New Reality Check: The Paycheck-to-Paycheck Report

Struggling Consumers Go to Short-Term Strategies to Manage Higher Expenses

January 2025

Rising costs across essential services and utilities exacerbate financial vulnerability for many struggling paycheck-to-paycheck consumers.

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    Economic pressures are reshaping household financial behavior. This widespread phenomenon strains consumer resilience in the face of inflation and rising cost of living. For example, inflation rates rose in the last quarter of 2024, settling at 2.9% as of December 2024, according to the Consumer Price Index.

    Currently, 65% of consumers live paycheck-to-paycheck, ending six months of increases but still indicating pervasive financial distress. Rising costs affect most consumers, with 78% experiencing at least one bill increase in the past year. The most impacted categories include electricity bills (56%), insurance (52%) and gas (51%). Paycheck-to-paycheck consumers with issues paying their bills take an average of 5.9 actions to address these challenges, nearly double the 3.2 actions reported by more financially stable households.

    Notably, struggling paycheck-to-paycheck consumers are more likely to take reactive actions than their financially stable peers. Struggling consumers often prioritize short-term survival over long-term planning. Furthermore, bill payment methods appear to influence the likelihood that consumers are aware of price increases. Consumers who use manual payment methods are more likely to notice increments than those using automatic payment methods.

    These are just some of the findings detailed in this edition of “New Reality Check: The Paycheck-to-Paycheck Report,” a PYMNTS Intelligence exclusive report. This edition, Struggling Consumers Go to Short-Term Strategies To Manage Higher Expenses, examines the impact of rising bills on the financial lifestyles of U.S. consumers and draws on insights from a survey of 2,986 U.S. consumers conducted from Dec. 9, 2024, to Dec. 16, 2024. The report explores the actions consumers are taking in response to inflation and how payment methods reflect broader disparities.

    Rising Bills Impact Affordability Across Essentials

    Insufficient income to cover bills is the top reason people report living paycheck-to-paycheck, especially as many see bills increase.

    Seventy-eight percent of consumers overall report experiencing at least one bill increase in the past year. This figure varies slightly by financial lifestyle. At 82%, struggling paycheck-to-paycheck consumers are the most likely to have noticed at least one increase. However, even 74% of those not living paycheck to paycheck report at least one bill increase.

    Although struggling paycheck-to-paycheck consumers report paying fewer bills overall, they report increases on approximately half the bills they paid. In contrast, consumers not living paycheck to paycheck saw increases in 37% of their bills. The increases for essential categories such as electricity, insurance, gas and rent ranged from 5.5% to 6.8%.

    Rising utility costs are a prominent concern: 56% of consumers reported higher electricity bills. We found that 52% of consumers reported increased insurance costs, and 51% reported higher gas prices. Housing costs add to the strain, with 49% of renters encountering rent hikes. These rising costs diminish consumers’ disposable incomes and compel households to prioritize spending.

    Meanwhile, the most cited reason consumers give for living paycheck-to-paycheck is insufficient income to cover bills, at 35%. Other significant factors include high debt burdens, at 23%, and financial responsibilities for family members, at 12%. Bill increases, combined with insufficient income and other obligations, can create a persistent cycle of financial instability.

    Struggling Consumers Respond Reactively to Bill Increases

    Struggling consumers take nearly twice as many actions in response to bill increases, favoring emergency measures over proactive strategies.

    Paycheck-to-paycheck consumers who are struggling take the most actions to manage rising bills. In fact, struggling paycheck-to-paycheck consumers take an average of 5.9 actions to manage bill increases. They favor reactive measures like skipping or partially paying bills (33%) over proactive steps such as negotiating rates (12%). In contrast, financially stable households take 3.2 actions on average. They tend to focus on optimizing costs.

    This discrepancy suggests a potential misalignment between perceived and actual savings, potentially leading to higher-than-expected costs. For example, 22% of struggling consumers reported canceling services, highlighting their immediate need to reduce costs. Emergency measures, such as applying for assistance programs (24%), were also relatively common for struggling households.

    Conversely, financially stable consumers were more likely to adopt strategies aimed at reducing costs in the long term. These included negotiating better rates (17%) and bundling services (12%). Income stability drives financial adaptability, with consumers whose income matches rising bills taking more proactive actions (5.9 vs. 4.5 actions on average). Since nearly half of six-figure earners live paycheck to paycheck, adaptability matters more than income alone.

    That struggling consumers focus on short-term survival rather than long-term stability helps explain why taking more actions does not necessarily mean escaping the paycheck-to-paycheck cycle. Moreover, while often necessary, reactive measures tend to perpetuate a cycle of financial instability. For example, skipping payments or opting for partial payments can damage credit scores and result in late fees or penalties. Relying too heavily on reactive measures may ultimately exacerbate consumers’ financial challenges.

    Payment Methods Show Financial Disparities

    Financial lifestyle drives bill payment methods, with struggling consumers half as likely to use autopay than their financially stable peers.

    How consumers pay their monthly bills reflects their financial stability. Barriers to adopting autopay, such as inconsistent income or concerns about automatic deductions, remain significant for many paycheck-to-paycheck consumers. As a result, they were roughly 50% less likely to use autopay for their recurring bills than financially stable consumers. Just 26% of struggling paycheck-to-paycheck consumers use automatic payments to pay most of their bills. In contrast, 50% of consumers who do not live paycheck to paycheck rely on automatic payments for most of their bills.

    Autopay usage was most common for discretionary expenses like streaming services (63%). Its use is notably lower for essentials such as rent (22%) and utilities like electricity (33%).

    Interestingly, our data reveals demographic nuances. At 48%, consumers earning more than $100,000 annually showed the highest adoption of autopay to pay most of their monthly bills after consumers not living paycheck to paycheck. In contrast, older generations and lower-income groups were more reliant on manual payment methods. This reliance, however, exposes them to higher financial risks, such as late payment fees. Incentivizing autopay adoption through discounts or waivers for essential services could address these disparities.

    The data shows a clear trend: Consumers who pay bills manually saw more price increases across most bill categories. For instance, 55% of consumers paying insurance bills manually saw price increases, compared to 50% of those paying automatically. The trend is evident across most bill categories in our study. This suggests that consumers paying bills automatically may not always be aware when a bill increases.

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    Methodology

    The New Reality Check: The Paycheck-to-Paycheck Report — Struggling Consumers Go to Short-Term Strategies To Manage Higher Expenses,” a PYMNTS Intelligence exclusive, examines the impact of rising bills on the financial lifestyles of U.S. consumers and draws on insights from a survey of 2,986 U.S. consumers conducted from Dec. 9, 2024, to Dec. 16, 2024. It explores the actions consumers are taking in response to inflation and how payment methods reflect broader disparities. Our sample was balanced to match the U.S. adult population in a set of key demographic variables: 51% of respondents identified as female, 33% were college-educated and 30% declared incomes of between $50,000 and $100,000 per year.

    About

    PYMNTS INTELLIGENCE

    PYMNTS Intelligence is a leading global data and analytics platform that uses proprietary data and methods to provide actionable insights on what’s now and what’s next in payments, commerce and the digital economy. Its team of data scientists include leading economists, econometricians, survey experts, financial analysts and marketing scientists with deep experience in the application of data to the issues that define the future of the digital transformation of the global economy. This multi-lingual team has conducted original data collection and analysis in more than three dozen global markets for some of the world’s leading publicly traded and privately held firms.

    The PYMNTS Intelligence team that produced this report:
    Scott Murray: SVP and Head of Analytics
    Mariah Warner, MA: Senior Research Manager
    Margot Suydam: Senior Writer
    Matthew Koslowski: Content Editor


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