A quarter of U.S. households live paycheck to paycheck. Here's what that means.

"Living paycheck to paycheck" is simply a word often utilized word to picture households that are nether financial strain. But what does it really mean, and really galore group find themselves depleting their paychecks soon aft earning them?

Bank of America Institute defines surviving paycheck to paycheck arsenic a households "where necessity spending is much than 95% of their family income, leaving them comparatively small near complete for 'nice to have' discretionary spending aliases saving." to beryllium surviving paycheck to paycheck. 

"Many of these spending pressures are apt unavoidable, arsenic they subordinate to family and lodging costs," Bank of America Institute elder economist David Tinsley told CBS MoneyWatch. 

In a Bank of America Institute study of consumers successful nan 3rd 4th of 2025, astir half said they considered themselves to beryllium surviving paycheck to paycheck.

Bank of America Institute besides looked astatine its ain customers' spending patterns to find that adjacent to one-quarter of Americans really unrecorded paycheck to paycheck, pinch astir of their monthly income going consecutive toward essentials. 

"The stock of households that are surviving paycheck to paycheck has been rising somewhat complete nan past fewer years, which is not terribly surprising, because prices person risen for a batch of basal equipment — groceries are much expensive, nan costs of car security is up, and kid attraction is up, too," Tinsley said.

Higher income, higher lodging costs

While lower-income households person a higher stock of group who unrecorded paycheck to paycheck, immoderate families that are higher up connected nan income ladder besides autumn into nan aforesaid category. 

Around 35% of households pinch incomes beneath $50K a twelvemonth are surviving paycheck to paycheck, up from 32% successful 2019, according to soul Bank of America data. Meanwhile, astir 20% of households earning $150,000 are surviving paycheck to paycheck, according to Bank of America Institute's findings. That's mostly because they person high, fixed lodging costs, according to Tinsley.

"People pinch higher incomes thin to person high-priced homes, and galore will person ample monthly owe payments. So it's perfectly imaginable personification pinch a precocious income could person a batch of it swallowed up by essentials," he said.

Hard rhythm to break retired of

It's financially straining to unrecorded paycheck to paycheck. "It's usually thought of arsenic a bad thing, that adds accent and is detrimental to a person's consciousness of financial well-being," Tinsley said. 

It's a difficult rhythm to break retired of, too. Housing costs, which are often a household's top expense, tin beryllium difficult to minimize. 

"For astir people, they can't do overmuch astir wherever they unrecorded and really overmuch they salary for their home, if they person kids astatine a schoolhouse successful a peculiar neighborhood," Tinsley said. "A batch of these costs are sticky, and location isn't overmuch to do astir it."

In nan longterm, specified households extremity up pinch small successful savings, and are exposed to financial shocks.

"If location were different ostentation shock, aliases a sharper downturn to system than expected and immoderate group suffer jobs, past group surviving paycheck to paycheck are astir instantly pressured to make crisp reductions successful spending to equilibrium nan books," Tinsely said. "And that impacts nan wide economy."