Wednesday, July 10, 2013

Living Paycheck to Paycheck

There was recently an article on CNN Money that a staggering 76% of Americans are living paycheck to paycheck, something that was very disheartening to read. About 16% of Americans are considered to be below the poverty line in America [1], so it's crazy to think that 76% of people are also living paycheck to paycheck. One would think that this number should be lower?

If we dig into the article a bit more, I think a more accurate way to display the information that is presented in the article is that 27% of Americans have no savings at all. That is what I would qualify as living "paycheck to paycheck" - which still isn't that great of a rate. But it isn't as drastic as the headline that lures us into the article and that actually lines up pretty well if you factor in the people living right at the poverty line or slightly above it.

We can also see that 22% of people have less than $100 in savings, while 46% have less than $800 in savings. I think that in this case we are actually dealing with two groups of people. There are the people working hard just to pay their rent, feed their families, and pay the bills. There is no way this person or family is going to be able to save money without increasing their income and there is a legitimate reason they are working paycheck to paycheck.

We then have a second group of people who are making enough to live comfortably but nothing extravagant, but spend every last dollar of their paycheck on stuff they might not really need. They keep up with the latest iPhone, they have an unlimited data plan, and they might get a more expensive car than is really needed on a loan. They probably also have a large amount of credit card debt as a result of living "paycheck to paycheck" and splurging on going out every night or buying expensive furniture and clothes.

And while the second group definitely does exist and is a sizable amount, I don't think it's as bad as the article makes it out to be. I think they use the 76% statistic to draw you in right away, and while almost half of the people not having at least a three-month cushion there was another half that at least did have an emergency fund. I think if you wanted to really stretch, you could say that half of all Americans are living paycheck to paycheck and make a valid argument for it.

What do you think of these statistics? Was there a time in your life when you were living paycheck to paycheck? Was it out of need or overspending?
Photo Credits for this post: aeropw


  1. I have a draft article I need to finish on a similar take on this. I would love to see some in-depth analysis of how much of this is self-inflicted. Particularly the ease with which people sign up for ongoing monthly bills for $50-$90 and create a scenario where it's hard to keep up. It's definitely sad to see.

    1. Would like to read that :) I think it's really tough to know who is actually struggling to get by and who is spending $100/month on a smartphone plan when they could be spending half that to save some more money!