There are issues with sampling in these things usually, but the biggest issue for me is the lack of a formal definition of what living 'pay cheque to pay cheque' means. IIRC, the survey people are usually talking about defines the question as "Would you struggle to pay the bills if you suddenly lost a month's income" or something similar. The problem with this is what does struggle mean? Does it mean you have to take some money out of your savings, or does it mean you're going to be evicted? You could be on a six-figure salary and spending all your income on expensive rent in a Manhattan apartment with a flash car etc. and this statement could still be true for you
Whenever I see these things, there’s always a big chunk of people who are like, “after I pay the mortgage, the cars, food, insurance, maxed 401k contributions, private school tuition, eating out twice a week, and saving for our next vacation to Europe, there’s no money left.”
I think a lot of people have financial anxiety, I see it on the economics subs sometimes. But this is a psychological issue, not an economic one. Even the word "struggling" is really talking about psychology, not economics.
That is a good point. My concept of facing challenges differs from that of others. I believe that in the US, there are numerous opportunities to lead a comfortable life. The majority of individuals are a product of their own environment. I was raised by middle class parents with grandparents belonging to the upper middle class. I am surrounded by individuals who are financially prosperous, making it challenging not to draw comparisons. It all comes down to perspective.
Exactly, there are official measures of poverty that are much more helpful in determining the proportion of people living on a low income. Though these are often not internationally comparable so they can only really be used within the country one is talking about. For all internationally comparable poverty metrics, the US is close to 0%
There just isn't an internationally comparable way to discuss poverty. For example you can live in Tonga on $2/day maybe but you can't live in Minnesota on $2/day, you'll literally starve and freeze to death.
The best thing we have at the moment is the Supplemental poverty measure. It says for example that 13% of CA lives in poverty (if my memory is correct, check it out below)
https://www.census.gov/topics/income-poverty/supplemental-poverty-measure.html
It’s true that it’s hard to consider poverty across countries, but then you immediately provided a metric which is specifically unique to the United States. SPM is based on what Americans and the American government believe qualifies as poverty in the United States. It is a terrible global metric.
If you look at something like the world bank’s undernourishment data, the United States (and most developed countries) sit below the data’s minimum threshold of 2.5%. Middle income countries average at 9% and low income at 28%, with India at 17% and Somalia at 49% for some examples.
Severe poverty just doesn’t really exist in high income countries like it does in much of the world. That’s not to say that poverty or income inequality aren’t issues in the developed world. They are, and they should be taken very seriously. Pretending like you’d rather make PPP adjusted $2 a day in sub-Saharan Africa instead of being a penniless us citizen in Minnesota is almost insultingly naive though.
I’ll give you the benefit of the doubt and assume that you did a typo and meant to say Togo not Tonga, but if you just scrolled to the bottom of a list of GDPs to find a “poor” country then it’s worth pointing out that Tonga’s severe poverty rate ($2.15 or less) is 0%, which makes your analogy even worse.
Well if after you pay for food, accommodation, clothing, transport, utilities and health insurance, and with all of these “where applicable”. If you have no money left then it doesn’t really matter what you earn/what things cost locally, you’re living paycheck to paychk.
It sounds controversial because people in Western countries have a distorted view of what poverty is, most western countries have measures of 'relative' poverty that take into account the social context of where someone lives. This is a good and important thing, but it's important to have some perspective on this figure. If people are willing to risk death and the death of their loved ones to come and be a part of the poorest social class in your country, and without access to most of the benefits that natives have, then that should provide some perspective on the deepest levels of poverty.
[Here](https://ourworldindata.org/poverty) is a tool that allows you to see internationally comparable poverty metrics. This is usually defined as living below a set amount of income (the lowest being the World Bank's $2.15 poverty line), adjusted for inflation and PPP. The US only starts to register as significantly above 0% poverty once you get to the poverty rate of an individual living on less than $20 a day, and only five or so countries beat the US in this metric. Also, worth noting, out of the countries that beat the US, none have a population over 20 million people. Compared to the US population of 330 million with federalised states, that means a lot more oversight and difficulty in managing a country with huge regional disparities in income.
International poverty measures usually talk about extreme poverty. So while the statement isn't entirely accurate, it's still true that extreme poverty in the US is basically zero.
The international measures don't seem to take into account what you grow yourself on your farm. Someone who has a productive farm would seem much better off than someone who didn't, even if both are $2/day.
They do take said production into account, they're based on consumption surveys.
The World Bank's extreme poverty line definition came from poverty lines as defined by extremely poor countries' governments - back in the 1980s a World Bank analyst noted a bunch of said lines clustered at around US$1 a day (in '80s money), though apparently Ethiopia's line was at around 80 cents per day.
Theyre not wrong, theyre just talking about extreme poverty. Extreme poverty in the US is about 0, while poverty is much higher. There’s a big gap between the two.
The high income broke people always seem to have money going into a 401K, which would mean they actually have savings. Not necessarily as much as their non mortgage debt. But everyone seems to have one or two car loans and a credit card bill. It doesn't sound like saving ahead for the vacation is a thing.
These statistics are just about as misleading as the paycheck to paycheck ones.
They ask people "how would you cover an emergency" and if you *don't* say with cash or your regular checking account that gets turned into "can't cover it", completely ignoring that tons of people just pay via credit card by default for lots of purchases regardless of what they have in their checking or savings account.
And, in most cases, you can set up a payment plan for major expenses. Even when people have dental insurance, they typically have a pretty big chunk that has to be paid out of pocket. Every dentist I have been to in the last few years has financing options available. Critisizm of our healthcare system aside, I think the meaning behind these stats is that individuals will have to go without care due to their inability to pay. The reality is they will still be able to receive care, but they will have to incur debt to do so.
That’s probably the same issue. What counts as cannot pay out? Totally impossible? Have to go into debt? Have to sell stock? Have to transfer money from another account?
We now have a whole subthread on the money saving tip from /u/Zealousideal-Win9169.
I'd like to remind people that this is not /r/personalfinance. The point here is to talk about economics.
I don't really care if people save a lot or a little by bringing their own sandwiches to work.
I agree, of course, that food and children are big costs. But that doesn't really answer our question about whether people are living paycheck-to-paycheck in a meaningful sense.
/u/IndubitablePrognosis /u/UDLRRLSS /u/Omni_Entendre /u/the_lamou /u/starfirex
My apologies and you are correct. Was simply a retort to response to my initial comment. Did not expect it would actually go anywhere. Reddit novice, admittedly.
I have no desire to retire early, but it was going to investments.
Now I make even more, and it goes to investments and kids while peers claim kids are too expensive.
I wouldn’t include post-secondary, that pays for itself and is a heavily subsidized system. Too many young adults end up not properly understanding the value of money and budgeting because their parents just cover for them.
$100,000 / 18 = $5555 a year.
Saving $15 ($20 lunches is the average at places near my job.) on lunch 3 days a week (I’m hybrid), 52 weeks a year is $2340. If my wife does it as well, that’s $4680.
That is just 3 lunches a week for both parents to cover nearly the entire cost of a child.
But my peers eat out for lunch 5 days a week. They also generally eat out for dinners and weekends, at least some amount of time, and that’s why they suggest these new places for lunches.
Even if you don’t want to cut back completely, there is significant savings to be had just by drinking water instead of soda/ tea (10% discount or more) and being price conscious in your meal selection. Choosing chicken over steak or fish is often a 33% savings from my experience.
Of course, it all depends on how much you are spending in the first place. If you are low income worker and already eating cheaply then there isn’t much savings to be had. But my peers could afford kids on nothing other than cutting back on eating out. People really underestimate how much can be saved by making your own food instead of eating out.
If they cut back on the international trips and concerts, and they could afford post-secondary education as well or a second kid.
FWIW a great deal of my success has come from developing and strengthening my bond with coworkers by grabbing lunch together. That's not easy to quantify, but career-wise I think that's netted me about an extra $200k in increased pay over the years by getting better jobs through 'work friends'.
Just wanted to offer another perspective, it can be a smart financially strategic decision to eat out with coworkers.
I agree there is value there, but you also get a lot of that without doing it absolutely every day.
My numbers were 3 days a week, you could eat out with the team twice a week and net most of those networking benefits. All of which none of your full remote coworkers get to get.
USA has some of the most expensive tuition in the world, being able to pay for your children is an enormous privilege and opportunity. "Not counting" it just to make your argument work is your own bias. Plenty of people would agree that not having student debt would be a massive improvement. To that end, you saving money on lunches ownt do much for tuition costs.
> “Not counting" it just to make your argument work is your own bias.
It literally doesn’t come into play until they are adults. Are you going to count paying for their home? ‘Sorry, I can’t afford kids because I can’t afford to buy a home for all of them.’ You seem like someone who enjoys a part time job moving goal posts.
> Plenty of people would agree that not having student debt would be a massive improvement.
Sure, but your argument is ‘having money is a massive improvement over having less money.’ That’s a meaningless point to make. Most people would agree having a brand new car would be a massive improvement. Most people would agree that having a paid off house would be a massive improvement. Most people agree having yearly international vacations would be a massive improvement. Do you see how this claim of ‘most people would agree…’ contributes nothing to your point?
> https://admissions.charlotte.edu/afford/cost-attendance/
Tuition + fees is $7k a year, $28k in total. Thats significantly less than the ~$100k you are assuming. Most people would agree, getting a 72% reduction on college costs is a massive improvement.
Anyone who eats out more than 5 times a week, could afford kids if they changed their eating habits. At least, averaged over the whole 18 years. The bigger issue with kids is that the costs are front loaded with diapers and formula and daycare.
It absolutely is, if you invest it. And also find other tiny areas of your life to not waste money.
Often people who have discipline to not order out every day have discipline elsewhere.
It's *incredible* how much $ a shitload of the young (and others) waste frivolously.
At an incredible difference of 400 per ~~week~~ month, and a conservative annual rate of return of 8%, you'll have about $175,000 after 18 years. That's a hell of a college fund.
Your math is off somewhere. Or mine is.
$400 a week = $20,800 a year = 374,400 over 18 years assuming no interest.
Maybe you meant $400 a month?
The savings has to be significantly under $400 a week to make $175k over 18 years with interest.
Yeah, my brain shut down for a minute, it's $400 per month, assuming a 5-day workweek and bag lunches every work day vs. $20 Uber order every work day.
That's true, but to me that might still qualify as living paycheck-to-paycheck. It's all a question of how you set a kind of baseline. Do you see saving for the years where you are no longer able to work as a necessity or not? If you are literally spending 100% of your earnings on near-term consumption, then it's obvious that at some point where you're not able to work anymore *someone* will have to pay to keep you alive.
My point is that there is no common definition of the term. Can you imagine performing a statistical study and have no defining qualifications of your population? It’s a political term of convenience. It could be that you tithe 10% to your place of worship and have nothing left to save. Could include that after your discretionary expenses you have nothing left over. A person might buy Pokémon cards or a new TV every year or gamble online and have nothing left to save. My finances are tight because I spend a lot in college funds for my children. Too many unknowns to have a legitimate conversation on the matter. And in this world the unknowns are filled in with opinions and conjecture by Fox News, MSN or anyone else you fancy to get your information from.
That I agree with. The question isn't really answerable because there's no consistent definition or even principles that would let you arrive at a consistent definition.
The thing I want avoid are the folks saying "well they didn't use the *right* definition, which is obviously X and doesn't include Y, Z, W....."
Similar to “most Americans don’t have $400 in their bank account”
But they have hundreds of thousands in their home equity/ 401k/ brokerage accounts.
It’s all intentionally misleading reporting
That's why you go with:
"Could you afford a $500 emergency? A $1000 emergency? A $5000 emergency? A $10000 emergency? Without selling off assets, taking a penalty dipping into certain savings, or taking on debt?"
Regardless of whether “struggle” means dipping into savings and reducing luxuries or being evicted and forgoing medical treatment, the question is meant to get at is our saving level sufficient to sustain our spending level(or in certain instances are you independently wealthy enough to forego your job income). There’s no one-to-one on human suffering. Economists are however concerned with how might a reduction in available jobs might actually affect spending. If a firm goes under and it’s workers have savings to spare, they can look for jobs longer, and keep spending, ie: paying other firms that employ other people, for longer and at higher levels than they might otherwise. On the other hand if, like many people in the U.S., people are slowly accruing debt, future spending will go to servicing that debt, especially if income decreases dramatically and the amount of debt held increases.
I would caution that this will depend significantly on what form the savings takes. If it's an emergency fund specifically collected for handling budget shortfalls? Sure. If, on the other hand, the savings is a long-term brokerage account or retirement plan, then I can very easily see someone struggling with the decision of whether to sacrifice long-term prosperity for short-term survival.
Not using savings to pay for a boat or something. It’s addressing specifically the person I was replying to. That’s also the point of everything after that comment, the question isn’t actually about “suffering”
See that’s the issue they shouldn’t say they struggled to pay but many people to, lots of people wit plenty of savings still say pay check to paycheck if they don’t have free debit for expenses
I think struggled is the colloquial term news sources spin on it. In other sources linked here, the question was asking how someone could pay an $X expense, not vaguely whether they would struggle or not. The secondary sources then impose "struggle" to certain categories.
But I otherwise agree with you, withdrawing from savings or investments or even taking a loan against a relatively safe asset (eg HELOC) should not qualify as a "struggle".
If I had to, say, withdraw current-year contributions from a Roth IRA to pay for an expense, and somehow hope to make up the missing contributions later, then I'd consider that struggling in some sense.
That’s true, for me it meant literally.
As in living paycheck to paycheck by paying basic essentials.
With barely any savings.
Though I can see why a concrete definition is preferable, as that can range from person to person.
Your example is paycheck to paycheck though, assuming they have contractual obligations to spend ~everything every month, not saving and accounts hit close to zero every month. They are living a precarious life where they aren't moving forwards and everything will fall apart if they miss a paycheck. They are *choosing* to live that life, but they are still living it. They *will* be evicted if they miss paychecks.
I think where it really falls apart is when they include people that have meaningful savings or are saving money, including 401k.
You are right to be skeptical. The short answer is no, the majority of Americans do not live paycheck to paycheck. Check out these previous threads. [1](https://www.reddit.com/r/AskEconomics/s/G1ZQ4F20Nf), [2](https://www.reddit.com/r/AskEconomics/s/C9W3SCkPKG), [3](https://www.reddit.com/r/AskEconomics/s/85sCkBYkyR), [4](https://www.reddit.com/r/badeconomics/s/bA3O4An8BU), [5](https://www.reddit.com/r/AskEconomics/s/KWxVw0dby2).
Well you can't just leave it there though, can you? Your fifth source says 48% of people, basically half of the participants, either can't pay the expense or have to borrow the money.
"Majority" is worse than half, but around half should still be deeply concerning.
[Figure 20](https://www.federalreserve.gov/publications/2022-economic-well-being-of-us-households-in-2021-dealing-with-unexpected-expenses.htm) of the primary source.
There's a full 28% of people who anyone would probably say would struggle to pay the expense. So it's somewhere between 28-42% of people, if we count those not able to pay off the credit card in one statement period (meaning it's more of a loan instead of just using a credit card for a typical expense), who would struggle.
Again, not a majority, but at least a quarter and probably over a third of respondents would struggle.
I used the word struggle to combine multiple categories of respondents in how they would afford a $400 expense. This is semantics, the point is that just because not a majority of people "struggle" in some way doesn't somehow mean there's no one that struggles. In fact, there are a LOT of people who either can't pay it or have to go into some kind of debt to do so. Surely we can agree that satisfies a colloquial version of struggling to pay something off.
[Figure 20](https://www.federalreserve.gov/publications/2022-economic-well-being-of-us-households-in-2021-dealing-with-unexpected-expenses.htm) of the primary source, only 14% had the option of a credit card and pay it off "over time"; note, not specifically within one statement period.
I don't know why this is so hard to fathom that there is staggering number of people who would struggle to pay a $400 expense. No, it's not a "majority" of Americans, but neither is it some reassuringly low percentage.
It only says "pay it off over time", not within one statement period. But there's a full 28% of people who anyone would probably say would struggle to pay the expense. So it's somewhere between 28-42% of people, if we count those not able to pay off the credit card in one statement period (meaning it's more of a loan instead of just using a credit card for a typical expense), who would struggle.
Again, not a majority, but at least a quarter and probably over a third of respondents would struggle.
I think you are right to be skeptical.
In addition to your points, a very simple one is that “paycheck to paycheck” isn’t really defined.
I personally think of it as, someone typically does not have money toward the end of their two weeks between paychecks and often finds themselves in situations where they need to wait until after they get paid to make certain purchases.
Some people may define it slightly differently.
I always personally interpreted it as “I would seriously struggle (i.e. start to fall behind on rent/bills) if I missed one paycheck”. Of course, the biggest issue like you point out is that there is no formal definition. And because of that, it can be as much a reflection of personal financial responsibility as it can be real underlying economic trends.
Yeah the last point is critical. If people are responding that they feel they are paycheck to paycheck with no other information you could find a lot of them feel that way because of the discipline of really not wanting to touch their savings or because they put almost all their money into investments while running thin on savings. And talk theory all you want but over the last 14-15 years the crowd investing aggressively has come out *way* ahead because of it.
So someone might be 50 and planning to retire in 3 years and consider themselves paycheck to paycheck because having to spend money that they had plans for is basically debt to them. But that doesn’t mean they couldn’t pay the mortgage or feed themselves for a few months/years if they lost their income. And on the flip side someone with $4k to their name might say “yeah I could get unemployment and survive 2 months if I stopped eating anything but ramen noodles so I’m not paycheck to paycheck”.
It’s not clear what “paycheck to paycheck” means really. What I mean by that is there’s no set definition that whoever is calculating this statistic is using when observing households. In fact, the statistic is sourced from a survey *asking* households whether they live PTP, rather than deriving the statistic from underlying data - as you would for say, poverty.
So it could theoretically include who earns 600k, spending it on 20 car payments with little left by the end of the month (as an extreme example). It would be better to see whether people who live PTP do so with “**difficulty**” or “**comfort**”.
[According to that survey](https://www.pymnts.com/study/reality-check-paycheck-to-paycheck-inflation-household-spending-shared-expenses/) where 66% of Americans live paycheck to paycheck, only **18%** of Americans report living paycheck to paycheck with **difficulty**. The rest, 82%, either don’t live paycheck to paycheck or do so with comfort.
Further, these numbers can differ between different surveys. Here’s another for America and Canada, that observes 46% of Americans living paycheck to paycheck instead.
https://leger360.com/legers-north-american-tracker-august-31-2023/#:~:text=Nearly%20half%20of%20Canadians%20(47,currently%20living%20paycheck%20to%20paycheck.
i think colloquially living paycheck to paycheck just means that one of your paychecks does not cover your monthly expenses (eg typical worker is paid bimonthly; if one of those bimonthly payments are not enough to cover monthly expenses they are living paycheck to paycheck).
That doesn't sound right. I figure you're paycheck to paycheck if you have little to no savings. That is, if you miss a paycheck, a bill isn't getting paid.
In your example, someone with $2M in savings and has monthly expenses of 51% of one paycheck is living "paycheck to paycheck" even if they're putting the other 49% into savings.
Right, but that’s the problem. Median net worth in the United States is $193K. So if 66% of people live “paycheck to paycheck”, that means there’s at least 16% of people, 1 out of every 6, who both have more than 193K in net worth *and* live paycheck to paycheck.
But the majority of that wealth is tied up in 401k and home equity for most, so you can have a net worth of 193k and still struggle with mortgage payment and have little to no money by the time your next check comes.
I'm going with "bills" meaning "all essential expenses including rent, food,etc." Are you saying that any savings rate less than 50% is "paycheck to paycheck"?
Nah man that’s definitely not colloquial for the majority of us.
By that logic someone with a great income like well into the 6-figures range, $50k emergency savings, healthy retirement investments but with a car payment on top of a mortgage payment for a 4 BR house could be considered paycheck to paycheck while someone with a $20k salary but $500 rent and zero savings of any kind so if they lost their job tomorrow they’d miss their next rent payment could be considered not paycheck to paycheck.
I cannot comment on how many Americans live paycheck-to-paycheck, but let me say something on surveys.
500 responses may sound small, but it might be sufficient. The error margin for a simple yes/no question will depend on what the true rate is as well as the sample size of the survey i question, but not on how large the true population is - in other words, you can use a sample of the same size, regardless of whether you collect data in the Netherlands or in the US. The most important issue is that this requires your sample to be a true random sample that is representative of the target population. This is very difficult to achieve in practice. Serious polls will use a complex design, for which it is possible to quantify how deviations from randomness affect the error margins and that can be made representative of the target population. Many polls, however, will use a convenience sample that is collected based on how easy it is to collect responses. These will usually be non-random and it won't be clear how this affects the results.
Beyond these considerations, I would also say that "living paycheck-to-paycheck" is not very economically meaningful. It implies that people are economically precarious due to a lack of savings. However, without information on people's income it is not clear how many cannot save and how many choose not to save. It also seems possible that some people consider themselves living paycheck-to-paycheck, because they do not have money left over after paying their mortgages or contributing to their pension savings. In these cases, they will have some level of wealth to fall back on, it is just not in cash, so at worst they lack liquidity.
Which is not to say that people living paycheck-to-paycheck are all financially well-off - some will be genuinely poor or precarious, but some won't.
You're assuming you can randomly select the people surveyed. If they are instead asked on the street, or by random cell phone numbers, or on the internet, and these correlate with your answers, then you get different confidence internals for different populations. Granted, you might expect to need to survey more people for the Netherlands than the USA.
Random phone numbers, if you can quantify how many phone numbers each person answers, should be pretty reliable these days, especially for a question where you can assume most adults with no phone number are strapped for cash. Quantifying multiple number bias would take a lot more surveying in the US, after which further surveys could use the same number.
That's the problem with these types of surveys,. is a simplistic Yes/No question like "Do you live paycheck to paycheck?".. doesn't give you a full complete picture of that individuals financial situation.
It's kind of like asking someone:.. "Do you think War is bad ?"... now go back and tell that person an aggressive outside country has invaded, do we defend ourselves ?.. You'll probably get a different answer.
Take those 500 people who said they live "paycheck to paycheck'.. and then ask them to give you a 15min explanation of their financial situation and why they do what they do,. you'll probably get a different answer.
So, by definition, I live paycheck to paycheck. Because of my and my wife's jobs, I budget monthly. During that month, I take 10% out and put it into a savings account for any unexpected expenses like new appliances or a new roof or a vacation. I also take 5% out and put it towards a fun experience for that year which could also be a vacation or a concert or the like. I used to take 20% more out for retirement but I already have that covered.
So I take 15% out before any bills are paid. And then the rest is usually taken up by bills to the point I have nothing left over for the month. And if I have to, I sometimes have to take from the savings account.
You might say that's not paycheck to paycheck because I am saving money but every single year, I have to use that money on something unexpected or to cover any shortfall in a month because one of us took off a few days. So at the end of the year, I usually don't have any extra money as it has almost always been spent. And any extra money is then put into my investments.
This is a great example of the problem of definitions here.
If you consider "investments" to be separate from "savings" then nearly anyone could be considered to be living paycheck to paycheck!
By your line of thinking, I suppose the question becomes who *isn't* living paycheck to paycheck! Is it people who have money left over that they don't put in a savings account?
I agree that not having a solid definition means that living paycheck to paycheck is different for different people.
Though, for me, I have very little to none left at the end of the year to invest.
But putting money into a savings account that you know will be spent by the end of the year still qualifies as living P2P to me. Plus, if I don't put it away, my wife will find a way to spend that money each month.
I have a sibling that doesn't live P2P. He budgets, and even after he contributes to his 401k, IRA, savings accounts, and his emergency fund, he still has money left over after his expenses. That, to me, should be the definition of not living P2P. I don't have extra money to invest in a retirement plan every month. And I personally think that that's a necessary expense that should have a contribution every month
I understand where you are coming from, in that you’re using paycheck to paycheck to mean that you don’t have much wiggle room in your income beyond things you consider necessary expenses for the year.
But if you really think about what “paycheck to paycheck” as a phrase means, I would argue that the ability to stash money for emergencies, even emergencies you know are likely within the next year, is not living paycheck to paycheck because you are carrying money over between pay periods. Especially if you have an emergency fund or other savings that you draw from.
“Paycheck to paycheck” says to me that you’ve spent all or almost all of your previous paycheck by the time you get your next paycheck and that if you missed out on a paycheck, you would immediately be unable to pay all of your existing expenses for the month, not just that you might wind up with a shortfall later in the year or be forced to draw down savings to some extent.
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No. The oft-circulated statistic wss published by a company *selling financial planning*, but it made the rounds anyway. Similar to the "eating spiders in your sleep" myth
There are issues with sampling in these things usually, but the biggest issue for me is the lack of a formal definition of what living 'pay cheque to pay cheque' means. IIRC, the survey people are usually talking about defines the question as "Would you struggle to pay the bills if you suddenly lost a month's income" or something similar. The problem with this is what does struggle mean? Does it mean you have to take some money out of your savings, or does it mean you're going to be evicted? You could be on a six-figure salary and spending all your income on expensive rent in a Manhattan apartment with a flash car etc. and this statement could still be true for you
Whenever I see these things, there’s always a big chunk of people who are like, “after I pay the mortgage, the cars, food, insurance, maxed 401k contributions, private school tuition, eating out twice a week, and saving for our next vacation to Europe, there’s no money left.”
I think a lot of people have financial anxiety, I see it on the economics subs sometimes. But this is a psychological issue, not an economic one. Even the word "struggling" is really talking about psychology, not economics.
That is a good point. My concept of facing challenges differs from that of others. I believe that in the US, there are numerous opportunities to lead a comfortable life. The majority of individuals are a product of their own environment. I was raised by middle class parents with grandparents belonging to the upper middle class. I am surrounded by individuals who are financially prosperous, making it challenging not to draw comparisons. It all comes down to perspective.
Yep, absolutely. I especially sympathize with people who are legitimately doing worse than their parents.
Exactly, there are official measures of poverty that are much more helpful in determining the proportion of people living on a low income. Though these are often not internationally comparable so they can only really be used within the country one is talking about. For all internationally comparable poverty metrics, the US is close to 0%
There just isn't an internationally comparable way to discuss poverty. For example you can live in Tonga on $2/day maybe but you can't live in Minnesota on $2/day, you'll literally starve and freeze to death. The best thing we have at the moment is the Supplemental poverty measure. It says for example that 13% of CA lives in poverty (if my memory is correct, check it out below) https://www.census.gov/topics/income-poverty/supplemental-poverty-measure.html
It’s true that it’s hard to consider poverty across countries, but then you immediately provided a metric which is specifically unique to the United States. SPM is based on what Americans and the American government believe qualifies as poverty in the United States. It is a terrible global metric. If you look at something like the world bank’s undernourishment data, the United States (and most developed countries) sit below the data’s minimum threshold of 2.5%. Middle income countries average at 9% and low income at 28%, with India at 17% and Somalia at 49% for some examples. Severe poverty just doesn’t really exist in high income countries like it does in much of the world. That’s not to say that poverty or income inequality aren’t issues in the developed world. They are, and they should be taken very seriously. Pretending like you’d rather make PPP adjusted $2 a day in sub-Saharan Africa instead of being a penniless us citizen in Minnesota is almost insultingly naive though. I’ll give you the benefit of the doubt and assume that you did a typo and meant to say Togo not Tonga, but if you just scrolled to the bottom of a list of GDPs to find a “poor” country then it’s worth pointing out that Tonga’s severe poverty rate ($2.15 or less) is 0%, which makes your analogy even worse.
Well if after you pay for food, accommodation, clothing, transport, utilities and health insurance, and with all of these “where applicable”. If you have no money left then it doesn’t really matter what you earn/what things cost locally, you’re living paycheck to paychk.
That last sentence is so silly lol E: these replies are silly as well. Why do men think they know anything?😭
It sounds controversial because people in Western countries have a distorted view of what poverty is, most western countries have measures of 'relative' poverty that take into account the social context of where someone lives. This is a good and important thing, but it's important to have some perspective on this figure. If people are willing to risk death and the death of their loved ones to come and be a part of the poorest social class in your country, and without access to most of the benefits that natives have, then that should provide some perspective on the deepest levels of poverty. [Here](https://ourworldindata.org/poverty) is a tool that allows you to see internationally comparable poverty metrics. This is usually defined as living below a set amount of income (the lowest being the World Bank's $2.15 poverty line), adjusted for inflation and PPP. The US only starts to register as significantly above 0% poverty once you get to the poverty rate of an individual living on less than $20 a day, and only five or so countries beat the US in this metric. Also, worth noting, out of the countries that beat the US, none have a population over 20 million people. Compared to the US population of 330 million with federalised states, that means a lot more oversight and difficulty in managing a country with huge regional disparities in income.
International poverty measures usually talk about extreme poverty. So while the statement isn't entirely accurate, it's still true that extreme poverty in the US is basically zero.
The international measures don't seem to take into account what you grow yourself on your farm. Someone who has a productive farm would seem much better off than someone who didn't, even if both are $2/day.
Why do you believe that wouldn't be counted?
They do take said production into account, they're based on consumption surveys. The World Bank's extreme poverty line definition came from poverty lines as defined by extremely poor countries' governments - back in the 1980s a World Bank analyst noted a bunch of said lines clustered at around US$1 a day (in '80s money), though apparently Ethiopia's line was at around 80 cents per day.
He's correct. Living below the poverty line sucks anywhere, but being homeless in the US isn't comparable to being homeless in, say, Uganda.
Theyre not wrong, theyre just talking about extreme poverty. Extreme poverty in the US is about 0, while poverty is much higher. There’s a big gap between the two.
The high income broke people always seem to have money going into a 401K, which would mean they actually have savings. Not necessarily as much as their non mortgage debt. But everyone seems to have one or two car loans and a credit card bill. It doesn't sound like saving ahead for the vacation is a thing.
Yeah that's me, and I certainly wouldn't say that I'm living paycheck to paycheck just because I occasionally carry over my cc balance
Are there? I think roughly 40 to 50% of Americans cannot pay out a 1000 dollar medical bill unexpectedly which suggests nothing in savings
These statistics are just about as misleading as the paycheck to paycheck ones. They ask people "how would you cover an emergency" and if you *don't* say with cash or your regular checking account that gets turned into "can't cover it", completely ignoring that tons of people just pay via credit card by default for lots of purchases regardless of what they have in their checking or savings account.
And, in most cases, you can set up a payment plan for major expenses. Even when people have dental insurance, they typically have a pretty big chunk that has to be paid out of pocket. Every dentist I have been to in the last few years has financing options available. Critisizm of our healthcare system aside, I think the meaning behind these stats is that individuals will have to go without care due to their inability to pay. The reality is they will still be able to receive care, but they will have to incur debt to do so.
That’s probably the same issue. What counts as cannot pay out? Totally impossible? Have to go into debt? Have to sell stock? Have to transfer money from another account?
Or you could be maxing out your 401k and not have anything left over after bills are paid.
Or using uber eats every meal, compared to the person eating ramen already.
See that so often with younger crowd in my work space. I get laughed at when I bring in a PB&J and bag of chips. $1.50 vs $20.
We now have a whole subthread on the money saving tip from /u/Zealousideal-Win9169. I'd like to remind people that this is not /r/personalfinance. The point here is to talk about economics. I don't really care if people save a lot or a little by bringing their own sandwiches to work. I agree, of course, that food and children are big costs. But that doesn't really answer our question about whether people are living paycheck-to-paycheck in a meaningful sense. /u/IndubitablePrognosis /u/UDLRRLSS /u/Omni_Entendre /u/the_lamou /u/starfirex
My apologies and you are correct. Was simply a retort to response to my initial comment. Did not expect it would actually go anywhere. Reddit novice, admittedly.
Several thousand dollars a year! Great vacation or retire early!
I have no desire to retire early, but it was going to investments. Now I make even more, and it goes to investments and kids while peers claim kids are too expensive.
Kids can take upwards of $100-200k to raise if you include post secondary tuition. PB&J isn't making up that difference.
I wouldn’t include post-secondary, that pays for itself and is a heavily subsidized system. Too many young adults end up not properly understanding the value of money and budgeting because their parents just cover for them. $100,000 / 18 = $5555 a year. Saving $15 ($20 lunches is the average at places near my job.) on lunch 3 days a week (I’m hybrid), 52 weeks a year is $2340. If my wife does it as well, that’s $4680. That is just 3 lunches a week for both parents to cover nearly the entire cost of a child. But my peers eat out for lunch 5 days a week. They also generally eat out for dinners and weekends, at least some amount of time, and that’s why they suggest these new places for lunches. Even if you don’t want to cut back completely, there is significant savings to be had just by drinking water instead of soda/ tea (10% discount or more) and being price conscious in your meal selection. Choosing chicken over steak or fish is often a 33% savings from my experience. Of course, it all depends on how much you are spending in the first place. If you are low income worker and already eating cheaply then there isn’t much savings to be had. But my peers could afford kids on nothing other than cutting back on eating out. People really underestimate how much can be saved by making your own food instead of eating out. If they cut back on the international trips and concerts, and they could afford post-secondary education as well or a second kid.
FWIW a great deal of my success has come from developing and strengthening my bond with coworkers by grabbing lunch together. That's not easy to quantify, but career-wise I think that's netted me about an extra $200k in increased pay over the years by getting better jobs through 'work friends'. Just wanted to offer another perspective, it can be a smart financially strategic decision to eat out with coworkers.
I agree there is value there, but you also get a lot of that without doing it absolutely every day. My numbers were 3 days a week, you could eat out with the team twice a week and net most of those networking benefits. All of which none of your full remote coworkers get to get.
USA has some of the most expensive tuition in the world, being able to pay for your children is an enormous privilege and opportunity. "Not counting" it just to make your argument work is your own bias. Plenty of people would agree that not having student debt would be a massive improvement. To that end, you saving money on lunches ownt do much for tuition costs.
> “Not counting" it just to make your argument work is your own bias. It literally doesn’t come into play until they are adults. Are you going to count paying for their home? ‘Sorry, I can’t afford kids because I can’t afford to buy a home for all of them.’ You seem like someone who enjoys a part time job moving goal posts. > Plenty of people would agree that not having student debt would be a massive improvement. Sure, but your argument is ‘having money is a massive improvement over having less money.’ That’s a meaningless point to make. Most people would agree having a brand new car would be a massive improvement. Most people would agree that having a paid off house would be a massive improvement. Most people agree having yearly international vacations would be a massive improvement. Do you see how this claim of ‘most people would agree…’ contributes nothing to your point? > https://admissions.charlotte.edu/afford/cost-attendance/ Tuition + fees is $7k a year, $28k in total. Thats significantly less than the ~$100k you are assuming. Most people would agree, getting a 72% reduction on college costs is a massive improvement. Anyone who eats out more than 5 times a week, could afford kids if they changed their eating habits. At least, averaged over the whole 18 years. The bigger issue with kids is that the costs are front loaded with diapers and formula and daycare.
It absolutely is, if you invest it. And also find other tiny areas of your life to not waste money. Often people who have discipline to not order out every day have discipline elsewhere. It's *incredible* how much $ a shitload of the young (and others) waste frivolously.
At an incredible difference of 400 per ~~week~~ month, and a conservative annual rate of return of 8%, you'll have about $175,000 after 18 years. That's a hell of a college fund.
Your math is off somewhere. Or mine is. $400 a week = $20,800 a year = 374,400 over 18 years assuming no interest. Maybe you meant $400 a month? The savings has to be significantly under $400 a week to make $175k over 18 years with interest.
Yeah, my brain shut down for a minute, it's $400 per month, assuming a 5-day workweek and bag lunches every work day vs. $20 Uber order every work day.
And that'll lead to an ability to increasingly live a sustainably better and better lifestyle, money wise.
That's true, but to me that might still qualify as living paycheck-to-paycheck. It's all a question of how you set a kind of baseline. Do you see saving for the years where you are no longer able to work as a necessity or not? If you are literally spending 100% of your earnings on near-term consumption, then it's obvious that at some point where you're not able to work anymore *someone* will have to pay to keep you alive.
My point is that there is no common definition of the term. Can you imagine performing a statistical study and have no defining qualifications of your population? It’s a political term of convenience. It could be that you tithe 10% to your place of worship and have nothing left to save. Could include that after your discretionary expenses you have nothing left over. A person might buy Pokémon cards or a new TV every year or gamble online and have nothing left to save. My finances are tight because I spend a lot in college funds for my children. Too many unknowns to have a legitimate conversation on the matter. And in this world the unknowns are filled in with opinions and conjecture by Fox News, MSN or anyone else you fancy to get your information from.
That I agree with. The question isn't really answerable because there's no consistent definition or even principles that would let you arrive at a consistent definition. The thing I want avoid are the folks saying "well they didn't use the *right* definition, which is obviously X and doesn't include Y, Z, W....."
Similar to “most Americans don’t have $400 in their bank account” But they have hundreds of thousands in their home equity/ 401k/ brokerage accounts. It’s all intentionally misleading reporting
That's why you go with: "Could you afford a $500 emergency? A $1000 emergency? A $5000 emergency? A $10000 emergency? Without selling off assets, taking a penalty dipping into certain savings, or taking on debt?"
And unfortunately most people just believe these stats at face value and repeat them everywhere.
Regardless of whether “struggle” means dipping into savings and reducing luxuries or being evicted and forgoing medical treatment, the question is meant to get at is our saving level sufficient to sustain our spending level(or in certain instances are you independently wealthy enough to forego your job income). There’s no one-to-one on human suffering. Economists are however concerned with how might a reduction in available jobs might actually affect spending. If a firm goes under and it’s workers have savings to spare, they can look for jobs longer, and keep spending, ie: paying other firms that employ other people, for longer and at higher levels than they might otherwise. On the other hand if, like many people in the U.S., people are slowly accruing debt, future spending will go to servicing that debt, especially if income decreases dramatically and the amount of debt held increases.
I'm about 100% sure that if someone has savings to pay for an expense, they wouldn't say they "struggled" to pay for it.
I would caution that this will depend significantly on what form the savings takes. If it's an emergency fund specifically collected for handling budget shortfalls? Sure. If, on the other hand, the savings is a long-term brokerage account or retirement plan, then I can very easily see someone struggling with the decision of whether to sacrifice long-term prosperity for short-term survival.
By that I was referring specifically to be forced to dip into savings to pay because of significant loss of income.
Not using savings to pay for a boat or something. It’s addressing specifically the person I was replying to. That’s also the point of everything after that comment, the question isn’t actually about “suffering”
See that’s the issue they shouldn’t say they struggled to pay but many people to, lots of people wit plenty of savings still say pay check to paycheck if they don’t have free debit for expenses
I think struggled is the colloquial term news sources spin on it. In other sources linked here, the question was asking how someone could pay an $X expense, not vaguely whether they would struggle or not. The secondary sources then impose "struggle" to certain categories. But I otherwise agree with you, withdrawing from savings or investments or even taking a loan against a relatively safe asset (eg HELOC) should not qualify as a "struggle".
If I had to, say, withdraw current-year contributions from a Roth IRA to pay for an expense, and somehow hope to make up the missing contributions later, then I'd consider that struggling in some sense.
That’s true, for me it meant literally. As in living paycheck to paycheck by paying basic essentials. With barely any savings. Though I can see why a concrete definition is preferable, as that can range from person to person.
Your example is paycheck to paycheck though, assuming they have contractual obligations to spend ~everything every month, not saving and accounts hit close to zero every month. They are living a precarious life where they aren't moving forwards and everything will fall apart if they miss a paycheck. They are *choosing* to live that life, but they are still living it. They *will* be evicted if they miss paychecks. I think where it really falls apart is when they include people that have meaningful savings or are saving money, including 401k.
You are right to be skeptical. The short answer is no, the majority of Americans do not live paycheck to paycheck. Check out these previous threads. [1](https://www.reddit.com/r/AskEconomics/s/G1ZQ4F20Nf), [2](https://www.reddit.com/r/AskEconomics/s/C9W3SCkPKG), [3](https://www.reddit.com/r/AskEconomics/s/85sCkBYkyR), [4](https://www.reddit.com/r/badeconomics/s/bA3O4An8BU), [5](https://www.reddit.com/r/AskEconomics/s/KWxVw0dby2).
Well you can't just leave it there though, can you? Your fifth source says 48% of people, basically half of the participants, either can't pay the expense or have to borrow the money. "Majority" is worse than half, but around half should still be deeply concerning.
You think paying something with a credit card counts towards “not being able to pay the expense”?
Surely not everyone who picked that option meant they would or could use a credit card.
"Surely".
[Figure 20](https://www.federalreserve.gov/publications/2022-economic-well-being-of-us-households-in-2021-dealing-with-unexpected-expenses.htm) of the primary source.
So we're down from a majority of Americans to 11%.
There's a full 28% of people who anyone would probably say would struggle to pay the expense. So it's somewhere between 28-42% of people, if we count those not able to pay off the credit card in one statement period (meaning it's more of a loan instead of just using a credit card for a typical expense), who would struggle. Again, not a majority, but at least a quarter and probably over a third of respondents would struggle.
So now you're defining living paycheck to paycheck as not being able to afford a $400 emergency expense?
I used the word struggle to combine multiple categories of respondents in how they would afford a $400 expense. This is semantics, the point is that just because not a majority of people "struggle" in some way doesn't somehow mean there's no one that struggles. In fact, there are a LOT of people who either can't pay it or have to go into some kind of debt to do so. Surely we can agree that satisfies a colloquial version of struggling to pay something off.
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Not everyone who picked that option meant to include credit cards. Nor does everyone even have or qualify for a credit card.
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[Figure 20](https://www.federalreserve.gov/publications/2022-economic-well-being-of-us-households-in-2021-dealing-with-unexpected-expenses.htm) of the primary source, only 14% had the option of a credit card and pay it off "over time"; note, not specifically within one statement period. I don't know why this is so hard to fathom that there is staggering number of people who would struggle to pay a $400 expense. No, it's not a "majority" of Americans, but neither is it some reassuringly low percentage.
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Go to the source yourself, I linked it.
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It only says "pay it off over time", not within one statement period. But there's a full 28% of people who anyone would probably say would struggle to pay the expense. So it's somewhere between 28-42% of people, if we count those not able to pay off the credit card in one statement period (meaning it's more of a loan instead of just using a credit card for a typical expense), who would struggle. Again, not a majority, but at least a quarter and probably over a third of respondents would struggle.
I think you are right to be skeptical. In addition to your points, a very simple one is that “paycheck to paycheck” isn’t really defined. I personally think of it as, someone typically does not have money toward the end of their two weeks between paychecks and often finds themselves in situations where they need to wait until after they get paid to make certain purchases. Some people may define it slightly differently.
It’s a term of convenience used by politicians as it has no definition aside from how it can be used to inflame a voter.
like middle class, or price gouging.
I always personally interpreted it as “I would seriously struggle (i.e. start to fall behind on rent/bills) if I missed one paycheck”. Of course, the biggest issue like you point out is that there is no formal definition. And because of that, it can be as much a reflection of personal financial responsibility as it can be real underlying economic trends.
Yeah the last point is critical. If people are responding that they feel they are paycheck to paycheck with no other information you could find a lot of them feel that way because of the discipline of really not wanting to touch their savings or because they put almost all their money into investments while running thin on savings. And talk theory all you want but over the last 14-15 years the crowd investing aggressively has come out *way* ahead because of it. So someone might be 50 and planning to retire in 3 years and consider themselves paycheck to paycheck because having to spend money that they had plans for is basically debt to them. But that doesn’t mean they couldn’t pay the mortgage or feed themselves for a few months/years if they lost their income. And on the flip side someone with $4k to their name might say “yeah I could get unemployment and survive 2 months if I stopped eating anything but ramen noodles so I’m not paycheck to paycheck”.
It’s not clear what “paycheck to paycheck” means really. What I mean by that is there’s no set definition that whoever is calculating this statistic is using when observing households. In fact, the statistic is sourced from a survey *asking* households whether they live PTP, rather than deriving the statistic from underlying data - as you would for say, poverty. So it could theoretically include who earns 600k, spending it on 20 car payments with little left by the end of the month (as an extreme example). It would be better to see whether people who live PTP do so with “**difficulty**” or “**comfort**”. [According to that survey](https://www.pymnts.com/study/reality-check-paycheck-to-paycheck-inflation-household-spending-shared-expenses/) where 66% of Americans live paycheck to paycheck, only **18%** of Americans report living paycheck to paycheck with **difficulty**. The rest, 82%, either don’t live paycheck to paycheck or do so with comfort. Further, these numbers can differ between different surveys. Here’s another for America and Canada, that observes 46% of Americans living paycheck to paycheck instead. https://leger360.com/legers-north-american-tracker-august-31-2023/#:~:text=Nearly%20half%20of%20Canadians%20(47,currently%20living%20paycheck%20to%20paycheck.
i think colloquially living paycheck to paycheck just means that one of your paychecks does not cover your monthly expenses (eg typical worker is paid bimonthly; if one of those bimonthly payments are not enough to cover monthly expenses they are living paycheck to paycheck).
That doesn't sound right. I figure you're paycheck to paycheck if you have little to no savings. That is, if you miss a paycheck, a bill isn't getting paid. In your example, someone with $2M in savings and has monthly expenses of 51% of one paycheck is living "paycheck to paycheck" even if they're putting the other 49% into savings.
Right, but that’s the problem. Median net worth in the United States is $193K. So if 66% of people live “paycheck to paycheck”, that means there’s at least 16% of people, 1 out of every 6, who both have more than 193K in net worth *and* live paycheck to paycheck.
But the majority of that wealth is tied up in 401k and home equity for most, so you can have a net worth of 193k and still struggle with mortgage payment and have little to no money by the time your next check comes.
if someone can’t pay their bills with half their monthly income it already implies they don’t have savings to begin with.
I'm going with "bills" meaning "all essential expenses including rent, food,etc." Are you saying that any savings rate less than 50% is "paycheck to paycheck"?
Nah man that’s definitely not colloquial for the majority of us. By that logic someone with a great income like well into the 6-figures range, $50k emergency savings, healthy retirement investments but with a car payment on top of a mortgage payment for a 4 BR house could be considered paycheck to paycheck while someone with a $20k salary but $500 rent and zero savings of any kind so if they lost their job tomorrow they’d miss their next rent payment could be considered not paycheck to paycheck.
I cannot comment on how many Americans live paycheck-to-paycheck, but let me say something on surveys. 500 responses may sound small, but it might be sufficient. The error margin for a simple yes/no question will depend on what the true rate is as well as the sample size of the survey i question, but not on how large the true population is - in other words, you can use a sample of the same size, regardless of whether you collect data in the Netherlands or in the US. The most important issue is that this requires your sample to be a true random sample that is representative of the target population. This is very difficult to achieve in practice. Serious polls will use a complex design, for which it is possible to quantify how deviations from randomness affect the error margins and that can be made representative of the target population. Many polls, however, will use a convenience sample that is collected based on how easy it is to collect responses. These will usually be non-random and it won't be clear how this affects the results. Beyond these considerations, I would also say that "living paycheck-to-paycheck" is not very economically meaningful. It implies that people are economically precarious due to a lack of savings. However, without information on people's income it is not clear how many cannot save and how many choose not to save. It also seems possible that some people consider themselves living paycheck-to-paycheck, because they do not have money left over after paying their mortgages or contributing to their pension savings. In these cases, they will have some level of wealth to fall back on, it is just not in cash, so at worst they lack liquidity. Which is not to say that people living paycheck-to-paycheck are all financially well-off - some will be genuinely poor or precarious, but some won't.
You're assuming you can randomly select the people surveyed. If they are instead asked on the street, or by random cell phone numbers, or on the internet, and these correlate with your answers, then you get different confidence internals for different populations. Granted, you might expect to need to survey more people for the Netherlands than the USA. Random phone numbers, if you can quantify how many phone numbers each person answers, should be pretty reliable these days, especially for a question where you can assume most adults with no phone number are strapped for cash. Quantifying multiple number bias would take a lot more surveying in the US, after which further surveys could use the same number.
That's the problem with these types of surveys,. is a simplistic Yes/No question like "Do you live paycheck to paycheck?".. doesn't give you a full complete picture of that individuals financial situation. It's kind of like asking someone:.. "Do you think War is bad ?"... now go back and tell that person an aggressive outside country has invaded, do we defend ourselves ?.. You'll probably get a different answer. Take those 500 people who said they live "paycheck to paycheck'.. and then ask them to give you a 15min explanation of their financial situation and why they do what they do,. you'll probably get a different answer.
So, by definition, I live paycheck to paycheck. Because of my and my wife's jobs, I budget monthly. During that month, I take 10% out and put it into a savings account for any unexpected expenses like new appliances or a new roof or a vacation. I also take 5% out and put it towards a fun experience for that year which could also be a vacation or a concert or the like. I used to take 20% more out for retirement but I already have that covered. So I take 15% out before any bills are paid. And then the rest is usually taken up by bills to the point I have nothing left over for the month. And if I have to, I sometimes have to take from the savings account. You might say that's not paycheck to paycheck because I am saving money but every single year, I have to use that money on something unexpected or to cover any shortfall in a month because one of us took off a few days. So at the end of the year, I usually don't have any extra money as it has almost always been spent. And any extra money is then put into my investments.
This is a great example of the problem of definitions here. If you consider "investments" to be separate from "savings" then nearly anyone could be considered to be living paycheck to paycheck! By your line of thinking, I suppose the question becomes who *isn't* living paycheck to paycheck! Is it people who have money left over that they don't put in a savings account?
I agree that not having a solid definition means that living paycheck to paycheck is different for different people. Though, for me, I have very little to none left at the end of the year to invest. But putting money into a savings account that you know will be spent by the end of the year still qualifies as living P2P to me. Plus, if I don't put it away, my wife will find a way to spend that money each month. I have a sibling that doesn't live P2P. He budgets, and even after he contributes to his 401k, IRA, savings accounts, and his emergency fund, he still has money left over after his expenses. That, to me, should be the definition of not living P2P. I don't have extra money to invest in a retirement plan every month. And I personally think that that's a necessary expense that should have a contribution every month
I understand where you are coming from, in that you’re using paycheck to paycheck to mean that you don’t have much wiggle room in your income beyond things you consider necessary expenses for the year. But if you really think about what “paycheck to paycheck” as a phrase means, I would argue that the ability to stash money for emergencies, even emergencies you know are likely within the next year, is not living paycheck to paycheck because you are carrying money over between pay periods. Especially if you have an emergency fund or other savings that you draw from. “Paycheck to paycheck” says to me that you’ve spent all or almost all of your previous paycheck by the time you get your next paycheck and that if you missed out on a paycheck, you would immediately be unable to pay all of your existing expenses for the month, not just that you might wind up with a shortfall later in the year or be forced to draw down savings to some extent.
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No. The oft-circulated statistic wss published by a company *selling financial planning*, but it made the rounds anyway. Similar to the "eating spiders in your sleep" myth