Living Paycheck to Paycheck

The results of an interesting survey recently conducted by indicate nearly half of American workers are living paycheck to paycheck.  Combine this with the news in recent years that we actually had a negative savings rate for the first time since the Great Depression era, and it is easy to see why so many Americans are struggling with their financial lives.

Defining Paycheck to Paycheck

I don’t know that an official definition of “living paycheck to paycheck” exists, but since I’ve been there myself I can sum it up by the example of checking your balance the day before payday and breathing a sigh of relief that you are not overdrawn, even though the $1.81 left in your checking account doesn’t leave much breathing room.  Your credit cards are nearly maxed out, you have nothing in an emergency fund, and your wallet is empty.  Kind of reminds me of my own soggy hotdog story.

The Numbers

The survey revealed some interesting statistics:

  • 47% of workers live paycheck to paycheck to make ends meet
  • 21% of those earning over $100,000 also live paycheck to paycheck
  • 25% of all workers reported they save nothing each month
  • 33% do not participate in any retirement programs (employer-sponsored or otherwise)

The numbers are telling.  One in four workers save $0 each month, either because they don’t have any additional money, or because they choose to spend it.  While there are a few in the former category, I imagine a large percentage of those who save nothing could find something to save if they simply cut back on their lifestyle.  These folks probably pay for cable, have cell phones, go out to movies, drink beer or cigarettes, indulge in meals out, etc.  If only one or two items were cut from their monthly budget they could probably free up $50-$100 dollars to begin a savings program.

Start Saving, Something

I personally know several people who save nothing because the amount they have to save is perceived to be so small that it couldn’t possibly make a difference.  Not true.  Even $20 a month adds up over time.  In just a few months you will have built a $100 cushion in your emergency fund.  Here are a couple ideas on how to start a savings program:

  • Find one or two monthly expenses you can live without and eliminate them.
  • Open a high-yield savings account.
  • Set up an automatic transfer each month in the amount you saved by reducing monthly expenses.
  • Find some creative ways to earn extra money (complete surveys, start a blog, work part time, etc.).
  • Add to your savings any additional part-time earnings you generate.
  • As you receive raises or bonuses at work, hold your lifestyle steady and increase the amount you save each month.

The point is to start saving something–any amount you can scrape together.  You don’t have to be saving half of your income for your savings plan to be worthwhile.  As your savings accumulate you will slowly become less dependent on a paycheck to pay your next bill.  Eventually, you may even have a month’s worth of expenses saved.  It’s been said that having money in the bank is the softest pillow of all, and I couldn’t agree more.  No more staying awake at night worrying about the power being cut off.  No more feelings of desperation when your kids are sick, but you can’t afford to get a prescription filled.  And best of all, no more soggy hotdogs for lunch!


  1. It is quite devistating to see how many Americans live paycheck to paycheck. I’m in that position but were slowly making our way out and I believe this may be the month that we do. Keeping our fingers crossed.

    I don’t think any of these people truly have excuses. We live on a low income and we have been able to find areas in our budget that can be reduced and either put into savings or put to debt. Thing is, any one can do it, it is just a matter of wanting to.

  2. Depressing, but unsurprising news. I agree with you Vanessa that people have to want to, but they also need to know how! I know it’s not rocket science to cut a few bucks out of your budget, but people just don’t have many basic financial skills that they need to develop. As a society, we don’t place an emphasis on managing and saving money, just on spending it. There needs to be a cultural shift into that mindset.

  3. @Ron: My guess…lifestyle inflation. Making $100k doesn’t mean tons of disposable income because many people have mortgaged and borrowed up to their income by constantly upgrading their lifestyle. People now earning $100k per year have just as little to invest as someone making $50k per year.

    But, there is hope because we know that savings is a function of spending less than you earn, regardless of what you earn.

  4. At a financial ed conference, I heard it put in a different way that I think a lot of people related to.

    The speaker asked, “Are you one paycheck away from being homeless?”

    I am. I just bought my first house in April and wiped out my savings on downpayment and closing costs. I only have $300 left in it now

    Of course, I’m building my savings back up but I’m terrified because although I’m not struggling at the end of the month, if I were to lose my job tomorrow, I wouldn’t be able to pay my mortgage.

    When you think about it like that, having a solid amount of money set aside for an emergency is an insurance policy that I can’t do without.

  5. thank God it’s no longer us. For those who want to escape the paycheqe to paycheque gring a good starting point would be the tighwad gazette. I didn’t take every idea but it gave me alot of food for thought.

  6. “21% of those earning over $100,000 also live paycheck to paycheck”

    This is American Consumerism at its worst. So sad that so many of us define our lives by how much we can consume.

  7. Perspective people, perspective.
    It may seem that people making $100K per year are just wasting money, worshiping at the alter of consumerism, etc etc, but keep in mind that making low six-figures in places like New York, San Francisco, Los Angeles and other metropolitan areas is just barely making it. Those cities are also home to a quite significant percentage of the population. I don’t like surveys that just give numbers or percentages of the total population. They need to use a per region or per capita qualifier for studies like this.
    On the other hand, where I live (souther Louisiana) making $100K or more IS a lot of money. I would suspect that there are a number of people here who make that much money and don’t have great savings accounts either.

  8. This report is scary but not surprising. Seems like our society is constantly sending messages saying MORE!

    Shifting from a consumer culture back to a savings culture won’t be easy. But, eventually the bill for the way we live will come due.

    I hope the increase in the number of frugal blogs and the popularity of folks like Dave Ramsey does represent some shift in attitudes.

  9. The numbers are frightening especially with the economy slowing down. I too live from pay to pay though I try to set aside a little money for savings. The reality is I’m just playing catch up from the years where I maxed out credit cards as a hobby. Given the option now I would never get back into a situation where I am stuck living from pay to pay.

  10. I made an investment mistake and then had to live paycheck to paycheck while I was in school. It isn’t an experience I cared to repeat. Also my brother and I watched my parents live paycheck to paycheck and occasionally go into debt in order to enjoy a standard of living that was consistently higher than their income (until my dad lucked into a very lucrative line of work and their income caught up with their spending).

    Realistically the odds are that I’ll have to support one or both parents in their old age. So I ignore my mother’s constant criticism about my clothing, house, yard, hobbies, and saving habits. If she knew that it’s her bread and butter that’s at stake, maybe she’d put a sock in it but I’m not sure.

  11. I actually thought the numbers would be in the 60% area.

    I’m with the majority here on overspending, but it’s difficult to get someone to listen to this argument until they have hit bottom with no where to turn.

    Unfortunately, we’re a society that reacts only when a manageable situation turns into a crisis. Plus, planning ahead and having some foresight is for boring old people anyway… right?

  12. I would also like to defend those making over $100K and living paycheck to paycheck. As another poster pointed out in some cities $100K is just not much money. I live in Southern California and make $100K and we strugle to make ends meet. We have a modest 2,100 sq ft house in an averge neighborhood not one of those “mini-mantions” which cost us $460K, so add that mortgage payment to the $2K/ mo it costs us to put our two children in daycare, and there is not a whole lot left over. Now if I lived in the midwest somewhere and made $100K that would be an entirely different story!

  13. I’d probably retire immediately if I could get ahold of that $100,000/yr for just one year! I’d totally have it made including the cost of health insurance. Hard to believe that people intentionally live in places where it costs so much to live, when they could be living easily somewhere else on $1000 or $2000/month and enjoy the good green rural lifestyle.

    Payroll deductions – yep – GREAT way to go. If I don’t see it, I sure won’t spend it!

    Being from a blended family, one of my Step-sibs was chiding me on my frugal lifestyle and lack of a fancy car/house, etc. The step-sib who makes literally at least 10 times more than I do per year…and flaunts his income…. I said, I’m on the same family vacation you are on and I paid for it myself – cash not credit card like you did; my car is a great Forester and it’s all paid for… you have a car payment. My house at 1010 sq ft is comfy, homey, and paid for also – is your McMansion? No – deep in debt. My total utility bills, water, sewer, electric, etc are under $100/month… how’s that compare to yours? And finally, if we all lost our jobs tomorrow…just how long could YOU survive on what you have saved up? I told him I could survive literally til I die… and that he couldn’t make it 3 months….. So who’s living the better life and is more financially secure? Well, he finally shut up about my frugalness… and no, his not speaking to me for a long time after that did not bother me in the least 🙂

  14. I couldn’t agree more. That said, I am still one of those people that struggles to live paycheck to paycheck. I’m not nearly as bad as I used to be, in part because I started making automatic deductions on payday to my EmigrantDirect account. And any time I got a windfall, I try to move it there immediately. It is am amazing comfort when there’s something there. Of course, I can’t really call it an “emergency fund”, as it gets used to pay medical bills, dentist visits, and excess childcare costs. It seems it always slips away somehow. And believe me, I don’t pay for cable, or a cell phone, or a daily latte. (Though I’m not perfect, I ate breakfast on the run this morning and picked up something along the way.)

    And it can be quite difficult, and feel very defeating, when you’ve scrimped and scrimped for months to save a tiny little sum, and one fell swoop wipes it out. I guess it beats the alternative, though – which is being shoveled deeper into debt.

    Thank you for the suggestions. One of the newest things I’m trying to pay myself for days that I break out of an unfrugal habit (say, I wanted to go out for lunch with co-workers, but I stayed at my desk and had my sandwich). I’d pay myself the money I could have spent in cash. That gets set aside until I have $50, and then it goes into the savings account.

  15. “Hard to believe that people intentionally live in places where it costs so much to live, when they could be living easily somewhere else on $1000 or $2000/month and enjoy the good green rural lifestyle.”

    Maybe we live in these places because that’s where the jobs are? Or maybe proximity to family and other opportunities?

  16. There are jobs everywhere – maybe not the big money jobs, but jobs. That was what I was trying to get across —- if you live in a non-expensive place, then you don’t need to make the big bucks to live comfortably. If the cost of living is low then the payscale can be lower also and you can be just as well off financially. You can buy a house for $40,000-$80,000….. big big difference!

    One can live whereever one wants to… but how can having to pay $400,000 for a house compare to paying $40,000? Look at all that money I DIDN’T have to make 🙂 That’s the point I was trying to make. Living in a cheaper area I don’t need to make the big bucks. Much less stressful!

  17. Yes, but that’s only true if you can find a job that matches your skill set. A teacher or a nurse would probably be able to find work anywhere. Someone who works in advertising or publishing, probably not, unless they can find a company willing to hire them to work offsite.

    Also, while housing and service costs may adjust by region, other large, centralized expenses (e.g., appliances or automobiles) will likely not vary as much.

  18. That’s true that there are less expensive houses in other parts of the country, however moving there would mean leaving all my friends and family behind, and up rooting my children just to buy a less expensive house. To me, those costs are just to high. But I do know people who don’t care if they are near their family, and to those people, moving might be a good option.

  19. Lucky for me my family is all here with me 🙂

    I had made the mistake of moving away to the big city for more money, and regretted it immediately, even tho I was only 90 minutes away.
    I was so fortunate to be able to move back to family and the lower rural cost of living. I’m dug in now til I die 🙂

  20. I live in one of those expensive cities, and I make half of 100K. I’m able to put away an entire paycheck a month. It’s not about where you live, it’s about your mindset and how many excuses you can find.

    It’s not the mortgage or daycare that’s getting you. It’s the dining out, the cable, the multiple cars (the only major city in which that is acceptable is LA), the nice shoes/clothes, etc.

  21. Interesting article, and sad to say we were there a year ago. Got tired of it, followed some simple plans for sticking to a strict budget, saved some money (a big chunk of it from the economic stimulus payment). 🙂

    Maybe that wasn’t quite the American spirit, but my husband lost his job last night. And for the first time in my life, the thought of no paycheck in four weeks is not terrifying. We don’t have much, but enough to cover a month if the unemployment doesn’t take long and I pick up some extra work. And once the paychecks come back, we will be even more ruthless in cutting expenses to fully fund an emergency fund. A month isn’t that long, after all.

    Budget budget budget. You don’t know what will happen tomorrow.

  22. “…checking your balance the day before payday and breathing a sigh of relief that you are not overdrawn, even though the $1.81 left in your checking account doesn’t leave much breathing room.”

    The funny thing is that the first half of your definition describes me perfectly even though we manage to save a significant portion of our income each month. We practice the “pay yourself first” philosophy to the extreme. If we have an extra bill, that means that something else must be cut from the budget. Well, with the exception of emergencies, but that is is what the emergency fund is for…

    I completely agree with you about lifestyle inflation. When my wife received a new job with a better paycheck, we had five separate people tell us “Now, you can buy a bigger house.” We are perfectly fine in our current house, so we will not be buying a larger house anytime soon. In fact, we just discussed today about how to reconfigure the rooms, furniture, etc to still host guests overnight and have another child.

  23. People might actually have a good reason to spend all of their pay check: inflation. Inflation has grown to rampant levels in the recent years. Trying to find an investment that keeps up with inflation, much less returns a profit is next to impossible.

  24. Well, living in the south and what used to be a manufacturing sector I can say fully that with this area when those higher paying jobs were cut out around 2001 and were replaced with fast food jobs and other retail jobs and many of these people lost nearly everything. Nearly everyone is under employed making sometimes 1/10 of their former salary.

    This state went the cheap route and turned down NAFTA job loss assistance. A neighboring state did the opposite and retrained their workforce. This area looks almost like the Great Depression warmed over now. Cars being replaced with bicycles and moped type scooters. Homes abandoned.

    In Western NC where I lived for a short time their manufacturing jobs were turned out. Not only did the lowly hourly employees suddenly become unemployed but, all the way up the scale from managers to ajoining businesses.

    So they have unpaid homes etc with the closest place to work being 80 miles one way. Their employment security had three listings for jobs. 1. Waiter 2.25 tips 2. Horse Breaker 7.50 hr 3.Janitor for the court 5.50 hr.

    I met one lady that worked four jobs. She literally worked 22 hours per day. She claimed that she slept Saturdays only and had done this for 3 years. 8am-2pm fry cook, 2:30pm-3am worked at a gas station. 3:30am-7am a waitress, 7am-7:30am she went home and got cleaned up for work. Had a weekend job on Sundays cleaning a church. She used to be a supervisor making 60k .

    I do however understand about overburdening one’s income though and that does happen way too much.

  25. I live paycheck to paycheck, making a goo0d salary, because of the failure of my marriage. My children are grown, but have been financially irresponsible, due in part to my lack of leading by example. My parents were very closed-mouth about finances; I learned nothing from them, and have passed my lack of knowledge to my children. I do feel great responsibility for their lack of financial knowlege as well as mine. But who do we as a people rely on to teach financial responsibility and methods of prosperity?

  26. “21% of those earning over $100,000 also live paycheck to paycheck”

    Considering I work 40 hours a week and only make $10K a year with a trade license, that f—ing makes me sick. Perhaps they should cut down on their lifestyles a smidge. I can pay my bills, albeit with help from my family, but if I made 12K a year I’d be paying all my own stuff and living more than comfortably. If I can do it at 12K there’s no reason in hell someone can’t do it at over 100K. Gross.

  27. My family lives one step above poverty. By that I mean we get foodstamps,a medical card and have a home which we are lucky enough to be buying. My husband works part-time as a dishwasher and I get disability. We live paycheck to paycheck. We get our bills paid just barely and when the foodstamps run out for the month we get by with VERY little until the next months come in. We never do anything fun because we can’t afford to. Once bills are paid we have nothing left. If a car problem were to occur then that would be in catastrophic trouble because then my husband would have no way to get to work and therefore lose his job. If we were in poverty we would be homeless. We are just one step and only one step above that.

  28. Thank you for this article. It really gave me a good idea on “living paycheck to paycheck.” I am a student and this not only helped me write a paper, but it gave me ideas on how to live in the future!

  29. Everyone’s situation is different. Anyone who believes they are in a position to dictate how and when someone else spends their money when they are unfamiliar with the every specific detail of someones circumstance is simply arrogant, pretentious and ignorant.

    The common cry of someone afflicted with this ignorance is “You can do it if you just want to”. I am personally well off. I am also aware that many of those who find themselves in bad economic circumstances are in such a position because of conditions beyond their control. These include, but are not limited to: unexpected, catastrophic illness, geographic location with respect to jobs (you’ve got to have money to move), transportation issues and many, many more.

    In a sliding economy people in financial distress need real solutions and jobs. Even if they stand ready to take FULL personal responsibility for their situation, spending habits and stand willing to accept a dramatically reduced lifestyle no income is still no income. All the “personal responsibility” cheerleading in the world isn’t going to grow money on trees. Again, in the very near future the American people need jobs and wage increases, not more ideological ranting about responsibility. A very clear fact somehow lost in the minds of those who proclaim themselves shining examples of financial accountability.