they make less than $25,000 a year. That’s 28% of all of the respondents making $12 an hour or less.
There’s very little opportunity to get ahead on less than $25,000 a year. I’m not saying it can’t be done. Heck, my mom is proof that some people can live on about $12,000 a year. But for the average person? Not viable.
Mo’ money, fewer problems
So it’s only slightly surprising that respondents said, on average, they’d need around $2,200 a month more to stop living paycheck to paycheck.
(Interestingly, men thought they needed more than women. I don’t know what that means, exactly, but as I said it’s interesting. Especially since it’s arguably more expensive to be a woman in this society.)
Anyway, I say that it’s slightly surprising because I think that $2,200 a month is a rather large boost. After all, it’d more than double the 28%’s income. That’s a big leap. I would’ve thought an extra $1,000 would do it, but then again I’m not privy to their expenses.
Plus I suppose an extra $12,000 a year would still mean that the 28% would make less than $40,000 a year. It’s not that you can’t put away money on it, but it’s certainly more difficult than, say, more than $40,000 a year.
Livin’ on the edge
So is living paycheck to paycheck now the American way of life? Well, more than half (if just barely) of people aren’t stuck in that cycle. So I guess technically the answer is no.
But that’s still a lot of people living financially precariously — especially with 55% or 64% (depending on which survey you believe) having less than $1,000 in savings.
So clearly, a lot of people aren’t robust in their finances, even if they’re not living paycheck to paycheck. Which means they’re probably one or two emergencies away from the that paycheck-to-paycheck life.
All of this is especially bad with a recession looming on the horizon. If you’re that close to the financial edge, a recession-induced layoff or even a cutback on hours is enough to make you fall off the precipice.
For that reason, I suppose, lot of people reported being concerned and looking to cut back on spending.
According to the LendEDU survey, 42% of people plan to trim their outlays. That’s promising. But 59% of respondents either thought their finances were too weak for a recession or were unsure of how they’d fare, which is disheartening.
So all in all, I’d say that a precarious financial life is starting — or perhaps long has been — a hallmark of American living.
In the PF blogosphere it’s easy to get trapped in a bubble of financially-minded folks who safeguard their money, usually make plenty of it, and spend carefully. But the fact is that living paycheck to paycheck is inching closer to being the norm.
Do you struggle with paycheck to paycheck living? Could you get ahead on less than $25,000 a year?