New Data: Uptick in Paycheck-to-Paycheck Living Pegged Mostly to Financial Fears

PYMNTS’ research in 2021 has illuminated the surprising extent of paycheck-to-paycheck living in the U.S. — even among those with high incomes. After a brief period of improvement, the situation is worsening again, as consumers’ fears of pandemic effects in areas like job security and housing costs are on the rise.

PYMNTS’ November 2021 Reality Check: The Paycheck-to-Paycheck Report, produced in collaboration with LendingClub and based on a September survey of over 2,210 U.S. adults, notes that “the share of consumers living paycheck to paycheck dropped from a high of 65% in December 2020 to a low of 52% in April 2021 before beginning to climb again. It stands at 57% as of September 2021, reflecting a marked rise in recent months in the number of consumers living with little or no financial safety net.”

See the study: Reality Check: The Paycheck-to-Paycheck Report

Overall, the data point to paycheck-to-paycheck consumers having less spending flexibility and being “more financially vulnerable to unexpected expenses and emergencies than those not living paycheck to paycheck.”

Whether a paycheck-to-paycheck consumer struggles to meet monthly expenses or not is a key dividing line among those whose salaries are consumed almost as soon as they’re paid.

While these consumers are concerned about COVID, more fear the financial fallout, with 32% of those living paycheck to paycheck and struggling to pay the bills identifying financial issues as their primary worry, “compared to 29% of those living paycheck to paycheck but not struggling to pay the bills and just 25% of their more financially secure peers.”

See the study: Reality Check: The Paycheck-to-Paycheck Report

Struggling Consumers Still Need to Shop

Not all is bleak, however.

For example, as the pandemic abates, the latest study states that “approximately one-third of respondents say they will make more trips to retail shops, grocery stores and dine-in restaurants. Slightly higher shares of paycheck-to-paycheck consumers plan to shop more often at physical retail (33%) and grocery stores (34%) than those who do not live paycheck to paycheck, but the opposite is true for dine-in restaurants.”

Additionally, PYMNTS found that many paycheck-to-paycheck consumers “will accelerate their online shopping when the pandemic is over, especially those living paycheck to paycheck. This underscores the expected recovery in consumer spending, since online shopping does not involve in-person health risks. It also confirms that the widely observed shift to online shopping since 2019 is here to stay, even with physical channels rebounding.”

See the study: Reality Check: The Paycheck-to-Paycheck Report

Demographics and Pent-Up Demand Factor Into Findings

As would be expected, the latest study finds that “consumers with higher incomes are more eager to ramp up their shopping activities than those with lower incomes. Those in the more than $100,000 per year income bracket say they will increase their activities in 3.3 categories, on average, compared to 2.8 for the middle ($50,000 to $100,000 per year) and lower (less than $50,000 per year) income groups.”

Some of that activity will depend on demographic trends, as the new data shows.

Per the November edition of this study series, there are “notable trends in terms of generational and income demographics as well. Millennials will increase their shopping activities in 4.2 categories on average, followed by Generation Z (3.9) and bridge millennials (3.5), substantially more than Generation X (2.6) and baby boomers and seniors (1.9).”

Regardless of demographics or income level, there are signs that paycheck-to-paycheck consumers want to unleash undischarged spending, with the study stating that “one-quarter of paycheck-to-paycheck consumers say they will increase their online retail shopping with home delivery when the crisis is over, compared to 17% of their more financially secure peers.”

See the study: Reality Check: The Paycheck-to-Paycheck Report