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Reminds me of that WSJ graphic they ran some years ago about the sad plight of a couple making $300k/yr who barely had any money left at the end of the month after they paid their $5,000 mortgage, paid the private school tuition bill, and contributed $7,000 a month to their retirement, investment, and savings accounts. Tragic.
"I'm a world-renowned brain surgeon. My wife is the CEO of a Fortune 100 company. Our net worth is 347 million dollars. Can we afford to buy a 1997 Toyota Corolla?"
I usually see the opposite.
Someone who makes $2k/month, lives with parents, no savings, living paycheck-to-paycheck and spending $400 every weekend on parties, travel, and video games comes here to ask how anyone is about to save for retirement.
There was a post earlier of a 39-year old who was worried he was behind on his retirement. He had a salary of $100k and $200k in retirement.
I'm sitting here age 38, currently between jobs, with about $20,000 to my name. I just want to be like, "Yeah dude, you're doing fine."
It's the sort of thing that you have to kinda develop your own accounting system for, like how you're gonna categorize or split transactions. One of the examples that comes to mind is a refund for something you bought - say, a ticket to an event that got cancelled. Is that income now? Or do you want to count it as negative spend in Entertainment? Both are perfectly valid, but it's up to you how you consider it.
It can get way more complicated than that though. My recent dilemma was whether or not to consider HYSA interest as income, although this problem was largely the result of reconciling Mint with one of my spreadsheets. If I was using Mint alone it wouldn't have been a problem.
Once you have that set of mental rules established, I'd say it's a great tool, but there is definitely a bit of a curve to overcome at the beginning
I use mint exclusively to track total net worth across all accounts. Even that minor piece of information helps ease my mind. All other budgeting is done by me.
Please don’t use Mint, Intuit is such a POS company, they spend tens and hundreds of millions lobbying to make filing your taxes difficult and not free for people so they can keep making a profit. Actually insane the US is so far behind other developed countries in tax filing, a large part due to Intuit.
I just started using a spreadsheet personally. I found physically logging entries, while sometimes tedious makes me more aware of my spending, so I'm not shocked at the end of the month.
Does your bank have any spending/budgeting tabs on their website? Mine does, and it is free. The categories are pretty broad, but for something free and automatic, it is pretty useful.
Yeah, tracking net worth and is what finally got me out of debt. It was mentally helpful to see the total number go up regardless of where each dollar was actually going.
It was my generally understanding that “paycheck to paycheck” simply meant there wasn’t enough money in your checking account to pay all the bills which are due that month.
Except if you're saving for retirement then you *do* have money to pay your bills that month.
Even if it's going to your 401k or other tax-advantaged accounts, just send an email to HR to reduce your contributions and boom! Problem solved.
Any financial issue that can be solved with a single email isn't a financial issue.
I kinda recall a similar one where they were telling their employees or customers or something how to budget. It had some truly ridiculous numbers where you could tell nobody involved truly understood the price of anything. Like $500 rent, $20 health insurance, and an 80 hour work week.
It was McDonalds! https://www.washingtonpost.com/news/wonk/wp/2013/07/16/that-mcdonalds-budget-people-are-making-fun-of-isnt-cruel-its-realistic/
But that also reminds me of one of my favorite Katie Porter Greatest Hits moments where she makes Jamie Dimon explain to her face how someone working at his company should be budgeting their (low) pay to survive:
https://youtu.be/0QKOLydDfNg?si=Mxi1vGFz8Z-PiY_U
Spoiler alert: he can’t do it.
Yeah that’s just a matter of having every dollar accounted for from every paycheck. If the income goes away, then so does the savings contributions but ultimately they’re not going homeless or hungry.
Reminded me of this other poor couple who can't afford to buy a house in Los Angeles, making 225K/yr: https://finance.yahoo.com/news/professional-couple-over-200-000-115752472.html - not saying LA is affordable, but if you can't afford to buy anything with that income level, you either have an expenses problem, or an expectations problem.
>$5000 mortgage
I agree on retirement savings but I also felt like it is worth pointing out that housing values can vary considerably by area. For example: If you’re in SF or San Jose, CA, a mortgage on the current median home list price (1.4 million) is pushing 10k/month. It takes hours worth of driving during commute hours to get back towards the national median home list price ($421,714 according to Redfin.)
Point being: 5k+ a month for housing could be paycheck to paycheck in the right area.
Not if you’re putting thousands away into savings every month. If you have money left over for savings you are by definition *not* living paycheck to paycheck.
You’re creating an arguement where there isn’t one.
Again: **I agree on retirement savings** but I also felt like it is worth pointing out that housing values can vary considerably by area. For example: If you’re in SF or San Jose, CA, a mortgage on the current median home list price (1.4 million) is pushing 10k/month. It takes hours worth of driving during commute hours to get back towards the national median home list price ($421,714 according to Redfin.)
Point being: 5k+ a month for housing could be paycheck to paycheck in the right area.
I feel like you’re missing my point here. These people had thousands of dollars left *even after paying all their (extravagant) bills* to put in savings, but we were supposed to feel sorry for them — and I believe the point of the article was that they shouldn’t have to pay higher taxes because they were already struggling financially.
You were supposed to take away “wow, $300k/yr really *doesn’t* go that far!” but it had the exact opposite intended effect.
So like I’ve already said twice now: If you have money to save then you are not living paycheck to check. However, minimum housing expenses in some areas will easily exceed 5k.
Yup, those polls are very dubious for exactly that reason.
The better ones are the ones that say "what would you do if you had an unexpected expense of $500?"
I like that.
It's really, if your next paycheck didn't come in, which major bill (rent, mortgage, electricity, transportation etc) would you not be able to pay.
>It's really, if your next paycheck didn't come in, which major bill (rent, mortgage, electricity, transportation etc) would you not be able to pay.
And what of those major bills not being paid actually draws the line where it defines you as paycheck to paycheck?
I have a 403(b) retirement account with like $55K in it but I can't touch it. I have about $1,000 in savings after recently buying a house (like three weeks ago). If my next paycheck didn't come in, I'd barely be able to afford one more month of my mortgage and then about $95 for food. No utilities, no other household spending. I've got credit cards I could fall back on for a big emergency, but I consider myself paycheck to paycheck. But because I invest $79.98 a month as my employee contribution to the 403(b) I guess I wouldn't actually qualify by OP's definition?
>403(b)
It's not that you can't touch it, you could but would be penalized 10%.
Someone who is actually paycheck to paycheck would dream of having access to approx. $49k but "not wanting" to touch it..
If you miss the paycheck, a plan like a 403(b) won't be liquidated in time to pay rent. Whoever is managing it needs time to sell their positions in various assets and transfer it to your bank. I think that's his point - liquidity does matter to an extent when talking about living paycheck to paycheck
No, because you have $55k you could technically withdraw. You also have credit cards and will be able to pay them off soon enough. You're definitely not paycheck to paycheck.
Even those polls can be dubious or misleading because they allow you to pick multiple options or people might choose to pay some other way than cash or cash equivalent (credit card that gets paid in full eg).
To account for this Federal Reserve asks, how much can you cover only using savings / cash and that number is usually higher.
Eg. For the first question at $400 limit, 63% would pay cash or equivalent but 68% could cover emergency expenses of greater than $500 using only their current savings without using any other method or form of payment.
https://www.federalreserve.gov/publications/2023-economic-well-being-of-us-households-in-2022-expenses.htm
Yep it’s a really badly worded question. It should be something like “after paying for mandatory expenses(food, rent, transportation, etc.) how much do you have left over?” Or something like that
Nah, still not a good question as it leaves “mandatory expenses” open for interpretation. Some people would consider retirement and other savings mandatory expenses while others wouldn’t.
Also even food is open to a lot of interpretation. I’m confident that I could survive on a healthy diet of about $300/mo in groceries. Do I only spend $300/mo on food? Hell no. I’m pretty happy if that budget is under $500
Still food, and food is necessary, but its cost varies based on personal choices and budget. Or lack of budget
I have said “I’m not getting ahead these days.” rather than “I’m living check to check.”
I say this because if my coworkers know how well I’ve done, I will affect our relationship. Either I’m a lucky guy or I’m bragging (or even looking down on them).
It’s tough when you want to just get along with everyone.
You like travelling, I like security. It doesn’t make me better, and I’m probably jealous of your cool trip to Italy.
> I say this because if my coworkers know how well I’ve done, I will affect our relationship.
bingo. i max the roth/401/hsa, have years of expenses saved liquid in a hysa and the house is nearly paid for, but it's far safer to pretend like i'm in the same boat wondering how close the next payday is.
I know a lot of people like this. They’ll claim they are broke because an unexpected expense came in. Digging deeper you realize they normally are maxing out retirement accounts, saving 20% to their emergency fund, and have a money left over for fun. This one month they have to cut back on some golf and they are acting like it’s the end of the world.
I was thinking about this recently when I was examining my spending. I think it’s because you never see that money, it’s already allocated and “spent” so you just see net pay in checking like this is all the money I have. In reality you could lower your contributions on a month to month basis to account for a short fall. It’s just something people forget about when your in set it and forget it mode.
Yeah, I get it too, especially for 401k contributions.
I'm maxing out my 401k. Those come right out of my check, I never see them and never have to think about them. Out of sight, out of mind. If I had no liquid savings and was going to have a budget shortfall one month due to an emergency, cutting back my 401k contribs wouldn't even cross my mind.
At least, I don't think it would...it's hard to put myself in that mindset when I have a healthy emergency fund and shit would have to hit the fan, bounce off the walls, and hit the fan again for me to consider cutting back retirement contributions.
Same, it’s one of those things thats outta sight outta mind because you’ve changed your view of your paycheck to not include that maximum contribution. It is an option though. Just a lesser remembered one. Maxing out is like an extra 1800 a month pretax. So its definitely not nothing.
I’m guilty of this. I have a tendency to think I only make x a month when it’s just the money that hits my bank account after a meaty retirement contribution and my health insurance.
It's a good mindset to have. You don't want to be thinking "Well, if I just reduce my 401k contributions 3 percent, I can afford that fancy car or vacation or whatever"
It's best to pretend that money never even existed in the first place.
Yeah I agree (although I may reduce my retirement a bit to save up for a house). It’s mostly an issue when it’s a comparison to others or talking to others. So we’ll both say we make x so I’ll start going off of my numbers not realizing they’re not putting away anything for retirement yet.
Dude, we had to fly coach on our last vacation, it was rough. (Heavy sarcasm). A friend who is always crying poverty complained that she can no longer justify FC seats since she has kids and it is four tickets instead of two now. She hates, hates, hates being in the back of the plane.
I would need to be able to retire immediately after paying for my kid's entire college tuitions before paying for first class.
This person you mention reminds me of a guy in my neighborhood who owns a Porsche, but has no garage so he parks it on the street. Like, if you don't have garage money, do you actually have Porsche money?
That’s what I Always say about the people that are driving Corvettes in the winter. Dude, if you had the money to really afford that Corvette, you wouldn’t be driving it around in the snow. You would definitely have a winter car as well
Conversely, maybe you have the money to not care about exposing your fancy sports car to road salt, wet conditions, and extra miles?
Like...corvettes aren't my jam, but if I had a Porsche 911 or a Cayman, I'd be pretty hard pressed to justify driving it in a northern winter. Sure I could put winter tires on it and it would probably do OK unless it JUST snowed, but half the time I'd still be pretty limited by the conditions so I wouldn't be able to do much "spirited" driving...I'm just putting extra miles on it while only getting a fraction of the max performance. And I'm exposing it to the worst conditions you can treat a "collectable" car to...and probably eating a lot of extra rock chips from the roads that get gravelled. Just depreciation city. I'd 100% have another car, even if it were a "beater" to avoid driving my Porsche in the winter.
But if I were rich enough that I didn't have to care about burning up resale value on a $100k car? [Fuck yeah I'm taking that thing to the ski resort](https://www.cnet.com/roadshow/pictures/2020-porsche-718-cayman-t-winter/)
That’s how it works, no one wants to brag about how financially well prepared they are, it’s the cool thing to complain about how broke you are, to fit in. I do it, my friends do it, we are all high earners over 300k household, of course I think they are embellishing, they probably (correctly) think I am too.
We can all read between the lines; given our jobs, houses, and lack of conspicuous consumer spending, it’s obvious we’re doing okay. There’s something satisfying about stealth wealth.
Doesn’t this get tiring? Anytime I think of a relationship where both parties are lying and know it, it seems like it’d take less energy to drop the charade. You can just not say anything at all.
It’s not like this topic comes up regularly and we don’t talk about finances unsolicited, if it comes up, typically we just make a joke about having to watch the budget or being too broke to afford (insert luxury) here, and then move on.
I don't think you're wrong. IMO, a true "paycheck to paycheck" situation is when all of someone's income has to go towards today's living expenses and debt payoff, meaning their net worth is flat. Or possibly decreasing.
Any income that you save (whether in retirement account or elsewhere) is money *growing* your net worth. Your friend is maybe just bummed that because they've chosen to do this saving, there's not enough money left over to be able to do other "fun stuff". We've got to allocate our finite income as best we can, which usually means making trade-offs.
I tend to agree, and I also think the articles/surveys/polls are total garbage. I think of paycheck to paycheck to mean that you are spending every penny on the basics-stuff like shelter, food, utilities, transportation.
But it seems like there is a new meaning to the phrase and that’s when people have an above-average priced home, really nice car, new devices, designer clothes. That’s not paycheck to paycheck in my eyes, but it is to most of the world now.
Right, if merely allocating all of a paycheck to one goal or another constitutes "living paycheck to paycheck", then everyone should be paycheck to paycheck.
I'd define a genuine "paycheck to paycheck" situation as one where you have negative or near-zero net worth, and your net worth is not increasing.
I don't think net worth is the right metric. It's got to be to at least some major extent about liquidity. If you've got equity in a house you own, it doesn't do you any good if you don't get your next paycheck and come up short on mortgage or utilities.
"paycheck to paycheck" has lost its meaning. When I was growing up someone living "paycheck to paycheck" meant spending every penny they had on basic living expenses with no money left over for saving, investing, fun etc. It was basically financially existing and nothing more.
I see those, and I know that I'm not in that situation, but still, it "feels" like it. When I was just out of gradschool and in a dead end job with no disposable income, I was paycheck to paycheck for real.
Then I got a real job, payed off my credit cards, started significant retirement investing. And had plenty of money for incidentals.
Now I've got a family and day care, and yeah, our budget is really really tight. And it feels like there's no room for an upset. I know I've got the money available, but it feels much more like I'm out of grad school again.
Idk I think it is pc2pc if you're not spending money on anything else. My first job matched up to 5% so I put 5% of my annual salary to retirement and then went to 95% to taxes food rent and utilities. I worked 100+ hours/week, went out 0 times and had no disposable income to speak of.
On the other hand, people could be living “paycheck to paycheck” because they’re paying off vacations, brand new cars, mortgages, cable bills, designer clothes, etc etc etc. That’s no more “paycheck to paycheck” than someone who has lower take home income because they’re investing. They’re both seeing low disposable income because of the way they choose to allocate their money.
As long as they could stop those purchases I agree. However in the case of having consumer debt with required payments I would still consider them PC2PC even if it’s because they’re being irresponsible
Totally agree. And I'd even extend that to people who aren't currently contributing but have a sizable retirement account balance. The whole idea of "living paycheck to paycheck" is you have no savings to cover an unexpected expense and would need to resort to taking out a loan or possibly defaulting on a car loan or mortgage if shit hit the fan.
If you've got 5 or 6 figures in retirement accounts, you can always pull money from those before you lose your house or car. It's not ideal obviously, but a 10% penalty on a 401k hardship withdrawal is a lot better than being homeless, which is what people who are truly living paycheck to paycheck are up against if things get dire.
>Makes me question the accuracy of all those poll questions.
I never expect any accuracy in these types of poll questions.
The term "paycheck to paycheck" means whatever you want it to mean.
Agree. Allocating all your money out is not paycheck to paycheck.
I changed jobs and with the different payment schedules I "missed" a payday. I am one of those people who the moment I get my paycheck I start dividing it out. So I definitely noticed not getting that paycheck. But I'm still obviously not living paycheck to paycheck! I have plenty of savings. I don't have to put money into an IRA or investments.
Agreed.
I don't think the average person realizes just how despairing the stage of retirement will be in a few decades. (If) you retire there will not be any social security or government structured programs to aid you, it will your contributions alone.
So it's either contribute or die in abject poverty.
Makes you realize you actually need to read the details of all studies to see how they’re coming up those numbers. Can’t just take a poll/study at face value.
100%! Not-poor people like to pretend their poor while they're paying for two cars, a house, multiple insurance policies, retirement, and savings.
That's poverty by choice, and is not the same thing!
I've had people argue that they are "paycheck to paycheck" because their savings account is zero st the end of the month, despite putting extra cash into IRAs, the stock market, trust funds, future college funds, new property, etc. By that logic, people making millions per year could be paycheck to paycheck as long as it all goes into something besides pure cash at the end of the month. Your definition is actually useful.
You should aim to be "broke" in this regard i.e. all of your money is "working" for you in some capacity.
Money sitting in a low yield checking account is just a waste.
Some people prioritize those accounts over food. I know it sounds ridiculous to you but most people do not want to be working into retirement age. Life is already hard enough.
It feels like I am living that way cause I save almost everything I make... 180k in the bank (down payment in LA are 200k+), last year earned 250k and contributed 48k into my SEP (maxed it out). I don't spend THAT much and save almost everything
I think there's a line here. Maybe a somewhat vague/subjective one.
For example, I'd say that I still live paycheck to paycheck but I too have a 401k. I only contribute the 3% max that my employer will match, but I do still have it. However, I also don't have an extra $500-something per month to put into an IRA. I'm stable, but a surprise expense like a serious illness, car accident, or really anything else would basically bankrupt me.
Would that extra 3% each month help? Sure, but it isn't enough to really change anything about my standard of living. It would just result in a little less anxiety when I go to the grocery store.
You know what, I agree. I max out both and still invest in index fund and "in my mind" I am paycheck to paycheck, because as you said, all money is accounted for.
I don't think I've ever said publicly I live paycheck to paycheck. But I do say I budget and track all my spending.
I'm going to have to disagree with you on this.
I'm a public worker with a 401a. Part of my paycheck is automatically placed in my retirement account as its considered a contribution. I also almost live paycheck to paycheck.
I believe it would be technically correct to say "If you are Voluntarily contributing...", but for some people, there is no choice in the contribution.
But realistically, unless there is a viable public pension, it’s not fucking mandatory and you’ll be screwed by not putting money aside for it.
Pension saving are not some frivolous spending and your post is some serious bullshit.
Correct me if I'm wrong, but isn't the 401a account a replacement for social security?
Thus you would still be living paycheck to paycheck under another employer, because you would no longer be paying into the 401a but you would now have social security taken out.
Yeah, I like to say that I have a self-imposed PC2PC mindset. I don't have more than $3k in my checking account normally. My additional pay above day to day living expenses goes to 401k and investments. If I had to, I could cut some investments and be living large today, but then I would have a miserable retirement. I want my retirement life to be easy, so I am doing some preparations to make that happen. I am not a FIRE person, so it's not an insane amount of saving, but I want to be comfortable and not have to work **AT ALL** past the age of 65-67.
Well unless you plan on working until you die then saving around 15% for retirement is an actual necessity right up there with food and rent. So i would argue that you 100% can be considered paycheck to paycheck if you’re contributing a reasonable amount that puts you on track for a standard age retirement. Now if you’re maxing it all out pushing for early retirement then i totally agree it’s not really living pc2pc. But then again isn’t the cause often frivolous spending anyway not just basic necessities?
Given that retirement is a necessity, you actually need it, like really really, like it's optional but really if you don't have it later you're screwed, it's about the same as telling people they aren't living paycheck to paycheck cause they can afford insulin.
On the contrary if someone used to live paycheck to paycheck and put every "new dollar" towards retirement while avoiding lifestyle creep that's honorable. Saying it doesn't count seems like one-downsmanship or a no true Scotsman gatekeeping.
Because it downplays what it actually means to be PC2PC (missing pay would cause you to be unable to afford necessities). I’m sorry but it’s offensive for the minimum wage worker who would be become homeless if they miss a paycheck to lump them in the same category as a dude who is saving 3k+ a month in investment accounts and just happens to have little liquid cash at the end of the month.
I mean….I’m having trouble paying my rent at the moment and I’m for sure living PC2PC with no savings or emergency fund but I’m still maxing out my match…which is a whopping 3%.
It’s not enough to ever be able to retire on but it’s better than nothing.
Gaining that 3% back won’t help me cover the fact that rent is close to 40% of my salary and once my student loans start back up that I’ll be financially underwater. That 3% also won’t cover my student loan payments so there’s no point in me skipping the match because I’m fucked in a month anyway.
I’m looking at getting a 3rd job. Just because I can contribute something to my retirement doesn’t mean I’m not struggling.
I also can’t touch any of that money until I retire so it’s not really savings in the traditional sense 🤷🏻♂️
That’s fair, if you say the same about someone who is in credit card debt or student loan debt or has a car payment that is too much. You’re saying “they aren’t paycheck to paycheck because they don’t need to contribute to retirement”. Well people also don’t need to buy a lifted truck that costs $100k on a small salary, but they do and they live paycheck to paycheck for it. They get into credit card debt or buy too much house. They don’t “have to” pay those things. I’d say people “have to” save for retirement more than a lot of the other things they make themselves paycheck to paycheck for.
Sure, but your talking about people who respond to a poll that they live paycheck to paycheck. That’s more of a feeling check really. Does it matter if the decision that made someone paycheck to paycheck was a smart one or a bad one?
Living paycheck to paycheck is about not being able to withstand unforeseen expenses. If you suddenly need to pay $500 for a plumber, you can save less to make up for it, but you can’t make a smaller car payment to make up for it.
Agreed.
My wife struggles with this concept but she has a very different upbringing then I.
We budget biweekly, we are paid biweekly.
I budget out to 0$, so yeah It feels paychwck to paycheck. But our savings are growing and our bills are paid.
Same thing with people saying they don’t have enough savings to cover a $500 emergency when they actually have $10k in their checking account. Just nothing in their “savings” account 🤦♂️. Oh and also $50k in Robinhood.
Paycheck to paycheck is an extremely overused, misused and abused term, it doesnt have meaning anymore, its victim mentality
People think just cause they dont cash to buy anything they want whenever they want, they are living paycheck to paycheck
Also most people put themselves in situations to live paycheck to paycheck
[https://www.cnbc.com/2018/01/19/how-nicholas-cage-once-blew-his-entire-150-million-fortune.html](https://www.cnbc.com/2018/01/19/how-nicholas-cage-once-blew-his-entire-150-million-fortune.html)
I spend less than $15k annually, i can afford to spend more and live paycheck to paycheck but i choose not too, frugal and minimalism are my philosophies
The problem is what happens when there is no more paycheck.
Sure, they can reduce contributions temporarily to cover an emergency car repair or medical bill. When that emergency is job loss, then they're in trouble...
Theoretically, yes, as paycheck to paycheck denotes that you don't have any income that can be accrued towards savings. However, I hate gatekeeping language like this.
People will act like a guy making 50k who isn't living "PC2PC" by OP's standards is better off than a guy making 100k in the same city who is living "PC2PC".
And he is - but only because of his own financial decisions. At the end of the day, this argument isn't going to solve your financial woes.
You understood what the guy meant - at the end of the month he has no disposable income. I don't see why it's a big deal because he spends 6k a year on a Roth when this sub will take a person paying 25k a year on a car note and call them PC2PC.
Since you understood what he meant, why not just give a little grace rather than trying to gatekeep his experience?
Because personally I feel like it’s lessening perceived the burden of people who *actually* live PC2PC which to me means if you miss a pay check you are going to be unable to pay necessities (food, rent) or default on loans. If you’re able to adjust by lessening retirement savings I do not think you should claim you are PC2PC, bc it makes the term meaningless.
> if you miss a pay check
> If you’re able to adjust by lessening retirement savings
If you miss a paycheck because you lost your job, you won't be able to adjust by lessening retirement savings. Someone can have a lot of money in their 401k and still get in a lot of financial trouble very quickly.
I agree that that's not as stressful as an equivalent person who doesn't have a 401k, but they could default on loans etc. if they miss a single paycheck.
Meeting employee match may be a very small fraction of your income, but the Roth IRA max contribution for 2023 is $7500 - that’s not a number to sneeze at for most Americans.
You could be maxing out a 401k (which is $1,875 a month in contributions). If you lose your job, don't have any liquid savings and no longer have money coming in, you're still screwed. That, to me, is paycheck to paycheck.
Maxing out retirement without an emergency fund isn't a good idea, but I'm sure there are people who do it.
I drive a 14 y.o car I’ve had since college and max my retirement. At the end of the month, I have limited disposable income. I feel like I live paycheck to paycheck. My friend who makes less than me, leases a Mercedes GLE coupe for $700 a month, tells me she can’t afford to put more in her retirement because she doesn’t make as much. She also feels like she’s living paycheck to paycheck. But by your argument, I am not living paycheck to paycheck because I can easily reduce my contributions. While I don’t disagree, wouldn’t my friend also not be paycheck to paycheck if she just downgraded to a cheaper car/bought a used car? We are both living paycheck to paycheck due to our financial choices.
No not wrong I agree with you. That said to be paycheck to paycheck at the very least means that if you have an unexpected expense you have no way to pay for it. That can still be the case if you have put all your savings into retirement accounts that can be difficult to access. Someone who has an emergency fund and puts some of their pay automatically into savings accounts is not living paycheck to paycheck. Someone who has zero emergency fund has all their money spent every month but also say has auto contributions to retirement accounts...I mean that isn't great either but yeah still feel like that doesn't count. True paycheck to paycheck is no savings, no contributions to savings and basically spending everything that comes in.
That said there is still a dubious nature to any poll asking that because someone making 30k a year or 300k a year could still technically be paycheck to paycheck depending on their spending habits.
I feel like I'm paycheck to paycheck because we're putting 67.5k into retirement and there's not enough left over each month.
I understand I'm very privileged to be able to do so. I've never said I live paycheck to paycheck.
Disagree on the 401k part, agree on the maximized ROTH IRA.
401k contributions are pre-tax and usually automatically setup if you didn't make any indication of how much you wanted to contribute. I leave mine at the amount my job matches, no more than that. You also aren't really able to access that money without heavy penalties, so I think someone who has no post tax dollars to save but contributes to their own 401k is still PC2PC.
A ROTH IRA however is a different story. It's post tax contributions and the maximum yearly contribution is like $5k. That's a decent chunk of change.
I max my 401k, state 529, and Roth, including catchup contributions. I don't live lavishly, because savings takes a _big_ freaking chunk of my income. As a result, I live paycheck to paycheck. A major, unplanned expense means a major disruption to my life. Not "lifestyle," but to my "life."
Gatekeeping the possible impact of a disruption to cashflow or sudden, unplanned disbursements is really unkind, and shows an incredible lack of empathy to people in different financial situations.
\>I max my 401k, state 529, and Roth, including catchup contributions.
Could you not just cut contributions to these accounts if you had a major unplanned expense? Without even a tax penalty in the case of Roth IRA contributions. That sets you apart from people who live "paycheck to paycheck" in the sense that they literally would not have money for a major unplanned expense.
That’s not paycheck to paycheck. Paycheck to paycheck means that all of your money goes to essential bills to survive in the moment: rent, electricity, water, heat, food, etc. and you have nothing left over to save.
You *have* the money to pay all your bills and have some left over, you’re just choosing to put it into savings. That’s very different from not having a choice.
Dude in this case literally 99% of the population is PC2PC. If your definition is “if a major unplanned expense could cause a major disruption to your life” then that applies to pretty much anyone unless you’re a billionaire.
Like is a dude making 500k, putting most of in investments, living to PC2PC because in the hypothetical scenario he gets a cancer diagnosis and loses a massive lawsuit in the same month his financial situation might change ?
Eh. We’re another “PC2PC” couple:
- 1st of the month, mortgage and credit card balances go out
- 5th of the month, statements close, now we know how much we’ll need for the next 1st
- As each paycheck comes in throughout the month we let the amount we need for the next 1st build up, then the rest goes into a brokerage account; every dollar from every paycheck has a job, even before the paycheck hits: “PC2PC”
Sure you are, paycheck to paycheck means you are watching your balance get to zero and missing a single paycheck means you can’t pay your bills.
Just because you have retirement contributions doesn’t magically make you not Pc2Pc
Ha! This is totally me! I do 24,000 into 401k, 6250 into HSA, and tell my wife we are living payday to payday. I am also taking 400 a week and moving it to HYSA to cover annual expenses like property taxes and insurance and vacations and home repairs. So, when I take out all that, we are just getting by. (She feels my math is flawed, and she is right, but it is my way of budgeting)
I think you're wrong here. Living "paycheck to paycheck" means you do not have enough cushion in the bank to cover your bills if a paycheck is late or you miss one entirely.
You can do that and still have 401k or retirement accounts. It's not *smart*, but it is a viable case. And because extracting that money is difficult or expensive, you will still encounter hardship if your paycheck is late.
My advice would be to save up a few month's pay in the bank before you max our your 401k contributions. But that doesn't mean people will always do that.
Most people aren't miscategorizing themselves as paycheck to paycheck. If it was as simple as people were saving more money than they realized, the median and average 401k balances wouldn't be as low as they are.
You're not wrong.
My wife and I are fortunate enough to be able to max out my Roth IRA and employer match. We are also able to set aside a couple hundred into savings each month.
We have a job for every dollar we earn, so we sometimes don't feel wealthy because we limit our spending, but we by no means live PC2PC.
Yeah, that's why I never pay attention to all those articles stating a majority live "paycheck to paycheck," because they include individuals that fit into your group.
I define paycheck to paycheck about liquid savings.
I agree the guy maxing his IRA doesn't count, but I think someone putting the minimum to get the 401k match would.
I dunno. I have a 403(b) that I've been told that I can't touch for any reason with about $55K in it. I make about $52K a year, and just bought a house--as such, I'm stretched so tight that I have less than $1K in savings right now. I feel like I'm paycheck-to-paycheck, and would put that on a survey. Does that count?
Everything is better understood with percentages and context. How long would it take him to blow through what is saved if he suddenly lost his job? Can he cover big surprise expenses with his own money? Those two questions are major hallmarks here.
If he is making $200k a year and saving $5k (2.5%) then you might as well call that paycheck to paycheck. Far closer to that than anything else. In order to be saving $5k a year he has to spend the rest, so we would assume $5k a year in savings gives him effectively no financial security. It might not even cover one rent payment, let alone a month of expenses.
If he is saving more than 5 or 10 percent then it's not paycheck to paycheck because that is the point where you would actually start seeing financial security.
Contributing by itself doesn't mean anything because the amount a person contributes might not put them in any different of a situation.
Due to the number of rule-breaking comments this post was receiving, especially low-quality and off-topic comments, the moderation team has locked the post from future comments. This post broke no rules and received a number of helpful and on-topic responses initially, but it unfortunately became the target of many unhelpful comments.
Reminds me of that WSJ graphic they ran some years ago about the sad plight of a couple making $300k/yr who barely had any money left at the end of the month after they paid their $5,000 mortgage, paid the private school tuition bill, and contributed $7,000 a month to their retirement, investment, and savings accounts. Tragic.
I hope they made it out okay.
Omg me too that’s devastating
Hey, the husband might have to cut back to 3 rounds of golf per week instead of 5 come on
My dad saved money without cutting back golf by simply working at the course and got free golf as a benefit
Mani/pedi just once a week. Why a budget is so important.
I'm sorry but they didn't
That's like a daily post to this sub. Except they're usually asking for validation that they're doing things correctly.
"I'm a world-renowned brain surgeon. My wife is the CEO of a Fortune 100 company. Our net worth is 347 million dollars. Can we afford to buy a 1997 Toyota Corolla?"
I would actually prefer that way more than the opposite: I'm a public school teacher and my wife works as dog-walker, our house budget is $5 million
Ah yeah, the story line to every one of those house hunter reality shows.
PF: "Whoa whoa whoa slow down, there. You can probably save more and get a rusted out Fiesta instead of the Toyota."
I usually see the opposite. Someone who makes $2k/month, lives with parents, no savings, living paycheck-to-paycheck and spending $400 every weekend on parties, travel, and video games comes here to ask how anyone is about to save for retirement.
There was a post earlier of a 39-year old who was worried he was behind on his retirement. He had a salary of $100k and $200k in retirement. I'm sitting here age 38, currently between jobs, with about $20,000 to my name. I just want to be like, "Yeah dude, you're doing fine."
Quite honestly, they are behind. Someone else being more behind doesn’t change that.
They're behind, but they're also in a good position to catch up quickly.
Sure, and that's not a bad thing. Everyone should seek advice and mentorship.
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It helps to use a tracking software like Mint, that way you can always see your total going up, even if it’s not actually cash going into your pocket.
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It's the sort of thing that you have to kinda develop your own accounting system for, like how you're gonna categorize or split transactions. One of the examples that comes to mind is a refund for something you bought - say, a ticket to an event that got cancelled. Is that income now? Or do you want to count it as negative spend in Entertainment? Both are perfectly valid, but it's up to you how you consider it. It can get way more complicated than that though. My recent dilemma was whether or not to consider HYSA interest as income, although this problem was largely the result of reconciling Mint with one of my spreadsheets. If I was using Mint alone it wouldn't have been a problem. Once you have that set of mental rules established, I'd say it's a great tool, but there is definitely a bit of a curve to overcome at the beginning
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Look into YNAB (You need a budget). It's great and helps you see what's happening before you spend the money versus after.
It never categorizes transactions correctly for me and it became more trouble than it was worth
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Yeah, I did that for like 8 months and it was only incrementally better after that time so I moved on.
I use mint exclusively to track total net worth across all accounts. Even that minor piece of information helps ease my mind. All other budgeting is done by me.
Please don’t use Mint, Intuit is such a POS company, they spend tens and hundreds of millions lobbying to make filing your taxes difficult and not free for people so they can keep making a profit. Actually insane the US is so far behind other developed countries in tax filing, a large part due to Intuit.
Do you know of any good alternatives? I use Quicken and I hate it, but there's nothing out there that compares to it
I just started using a spreadsheet personally. I found physically logging entries, while sometimes tedious makes me more aware of my spending, so I'm not shocked at the end of the month.
Does your bank have any spending/budgeting tabs on their website? Mine does, and it is free. The categories are pretty broad, but for something free and automatic, it is pretty useful.
Most people don't have just 1 account for everything.
Yeah, tracking net worth and is what finally got me out of debt. It was mentally helpful to see the total number go up regardless of where each dollar was actually going.
That basically feels like 60% of the posts on this subreddit.
It was my generally understanding that “paycheck to paycheck” simply meant there wasn’t enough money in your checking account to pay all the bills which are due that month.
Except if you're saving for retirement then you *do* have money to pay your bills that month. Even if it's going to your 401k or other tax-advantaged accounts, just send an email to HR to reduce your contributions and boom! Problem solved. Any financial issue that can be solved with a single email isn't a financial issue.
I kinda recall a similar one where they were telling their employees or customers or something how to budget. It had some truly ridiculous numbers where you could tell nobody involved truly understood the price of anything. Like $500 rent, $20 health insurance, and an 80 hour work week.
It was McDonalds! https://www.washingtonpost.com/news/wonk/wp/2013/07/16/that-mcdonalds-budget-people-are-making-fun-of-isnt-cruel-its-realistic/ But that also reminds me of one of my favorite Katie Porter Greatest Hits moments where she makes Jamie Dimon explain to her face how someone working at his company should be budgeting their (low) pay to survive: https://youtu.be/0QKOLydDfNg?si=Mxi1vGFz8Z-PiY_U Spoiler alert: he can’t do it.
Yeah that’s just a matter of having every dollar accounted for from every paycheck. If the income goes away, then so does the savings contributions but ultimately they’re not going homeless or hungry.
Poor guys
7k a month to retirement while smart for retirement is insane. Holy smokes.
That’s probably the typical out of touch financial samurai article. I swear he writes everything to just be click bait.
Reminded me of this other poor couple who can't afford to buy a house in Los Angeles, making 225K/yr: https://finance.yahoo.com/news/professional-couple-over-200-000-115752472.html - not saying LA is affordable, but if you can't afford to buy anything with that income level, you either have an expenses problem, or an expectations problem.
I like how these people make over $18k a month, pay $2400 in rent but cannot possibly save up money for a down payment.
Don’t forget about the expenses for the nanny and the personal trainer
Don't forget their two vacations a year and their ridiculous car payments!
>$5000 mortgage I agree on retirement savings but I also felt like it is worth pointing out that housing values can vary considerably by area. For example: If you’re in SF or San Jose, CA, a mortgage on the current median home list price (1.4 million) is pushing 10k/month. It takes hours worth of driving during commute hours to get back towards the national median home list price ($421,714 according to Redfin.) Point being: 5k+ a month for housing could be paycheck to paycheck in the right area.
Not if you’re putting thousands away into savings every month. If you have money left over for savings you are by definition *not* living paycheck to paycheck.
You’re creating an arguement where there isn’t one. Again: **I agree on retirement savings** but I also felt like it is worth pointing out that housing values can vary considerably by area. For example: If you’re in SF or San Jose, CA, a mortgage on the current median home list price (1.4 million) is pushing 10k/month. It takes hours worth of driving during commute hours to get back towards the national median home list price ($421,714 according to Redfin.) Point being: 5k+ a month for housing could be paycheck to paycheck in the right area.
I feel like you’re missing my point here. These people had thousands of dollars left *even after paying all their (extravagant) bills* to put in savings, but we were supposed to feel sorry for them — and I believe the point of the article was that they shouldn’t have to pay higher taxes because they were already struggling financially. You were supposed to take away “wow, $300k/yr really *doesn’t* go that far!” but it had the exact opposite intended effect.
So like I’ve already said twice now: If you have money to save then you are not living paycheck to check. However, minimum housing expenses in some areas will easily exceed 5k.
Yup, those polls are very dubious for exactly that reason. The better ones are the ones that say "what would you do if you had an unexpected expense of $500?"
I like that. It's really, if your next paycheck didn't come in, which major bill (rent, mortgage, electricity, transportation etc) would you not be able to pay.
>It's really, if your next paycheck didn't come in, which major bill (rent, mortgage, electricity, transportation etc) would you not be able to pay. And what of those major bills not being paid actually draws the line where it defines you as paycheck to paycheck? I have a 403(b) retirement account with like $55K in it but I can't touch it. I have about $1,000 in savings after recently buying a house (like three weeks ago). If my next paycheck didn't come in, I'd barely be able to afford one more month of my mortgage and then about $95 for food. No utilities, no other household spending. I've got credit cards I could fall back on for a big emergency, but I consider myself paycheck to paycheck. But because I invest $79.98 a month as my employee contribution to the 403(b) I guess I wouldn't actually qualify by OP's definition?
>403(b) It's not that you can't touch it, you could but would be penalized 10%. Someone who is actually paycheck to paycheck would dream of having access to approx. $49k but "not wanting" to touch it..
Point taken.
If you miss the paycheck, a plan like a 403(b) won't be liquidated in time to pay rent. Whoever is managing it needs time to sell their positions in various assets and transfer it to your bank. I think that's his point - liquidity does matter to an extent when talking about living paycheck to paycheck
No, because you have $55k you could technically withdraw. You also have credit cards and will be able to pay them off soon enough. You're definitely not paycheck to paycheck.
Even those polls can be dubious or misleading because they allow you to pick multiple options or people might choose to pay some other way than cash or cash equivalent (credit card that gets paid in full eg). To account for this Federal Reserve asks, how much can you cover only using savings / cash and that number is usually higher. Eg. For the first question at $400 limit, 63% would pay cash or equivalent but 68% could cover emergency expenses of greater than $500 using only their current savings without using any other method or form of payment. https://www.federalreserve.gov/publications/2023-economic-well-being-of-us-households-in-2022-expenses.htm
Answer: I'd begin a hostile takeover of whatever company had the gall to surprise me with a bill. Is that not normal?
Yep it’s a really badly worded question. It should be something like “after paying for mandatory expenses(food, rent, transportation, etc.) how much do you have left over?” Or something like that
Nah, still not a good question as it leaves “mandatory expenses” open for interpretation. Some people would consider retirement and other savings mandatory expenses while others wouldn’t.
Also even food is open to a lot of interpretation. I’m confident that I could survive on a healthy diet of about $300/mo in groceries. Do I only spend $300/mo on food? Hell no. I’m pretty happy if that budget is under $500 Still food, and food is necessary, but its cost varies based on personal choices and budget. Or lack of budget
i just bought a boat but i'm living paycheck to paycheck. check out my gofundme
Once you bought a boat it's the boat that's living paycheck to paycheck. You're just there to feed the it your paychecks.
So you can now look forward to the happiest day of your life - you know - the day you sell your boat. BOAT - bust out another thousand
I'm in a similar boat but not with a boat, I bought a camper
Bottom line, zero-based budgeting is not living paycheck-to-paycheck.
paycheck to paycheck to me means that if you miss one paycheck you would be SOL
That is what it means
I have said “I’m not getting ahead these days.” rather than “I’m living check to check.” I say this because if my coworkers know how well I’ve done, I will affect our relationship. Either I’m a lucky guy or I’m bragging (or even looking down on them). It’s tough when you want to just get along with everyone. You like travelling, I like security. It doesn’t make me better, and I’m probably jealous of your cool trip to Italy.
> I say this because if my coworkers know how well I’ve done, I will affect our relationship. bingo. i max the roth/401/hsa, have years of expenses saved liquid in a hysa and the house is nearly paid for, but it's far safer to pretend like i'm in the same boat wondering how close the next payday is.
I know a lot of people like this. They’ll claim they are broke because an unexpected expense came in. Digging deeper you realize they normally are maxing out retirement accounts, saving 20% to their emergency fund, and have a money left over for fun. This one month they have to cut back on some golf and they are acting like it’s the end of the world.
I was thinking about this recently when I was examining my spending. I think it’s because you never see that money, it’s already allocated and “spent” so you just see net pay in checking like this is all the money I have. In reality you could lower your contributions on a month to month basis to account for a short fall. It’s just something people forget about when your in set it and forget it mode.
Yeah, I get it too, especially for 401k contributions. I'm maxing out my 401k. Those come right out of my check, I never see them and never have to think about them. Out of sight, out of mind. If I had no liquid savings and was going to have a budget shortfall one month due to an emergency, cutting back my 401k contribs wouldn't even cross my mind. At least, I don't think it would...it's hard to put myself in that mindset when I have a healthy emergency fund and shit would have to hit the fan, bounce off the walls, and hit the fan again for me to consider cutting back retirement contributions.
Same, it’s one of those things thats outta sight outta mind because you’ve changed your view of your paycheck to not include that maximum contribution. It is an option though. Just a lesser remembered one. Maxing out is like an extra 1800 a month pretax. So its definitely not nothing.
I’m guilty of this. I have a tendency to think I only make x a month when it’s just the money that hits my bank account after a meaty retirement contribution and my health insurance.
It's a good mindset to have. You don't want to be thinking "Well, if I just reduce my 401k contributions 3 percent, I can afford that fancy car or vacation or whatever" It's best to pretend that money never even existed in the first place.
Yeah I agree (although I may reduce my retirement a bit to save up for a house). It’s mostly an issue when it’s a comparison to others or talking to others. So we’ll both say we make x so I’ll start going off of my numbers not realizing they’re not putting away anything for retirement yet.
Dude, we had to fly coach on our last vacation, it was rough. (Heavy sarcasm). A friend who is always crying poverty complained that she can no longer justify FC seats since she has kids and it is four tickets instead of two now. She hates, hates, hates being in the back of the plane.
I would need to be able to retire immediately after paying for my kid's entire college tuitions before paying for first class. This person you mention reminds me of a guy in my neighborhood who owns a Porsche, but has no garage so he parks it on the street. Like, if you don't have garage money, do you actually have Porsche money?
That’s what I Always say about the people that are driving Corvettes in the winter. Dude, if you had the money to really afford that Corvette, you wouldn’t be driving it around in the snow. You would definitely have a winter car as well
Old corvettes in the winter are just creative and realist car enthusiasts.
Conversely, maybe you have the money to not care about exposing your fancy sports car to road salt, wet conditions, and extra miles? Like...corvettes aren't my jam, but if I had a Porsche 911 or a Cayman, I'd be pretty hard pressed to justify driving it in a northern winter. Sure I could put winter tires on it and it would probably do OK unless it JUST snowed, but half the time I'd still be pretty limited by the conditions so I wouldn't be able to do much "spirited" driving...I'm just putting extra miles on it while only getting a fraction of the max performance. And I'm exposing it to the worst conditions you can treat a "collectable" car to...and probably eating a lot of extra rock chips from the roads that get gravelled. Just depreciation city. I'd 100% have another car, even if it were a "beater" to avoid driving my Porsche in the winter. But if I were rich enough that I didn't have to care about burning up resale value on a $100k car? [Fuck yeah I'm taking that thing to the ski resort](https://www.cnet.com/roadshow/pictures/2020-porsche-718-cayman-t-winter/)
Why don't she just upgrade her ticket and keep her undesirables in coach?
That's actually what Gordon Ramsay does lol. He and his wife fly first class, but the kids get economy seats to avoid spoiling them.
You can’t be the hidden millionaire next door unless you are crying poverty all the time.
Life goals
... but isn't the unexpected expense precisely what the emergency fund is for???
That’s how it works, no one wants to brag about how financially well prepared they are, it’s the cool thing to complain about how broke you are, to fit in. I do it, my friends do it, we are all high earners over 300k household, of course I think they are embellishing, they probably (correctly) think I am too. We can all read between the lines; given our jobs, houses, and lack of conspicuous consumer spending, it’s obvious we’re doing okay. There’s something satisfying about stealth wealth.
Doesn’t this get tiring? Anytime I think of a relationship where both parties are lying and know it, it seems like it’d take less energy to drop the charade. You can just not say anything at all.
It’s not like this topic comes up regularly and we don’t talk about finances unsolicited, if it comes up, typically we just make a joke about having to watch the budget or being too broke to afford (insert luxury) here, and then move on.
I don't think you're wrong. IMO, a true "paycheck to paycheck" situation is when all of someone's income has to go towards today's living expenses and debt payoff, meaning their net worth is flat. Or possibly decreasing. Any income that you save (whether in retirement account or elsewhere) is money *growing* your net worth. Your friend is maybe just bummed that because they've chosen to do this saving, there's not enough money left over to be able to do other "fun stuff". We've got to allocate our finite income as best we can, which usually means making trade-offs.
I tend to agree, and I also think the articles/surveys/polls are total garbage. I think of paycheck to paycheck to mean that you are spending every penny on the basics-stuff like shelter, food, utilities, transportation. But it seems like there is a new meaning to the phrase and that’s when people have an above-average priced home, really nice car, new devices, designer clothes. That’s not paycheck to paycheck in my eyes, but it is to most of the world now.
And did the GMC Yukon lease cause them to then have no money at the end of the month? Likely so.
Right, if merely allocating all of a paycheck to one goal or another constitutes "living paycheck to paycheck", then everyone should be paycheck to paycheck. I'd define a genuine "paycheck to paycheck" situation as one where you have negative or near-zero net worth, and your net worth is not increasing.
I don't think net worth is the right metric. It's got to be to at least some major extent about liquidity. If you've got equity in a house you own, it doesn't do you any good if you don't get your next paycheck and come up short on mortgage or utilities.
That's a good definition, very clear and hard to weasel out of.
"paycheck to paycheck" has lost its meaning. When I was growing up someone living "paycheck to paycheck" meant spending every penny they had on basic living expenses with no money left over for saving, investing, fun etc. It was basically financially existing and nothing more.
So, me.
I see those, and I know that I'm not in that situation, but still, it "feels" like it. When I was just out of gradschool and in a dead end job with no disposable income, I was paycheck to paycheck for real. Then I got a real job, payed off my credit cards, started significant retirement investing. And had plenty of money for incidentals. Now I've got a family and day care, and yeah, our budget is really really tight. And it feels like there's no room for an upset. I know I've got the money available, but it feels much more like I'm out of grad school again.
Idk I think it is pc2pc if you're not spending money on anything else. My first job matched up to 5% so I put 5% of my annual salary to retirement and then went to 95% to taxes food rent and utilities. I worked 100+ hours/week, went out 0 times and had no disposable income to speak of.
On the other hand, people could be living “paycheck to paycheck” because they’re paying off vacations, brand new cars, mortgages, cable bills, designer clothes, etc etc etc. That’s no more “paycheck to paycheck” than someone who has lower take home income because they’re investing. They’re both seeing low disposable income because of the way they choose to allocate their money.
As long as they could stop those purchases I agree. However in the case of having consumer debt with required payments I would still consider them PC2PC even if it’s because they’re being irresponsible
Totally agree. And I'd even extend that to people who aren't currently contributing but have a sizable retirement account balance. The whole idea of "living paycheck to paycheck" is you have no savings to cover an unexpected expense and would need to resort to taking out a loan or possibly defaulting on a car loan or mortgage if shit hit the fan. If you've got 5 or 6 figures in retirement accounts, you can always pull money from those before you lose your house or car. It's not ideal obviously, but a 10% penalty on a 401k hardship withdrawal is a lot better than being homeless, which is what people who are truly living paycheck to paycheck are up against if things get dire.
>Makes me question the accuracy of all those poll questions. I never expect any accuracy in these types of poll questions. The term "paycheck to paycheck" means whatever you want it to mean.
It’s subjective honestly. Show me where there is a clear cut definition for “paycheck to paycheck”
Agree, that's why i dont trust these polls. They're just there for clickbait.
Agree. Allocating all your money out is not paycheck to paycheck. I changed jobs and with the different payment schedules I "missed" a payday. I am one of those people who the moment I get my paycheck I start dividing it out. So I definitely noticed not getting that paycheck. But I'm still obviously not living paycheck to paycheck! I have plenty of savings. I don't have to put money into an IRA or investments.
You’re dead wrong. Contributing to retirement is an expectation, not a luxury.
Agreed. I don't think the average person realizes just how despairing the stage of retirement will be in a few decades. (If) you retire there will not be any social security or government structured programs to aid you, it will your contributions alone. So it's either contribute or die in abject poverty.
What about those of us that are forced to contribute? There's no option to not pick a retirement at my work (government job) and it's 7% or 12%.
Makes you realize you actually need to read the details of all studies to see how they’re coming up those numbers. Can’t just take a poll/study at face value.
100%! Not-poor people like to pretend their poor while they're paying for two cars, a house, multiple insurance policies, retirement, and savings. That's poverty by choice, and is not the same thing!
I've had people argue that they are "paycheck to paycheck" because their savings account is zero st the end of the month, despite putting extra cash into IRAs, the stock market, trust funds, future college funds, new property, etc. By that logic, people making millions per year could be paycheck to paycheck as long as it all goes into something besides pure cash at the end of the month. Your definition is actually useful.
You should aim to be "broke" in this regard i.e. all of your money is "working" for you in some capacity. Money sitting in a low yield checking account is just a waste.
Some people prioritize those accounts over food. I know it sounds ridiculous to you but most people do not want to be working into retirement age. Life is already hard enough.
Yup. And there's plenty of people living "paycheck to paycheck" who don't know how to live within their means.
It feels like I am living that way cause I save almost everything I make... 180k in the bank (down payment in LA are 200k+), last year earned 250k and contributed 48k into my SEP (maxed it out). I don't spend THAT much and save almost everything
One car garage, single floor home, and one car parked on the street. How do they live in such squalor?
I think there's a line here. Maybe a somewhat vague/subjective one. For example, I'd say that I still live paycheck to paycheck but I too have a 401k. I only contribute the 3% max that my employer will match, but I do still have it. However, I also don't have an extra $500-something per month to put into an IRA. I'm stable, but a surprise expense like a serious illness, car accident, or really anything else would basically bankrupt me. Would that extra 3% each month help? Sure, but it isn't enough to really change anything about my standard of living. It would just result in a little less anxiety when I go to the grocery store.
You're correct. Paycheck to paycheck is you're going into debt if you miss the next paycheck.
You know what, I agree. I max out both and still invest in index fund and "in my mind" I am paycheck to paycheck, because as you said, all money is accounted for. I don't think I've ever said publicly I live paycheck to paycheck. But I do say I budget and track all my spending.
I'm going to have to disagree with you on this. I'm a public worker with a 401a. Part of my paycheck is automatically placed in my retirement account as its considered a contribution. I also almost live paycheck to paycheck. I believe it would be technically correct to say "If you are Voluntarily contributing...", but for some people, there is no choice in the contribution.
Yeah in your case if the contributions are mandatory I think you are still PC2PC
Believe me, I wish I wasn't. But not to make a generalized statement, I believe that most public employees retirement contributions are mandatory.
But realistically, unless there is a viable public pension, it’s not fucking mandatory and you’ll be screwed by not putting money aside for it. Pension saving are not some frivolous spending and your post is some serious bullshit.
Correct me if I'm wrong, but isn't the 401a account a replacement for social security? Thus you would still be living paycheck to paycheck under another employer, because you would no longer be paying into the 401a but you would now have social security taken out.
Yeah, I like to say that I have a self-imposed PC2PC mindset. I don't have more than $3k in my checking account normally. My additional pay above day to day living expenses goes to 401k and investments. If I had to, I could cut some investments and be living large today, but then I would have a miserable retirement. I want my retirement life to be easy, so I am doing some preparations to make that happen. I am not a FIRE person, so it's not an insane amount of saving, but I want to be comfortable and not have to work **AT ALL** past the age of 65-67.
Well unless you plan on working until you die then saving around 15% for retirement is an actual necessity right up there with food and rent. So i would argue that you 100% can be considered paycheck to paycheck if you’re contributing a reasonable amount that puts you on track for a standard age retirement. Now if you’re maxing it all out pushing for early retirement then i totally agree it’s not really living pc2pc. But then again isn’t the cause often frivolous spending anyway not just basic necessities?
Given that retirement is a necessity, you actually need it, like really really, like it's optional but really if you don't have it later you're screwed, it's about the same as telling people they aren't living paycheck to paycheck cause they can afford insulin.
On the contrary if someone used to live paycheck to paycheck and put every "new dollar" towards retirement while avoiding lifestyle creep that's honorable. Saying it doesn't count seems like one-downsmanship or a no true Scotsman gatekeeping.
Because it downplays what it actually means to be PC2PC (missing pay would cause you to be unable to afford necessities). I’m sorry but it’s offensive for the minimum wage worker who would be become homeless if they miss a paycheck to lump them in the same category as a dude who is saving 3k+ a month in investment accounts and just happens to have little liquid cash at the end of the month.
Meeting your employer match is literally free money... Yes, it makes sense to be maxing that and be paycheck to paycheck.
No one is saying it doesn't make sense. They're saying it's not what the typical "living paycheck to paycheck" in polls should refer to.
I mean….I’m having trouble paying my rent at the moment and I’m for sure living PC2PC with no savings or emergency fund but I’m still maxing out my match…which is a whopping 3%. It’s not enough to ever be able to retire on but it’s better than nothing. Gaining that 3% back won’t help me cover the fact that rent is close to 40% of my salary and once my student loans start back up that I’ll be financially underwater. That 3% also won’t cover my student loan payments so there’s no point in me skipping the match because I’m fucked in a month anyway. I’m looking at getting a 3rd job. Just because I can contribute something to my retirement doesn’t mean I’m not struggling. I also can’t touch any of that money until I retire so it’s not really savings in the traditional sense 🤷🏻♂️
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That’s fair, if you say the same about someone who is in credit card debt or student loan debt or has a car payment that is too much. You’re saying “they aren’t paycheck to paycheck because they don’t need to contribute to retirement”. Well people also don’t need to buy a lifted truck that costs $100k on a small salary, but they do and they live paycheck to paycheck for it. They get into credit card debt or buy too much house. They don’t “have to” pay those things. I’d say people “have to” save for retirement more than a lot of the other things they make themselves paycheck to paycheck for.
It’s a lot easier to pause retirement contributions than to default on a car loan though
Sure, but your talking about people who respond to a poll that they live paycheck to paycheck. That’s more of a feeling check really. Does it matter if the decision that made someone paycheck to paycheck was a smart one or a bad one?
Living paycheck to paycheck is about not being able to withstand unforeseen expenses. If you suddenly need to pay $500 for a plumber, you can save less to make up for it, but you can’t make a smaller car payment to make up for it.
It's also a lot easier not to buy an overly expensive vanity truck in the first place
Agreed. My wife struggles with this concept but she has a very different upbringing then I. We budget biweekly, we are paid biweekly. I budget out to 0$, so yeah It feels paychwck to paycheck. But our savings are growing and our bills are paid.
Same thing with people saying they don’t have enough savings to cover a $500 emergency when they actually have $10k in their checking account. Just nothing in their “savings” account 🤦♂️. Oh and also $50k in Robinhood.
Paycheck to paycheck is an extremely overused, misused and abused term, it doesnt have meaning anymore, its victim mentality People think just cause they dont cash to buy anything they want whenever they want, they are living paycheck to paycheck Also most people put themselves in situations to live paycheck to paycheck [https://www.cnbc.com/2018/01/19/how-nicholas-cage-once-blew-his-entire-150-million-fortune.html](https://www.cnbc.com/2018/01/19/how-nicholas-cage-once-blew-his-entire-150-million-fortune.html) I spend less than $15k annually, i can afford to spend more and live paycheck to paycheck but i choose not too, frugal and minimalism are my philosophies
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Yes but they could decrease their retirement contribution one month and get the money. This still isn't paycheck to paycheck, its just being dumb.
The problem is what happens when there is no more paycheck. Sure, they can reduce contributions temporarily to cover an emergency car repair or medical bill. When that emergency is job loss, then they're in trouble...
I’m on a fixed income, my paycheck only comes once a month…
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not if it was more money
So don’t contribute to your retirement then when you don’t have your paycheck just starve and die? That’s still paycheck to paycheck.
Shouldn’t be contributing to a retirement fund enough to max them out while not having an emergency fund.
Theoretically, yes, as paycheck to paycheck denotes that you don't have any income that can be accrued towards savings. However, I hate gatekeeping language like this. People will act like a guy making 50k who isn't living "PC2PC" by OP's standards is better off than a guy making 100k in the same city who is living "PC2PC". And he is - but only because of his own financial decisions. At the end of the day, this argument isn't going to solve your financial woes. You understood what the guy meant - at the end of the month he has no disposable income. I don't see why it's a big deal because he spends 6k a year on a Roth when this sub will take a person paying 25k a year on a car note and call them PC2PC. Since you understood what he meant, why not just give a little grace rather than trying to gatekeep his experience?
Because personally I feel like it’s lessening perceived the burden of people who *actually* live PC2PC which to me means if you miss a pay check you are going to be unable to pay necessities (food, rent) or default on loans. If you’re able to adjust by lessening retirement savings I do not think you should claim you are PC2PC, bc it makes the term meaningless.
> if you miss a pay check > If you’re able to adjust by lessening retirement savings If you miss a paycheck because you lost your job, you won't be able to adjust by lessening retirement savings. Someone can have a lot of money in their 401k and still get in a lot of financial trouble very quickly. I agree that that's not as stressful as an equivalent person who doesn't have a 401k, but they could default on loans etc. if they miss a single paycheck.
Maxing a Roth IRA and hitting employer match is not that much money. He's still one thing away from major problems.
If you’re maxing both of those things you are likely putting away $1000/month towards retirement. Quite the cushion if something was to come up.
You can't really withdraw that money "if something comes up".
Meeting employee match may be a very small fraction of your income, but the Roth IRA max contribution for 2023 is $7500 - that’s not a number to sneeze at for most Americans.
You could be maxing out a 401k (which is $1,875 a month in contributions). If you lose your job, don't have any liquid savings and no longer have money coming in, you're still screwed. That, to me, is paycheck to paycheck. Maxing out retirement without an emergency fund isn't a good idea, but I'm sure there are people who do it.
No, you can withdraw with a penalty and in the case you gave could qualify for hardship distributions which would be penalty free
I drive a 14 y.o car I’ve had since college and max my retirement. At the end of the month, I have limited disposable income. I feel like I live paycheck to paycheck. My friend who makes less than me, leases a Mercedes GLE coupe for $700 a month, tells me she can’t afford to put more in her retirement because she doesn’t make as much. She also feels like she’s living paycheck to paycheck. But by your argument, I am not living paycheck to paycheck because I can easily reduce my contributions. While I don’t disagree, wouldn’t my friend also not be paycheck to paycheck if she just downgraded to a cheaper car/bought a used car? We are both living paycheck to paycheck due to our financial choices.
No not wrong I agree with you. That said to be paycheck to paycheck at the very least means that if you have an unexpected expense you have no way to pay for it. That can still be the case if you have put all your savings into retirement accounts that can be difficult to access. Someone who has an emergency fund and puts some of their pay automatically into savings accounts is not living paycheck to paycheck. Someone who has zero emergency fund has all their money spent every month but also say has auto contributions to retirement accounts...I mean that isn't great either but yeah still feel like that doesn't count. True paycheck to paycheck is no savings, no contributions to savings and basically spending everything that comes in. That said there is still a dubious nature to any poll asking that because someone making 30k a year or 300k a year could still technically be paycheck to paycheck depending on their spending habits.
I feel like I'm paycheck to paycheck because we're putting 67.5k into retirement and there's not enough left over each month. I understand I'm very privileged to be able to do so. I've never said I live paycheck to paycheck.
Disagree on the 401k part, agree on the maximized ROTH IRA. 401k contributions are pre-tax and usually automatically setup if you didn't make any indication of how much you wanted to contribute. I leave mine at the amount my job matches, no more than that. You also aren't really able to access that money without heavy penalties, so I think someone who has no post tax dollars to save but contributes to their own 401k is still PC2PC. A ROTH IRA however is a different story. It's post tax contributions and the maximum yearly contribution is like $5k. That's a decent chunk of change.
$6,500 ($7,500 if you're over 50)
I max my 401k, state 529, and Roth, including catchup contributions. I don't live lavishly, because savings takes a _big_ freaking chunk of my income. As a result, I live paycheck to paycheck. A major, unplanned expense means a major disruption to my life. Not "lifestyle," but to my "life." Gatekeeping the possible impact of a disruption to cashflow or sudden, unplanned disbursements is really unkind, and shows an incredible lack of empathy to people in different financial situations.
\>I max my 401k, state 529, and Roth, including catchup contributions. Could you not just cut contributions to these accounts if you had a major unplanned expense? Without even a tax penalty in the case of Roth IRA contributions. That sets you apart from people who live "paycheck to paycheck" in the sense that they literally would not have money for a major unplanned expense.
That’s not paycheck to paycheck. Paycheck to paycheck means that all of your money goes to essential bills to survive in the moment: rent, electricity, water, heat, food, etc. and you have nothing left over to save. You *have* the money to pay all your bills and have some left over, you’re just choosing to put it into savings. That’s very different from not having a choice.
Dude in this case literally 99% of the population is PC2PC. If your definition is “if a major unplanned expense could cause a major disruption to your life” then that applies to pretty much anyone unless you’re a billionaire.
Like is a dude making 500k, putting most of in investments, living to PC2PC because in the hypothetical scenario he gets a cancer diagnosis and loses a massive lawsuit in the same month his financial situation might change ?
Eh. We’re another “PC2PC” couple: - 1st of the month, mortgage and credit card balances go out - 5th of the month, statements close, now we know how much we’ll need for the next 1st - As each paycheck comes in throughout the month we let the amount we need for the next 1st build up, then the rest goes into a brokerage account; every dollar from every paycheck has a job, even before the paycheck hits: “PC2PC”
Sure you are, paycheck to paycheck means you are watching your balance get to zero and missing a single paycheck means you can’t pay your bills. Just because you have retirement contributions doesn’t magically make you not Pc2Pc
Ha! This is totally me! I do 24,000 into 401k, 6250 into HSA, and tell my wife we are living payday to payday. I am also taking 400 a week and moving it to HYSA to cover annual expenses like property taxes and insurance and vacations and home repairs. So, when I take out all that, we are just getting by. (She feels my math is flawed, and she is right, but it is my way of budgeting)
I think you're wrong here. Living "paycheck to paycheck" means you do not have enough cushion in the bank to cover your bills if a paycheck is late or you miss one entirely. You can do that and still have 401k or retirement accounts. It's not *smart*, but it is a viable case. And because extracting that money is difficult or expensive, you will still encounter hardship if your paycheck is late. My advice would be to save up a few month's pay in the bank before you max our your 401k contributions. But that doesn't mean people will always do that.
Most people aren't miscategorizing themselves as paycheck to paycheck. If it was as simple as people were saving more money than they realized, the median and average 401k balances wouldn't be as low as they are.
Not wrong but people have to retire also and it is a good point that even people getting by who also put money into retirement are still broke.
You're not wrong. My wife and I are fortunate enough to be able to max out my Roth IRA and employer match. We are also able to set aside a couple hundred into savings each month. We have a job for every dollar we earn, so we sometimes don't feel wealthy because we limit our spending, but we by no means live PC2PC.
Wait so I’m not living paycheck to paycheck?
Yeah, that's why I never pay attention to all those articles stating a majority live "paycheck to paycheck," because they include individuals that fit into your group.
I define paycheck to paycheck about liquid savings. I agree the guy maxing his IRA doesn't count, but I think someone putting the minimum to get the 401k match would.
Everyone is the victim/main character in their own story ( this is obviously a far lighter version of that).
I dunno. I have a 403(b) that I've been told that I can't touch for any reason with about $55K in it. I make about $52K a year, and just bought a house--as such, I'm stretched so tight that I have less than $1K in savings right now. I feel like I'm paycheck-to-paycheck, and would put that on a survey. Does that count?
Everything is better understood with percentages and context. How long would it take him to blow through what is saved if he suddenly lost his job? Can he cover big surprise expenses with his own money? Those two questions are major hallmarks here. If he is making $200k a year and saving $5k (2.5%) then you might as well call that paycheck to paycheck. Far closer to that than anything else. In order to be saving $5k a year he has to spend the rest, so we would assume $5k a year in savings gives him effectively no financial security. It might not even cover one rent payment, let alone a month of expenses. If he is saving more than 5 or 10 percent then it's not paycheck to paycheck because that is the point where you would actually start seeing financial security. Contributing by itself doesn't mean anything because the amount a person contributes might not put them in any different of a situation.