Running on Empty: How Paycheck-to-Paycheck Living Turns Small Shocks Into Big Crises

Double-digit inflation for groceries like beef and coffee, a cooling job market and accelerating monthly costs for utilities, insurance and housing are exerting persistent financial pressure on millions of Americans. As of late 2025, two in three consumers lived paycheck to paycheck. What’s new is that a growing share are living that way. And it’s not because they have wiggle room to choose how they spend their income, perhaps opting to splash out on discretionary purchases or minimizing savings. It’s because they have no financial choice. This shift shows that consumers are finding it increasingly more difficult to absorb financial setbacks. Those struggling to pay bills, younger consumers and parents with children are hit especially hard.

More than half of consumers experienced at least one large unexpected expense in the past year. But repeated surprise expenses are disproportionately concentrated among paycheck-to-paycheck consumers.

How consumers absorb these shocks varies by their financial lifestyle. Roughly half of all consumers rely on cash or other liquid funds to cover their largest emergency expense. Those living paycheck to paycheck are much more likely to rely on revolving credit and alternative or supplemental financing. Fewer than half of consumers feel confident they could absorb a $1,000 surprise expense without falling behind, highlighting persistent gaps in short-term financial resilience.

These are just some of the findings detailed in “Running on Empty: How Paycheck-to-Paycheck Living Turns Small Shocks Into Big Crises,” a PYMNTS Intelligence exclusive report. This edition of the Paycheck-to-Paycheck series examines how consumers weather financial shocks and draws on insights from a survey of 2,465 complete responses conducted from Dec. 15, 2025, to Dec. 31, 2025.

• Financial Necessity as a Defining Force
• The Impact of Emergency Expenses
• Expense Shock Anxiety
• Read More
• Methodology

Financial Necessity as a Defining Force

The share of consumers who lived paycheck to paycheck out of financial necessity jumped from 29% in December 2024 to 40% in December 2025.

Not all financially crimped consumers face the same budgeting constraints. Some live paycheck to paycheck because their basic monthly bills for food, housing, healthcare and the like eat up every penny of their take-home pay. Others live that way by choice, budgeting to cover their monthly costs and perhaps having something left over for discretionary purchases or savings. Still, others blend “necessity” and “choice.”¹ These consumers pay their monthly basics and opt to spend on discretionary items, with the combination zeroing out their income the month it arrives.

It’s the first group that’s growing in number. While the overall share of consumers who live paycheck to paycheck remained stable at just below 66% between December 2024 and December 2025, the share who live paycheck to paycheck due to financial necessity spiked from 29% to 40% in that period.

After hitting a record high of 42% in October 2025, the share of consumers living paycheck to paycheck by necessity remained elevated at 40% in December 2025. The share of consumers living paycheck to paycheck by choice dropped to 30%, a significant retreat from its July 2024 peak of 41%.

A persistent middle group remains. Roughly three in 10 paycheck-to-paycheck consumers report living this financial lifestyle both by necessity and choice.

The near-convergence of the “choice” and “mixed” groups in December suggests that the line between optional and required spending became less clear. Are fancy holiday presents an essential, or a splurge? What about end-of-year travel team costs for your young hockey player? Perhaps seasonal financial pressures prompted households to spend in ways that felt voluntary even as their budgets were strained.

At the end of the year, fewer paycheck-to-paycheck consumers were struggling to pay their monthly bills.

A late-2025 uptick in the share of consumers living paycheck to paycheck without issues paying monthly bills—to 44.4%—coincided with a decline in the share struggling to pay bills. That may reflect a temporary easing of financial strain for some households earning more seasonal income or a shift in how consumers budget essentials versus splurges during the holiday shopping season.

The Impact of Emergency Expenses

For two-thirds of consumers who experienced a financial shock last year, the cost was more than $1,000.

Unexpected expenses, such as car repairs or an emergency trip to the dentist, are common in household finances. Even mild shocks can become a routine feature of household finances rather than occasional outliers.

More than half of consumers who experienced an unexpected expense reported paying for one or two surprises in the past year, underscoring how frequently financial emergencies translate into real out-of-pocket costs. While surprise expenses affect households across financial lifestyles and income levels, consumers living paycheck to paycheck experience these shocks the most.

Paycheck-to-paycheck households—especially those struggling to pay bills and those living paycheck to paycheck by choice—are more likely to report multiple emergency expenses throughout the year. Needless to say, this pattern underscores how financial surprises are the most destabilizing for consumers with limited cash-flow flexibility, with recurring emergencies quickly compounding financial strain.

Paycheck-to-paycheck consumers are the most likely to report smaller-dollar emergencies (less than $1,000), reflecting tighter short-term cash-flow constraints and perhaps routine care or maintenance issues they kicked down the road. This is particularly true for those living this financial lifestyle out of necessity. In contrast, consumers from higher-income households, households with children and retirees are more likely to report larger-dollar emergency expenses, consistent with ownership of higher-dollar assets and use of more costly services.

Consumers who faced unexpected expenses managed the shock in various ways.

Across the population, liquid funds and personal loans (non-revolving credit) serve as the primary tools consumers use to cover their biggest emergency expenses, underscoring the importance of immediate liquidity and access to lower-cost credit in absorbing financial shocks. Still, nearly one in four consumers rely on revolving credit. A meaningful minority turns to alternative or supplemental financing. This includes payday loans, personal lines of credit or borrowing from family or friends.

These patterns diverge sharply by financial circumstance. Consumers living paycheck to paycheck are far more likely to rely on revolving credit, alternative financing or last-resort measures like payday loans. Those living this financial lifestyle while struggling to pay bills, single parents and individuals with weaker or uncertain credit profiles especially rely on revolving credit. This reflects their limited cash buffers and constrained access to affordable credit at the time of shock. By contrast, consumers from higher-income households, those not living paycheck to paycheck and super-prime credit holders more often draw on liquid funds or non-revolving credit, suggesting that stronger liquidity buffers and better credit access enable them to manage emergencies without cascading financial stress.

Expense Shock Anxiety

Fewer than one in four paycheck-to-paycheck consumers are confident they could cover a $1,000 shock tomorrow.

Worry about future financial shocks is unevenly distributed. While 59.3% of consumers reported being slightly or not at all concerned about covering a $400+ unexpected expense in the next 12 months, 21.9% said they were very or extremely worried. Consumers not living paycheck to paycheck were far more likely to report little or no concern (89.3%). This data underscores a clear divide in perceived financial resilience.

Unsurprisingly, anxiety is most acute among consumers living paycheck to paycheck, particularly those struggling to pay bills. In this group, 56.8% report being very or extremely worried. That’s nearly three times the share observed among consumers from higher-income households and among super-prime credit holders (9.8%). Within the paycheck-to-paycheck population, concern is greatest among those living paycheck to paycheck out of necessity. In this group, 32.5% said they were very or extremely worried, and 24.6% were somewhat worried. This reinforces that vulnerability to financial shocks is closely tied to cash-flow constraints rather than to income level alone.

Consumer confidence in their ability to handle a $1,000 shock without falling behind varies by paycheck-to-paycheck status.

Overall, 48.5% of consumers said they are very or extremely confident they could cover a $1,000 unexpected expense tomorrow without falling behind on other bills. At the same time, one-third reported being slightly or not at all confident they could do so. Confidence is stratified by financial lifestyle. Only 22.4% of consumers living paycheck to paycheck and struggling to pay bills expressed high confidence. For those not living paycheck to paycheck, 83.1% are highly confident they could handle these expenses. Consumers living paycheck to paycheck without issues paying bills comfortably fell in the middle. Roughly one-third (34.2%) report high confidence, and nearly four in 10 (38.1%) express low confidence.

These disparities persist across the paycheck-to-paycheck personas and socioeconomic groups. Among paycheck-to-paycheck consumers, those living this financial lifestyle out of necessity were the least confident (26.9% very or extremely confident; 53.8% slightly or not at all confident). Those living paycheck to paycheck by choice reported modestly higher confidence, at 31.4%. Income and credit gradients were pronounced. Those feeling very or extremely confident included 19.9% of subprime consumers, 28.7% of households earning less than $50,000 a year, 64.2% of those earning more than $150,000 annually and 69.4% of super-prime consumers.

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Methodology

”Running on Empty: How Paycheck-to-Paycheck Living Turns Small Shocks Into Big Crises,” the newest installment of The Paycheck to Paycheck Report, a PYMNTS Intelligence exclusive series, is based on a survey of 2,465 U.S. adult consumers conducted from Dec. 15, 2025, to Dec. 31, 2025. The report examines how recurring unexpected expenses shape paycheck-to-paycheck living and households’ ability to absorb financial shocks. All findings are descriptive and reflect self-reported behavior; results describe associations rather than causal relationships. Our sample was balanced to match the U.S. adult population by age, gender, education and income.

^{1. Consumers who report living paycheck to paycheck are classified under choice or necessity status based on a proprietary weighting scheme that considers their household composition, number of dependents, income sources, debt and spending habits. The purpose of the classification is to provide an indication of factors that likely contribute to living paycheck to paycheck due to choices in spending or lifestyle versus factors that may be outside a consumer’s control.↩}