The lowest rate of primarily living paycheck to paycheck is the $100k-$200k range (55th-82nd percentile), while the highest rate of making significant progress to long term goals is the $200k-$300k range (82nd-92nd percentile). Above that, it seems that more income correlates to more rather than less money worries.
Perhaps that is related to the phenomenon of “too much money to get college financial aid but cannot afford to contribute much for kids’ college”.
Pretty awful that people making so much money are “living paycheck to paycheck.” Their lives are still a lot more comfortable than those living in boxes, cars and on side of the road.
I can see why some high earners might be living paycheck to paycheck. There is a difference between a family of two newly minted doctors making $250k each and trying to pay off massive medical school loans as soon as possible and a family that has been making $500k for years. I haven’t read the article so no idea if that has been accounted for.
Not if you’re living in a very high COL area like Manhattan. Of course, it’s all relative and depends on lifestyle choices (rent on a 2-bedroom apartment, for example, could cost anywhere from $5,500 to over $10,000 a month). After federal, state and city taxes, mandatory deductions, non-discretionary expenses, debt payments, etc., a couple might have considerably less disposable income than the $500k gross figure suggests. Even if they’re still managing to save $60–70k a year, that might feel like living paycheck to paycheck relative to their income and expectations for building retirement savings.
The U-shaped curve is interesting, though. Perhaps lifestyle inflation and rising expectations around housing, travel, education, etc., as income increases, explain some of this.
Given the other categories, “paycheck to paycheck” in this instance seems to mean truly that, with no significant savings. My wife and I will probably make $700,000 to $800,000 this year, and while we live (in NYC) paycheck to paycheck in the sense that we couldn’t get through a paycheck-less month without dipping into savings, we do have considerable retirement savings and insurance.
While to a degree I feel like “too bad, so sad “, I think the bottom line is making savings a priority at nearly any level of income - except the lowest where it’s just not possible.
For most of us- compare how we grew up with our kid’s expectations for an adult life.
Sharing bedrooms, 6 people figuring out how to navigate one bathroom in the morning, fans in the windows during brutally hot summers, the elaborate hand-off of the shared vehicle, takeout meant a parent was hospitalized and couldn’t cook, a restaurant meal was for mom and dad’s anniversary.
And that was a perfectly fine, middle class lifestyle. Nobody was whining “poor me” because we weren’t getting meal delivery or eating sushi whenever we didn’t feel like chopping and broiling.
I’m not in the “today’s young people can’t buy a home because they eat avocado toast” camp. But you’d have to be very “math challenged” not to tote up the costs of what many people consider “normal weekly expenses” and note that they include items that one generation ago were considered absolute luxuries.
I fell out of my chair the first time I heard about “glamping”. Camping used to be an affordable vacation- borrow a tent, dig the old sleeping bags out of the basement, fill the ice chest with groceries and head out to a state park. What was it- $8 parking fee for three days which included toilets and outdoor showers? And now people are paying the equivalent of a 5 star hotel because the campsite serves espresso and grinds their own beans???
To me, by definition, if you are saving anything you are not living paycheck to paycheck. That means these households are spending every cent they make. Which suggests a lot of discretionary/unnecessary spending such as multiple private school tuitions, a second home, household help, etc.
The category missing here is the going into debt a little each month because you can’t stretch the paycheck anymore. As a single parent paying daycare costs I was in that category in those years. I actually used to joke that living paycheck to paycheck would be a step up. The overall debt when my daughter went to kindergarten was relatively small - maybe 25k? But paying it off precluded saving for college and somewhat for retirement until she was in middle school as I really was living paycheck to paycheck by then (and just like the wealthy families made some choices like travel or dance classes that slowed the repayment). But in my mind if you’re saving you’re not living paycheck to paycheck.
“Living paycheck to paycheck” might not be true in the literal sense for many of these high-income families. But it can certainly feel that way if you have very little disposable income left over each month and a month without a paycheck would require dipping into savings (even if those savings are substantial).
There’s no doubt that their situation is vastly better than that of a family making $50k. But I expect that when people are asked how well they feel they’re progressing toward their long-term goals, they’re assessing their own situation rather than comparing themselves to lower-income families.
And yes, lifestyle choices make a difference: Manhattan vs. Queens, private school vs. local public school, cooking at home vs. DoorDash, etc. (Although I know families who feel that sending their kids to private school is a necessity, not a luxury — again, it’s a choice, as I said). Could these families make different choices and have more disposable income? Perhaps yes, and perhaps not. I’m just addressing why people might feel the way they do about their situation.
Unless the savings are substantial enough that the investment gains/income covers expenses, wouldn’t the absence of a paycheck require dipping into savings?
In the survey, it seems like living paycheck to paycheck is contrasted against making progress to long term financial goals (savings and investment), so that suggests that people living paycheck to paycheck are not really saving or investing.
And out in the 'burbs you’ve got the folks insisting that they need the 5 bedroom colonial in New Canaan CT because of the public school system-- even though their kids could probably learn to read in Stamford or Norwalk- two towns that abut New Canaan-- places with lower property values and horror- no one acre zoning restrictions.
People do find a way to justify their decisions retroactively!
True, but if that 401(k) withdrawal comes out of every paycheck and goes into a “pile of $$” that can’t be touched without serious tax consequences, it is easy to think about it as being just another deduction. So the paycheck then becomes whatever is deposited into the bank account after all deductions.
That is a good point, though arguably the percentage withheld can be changed (especially if it’s more than the employer match). I will note that many people at lower salaries aren’t having anything withheld because they need every cent to pay current expenses, but I do think a minimal amount of automatically withheld 401k savings could fall into a paycheck to paycheck definition.
"Nearly four in ten respondents (40%) report paying only the minimum on their credit cards each month, or less. Among households earning under $50,000 that figure reaches 47%, and, follows the same two-tailed pattern documented in this report, as it rises again to 46% among those earning above $500,000.
This is where the macro data and the survey data converge. Borrowing to meet everyday costs produces a debt payment. That debt payment then becomes the obstacle households cite most often when asked what stands in the way of saving for retirement, first among Gen Z (31%) and Gen X (30%).
Importantly, the gap does not disappear when it is financed. It reappears the following month, with interest. "
IMO it sounds like a lot of people missed the lesson about compound interest. Guess this is why Dave Ramsey’s first advice is to cut up the credit cards. The middle (100-300K) also have the lowest credit card debt which corresponds to the higher achievement of financial goals.
Thought it was interesting that at the 500K level one of the main reasons for the paycheck-to-paycheck scenario was trying to maintain lifestyle (guess it’s hard to give it up!)
I don’t understand how someone making $500k/yr is living pay check to pay check. Are these people not keeping a 3-6 month cash reserve on hand? If you are working and don’t have a reserve on hand for emergencies or job loss, you are living beyond your means.
There is a certain mindset, that money is perishable and must be spent immediately before it spoils. For those who think that way, no amount of income or money coming to hand changes the “paycheck to paycheck” mentality. I bet some of us remember the DH Lawrence short story, The Rocking Horse Winner. The Rocking-Horse Winner--D. H. Lawrence (1885-1930) There are various interpretations of it, but what I remember most about it was the constant whisper of “There must be more money”, and when there was, the spending simply increased to consume every penny available, and the house screamed, “There must be more money!” It’s still relevant, and always will be.
“, I think the bottom line is making savings a priority at nearly any level of income - except the lowest where it’s just not possible.