Two-Thirds of Consumers Say They Need Their Next Paycheck to Pay the Bills

In the fourth quarter of 2024, increased economic pressures continued to affect households in the United States.

With inflation at 2.9% by December, 65% of consumers reported living paycheck to paycheck, indicating ongoing financial strain.

The PYMNTS Intelligence report “Struggling Consumers Go to Short-Term Strategies to Manage Higher Expenses” found that rising costs, including higher bills, were pushing consumers to adapt their financial habits. The report was based on a December survey of 2,986 U.S. consumers.

Increasing Bills and Affordability Struggles

Higher utility costs and essential expenses were putting a strain on U.S. consumers. According to the report, 78% of consumers reported bill increases in the prior year, with the most common being electricity, insurance and gas.

Struggling paycheck-to-paycheck households were more likely to notice these increases, with 82% of them experiencing at least one hike. In comparison, 74% of financially stable consumers saw similar increases, with those living paycheck to paycheck facing hikes on nearly half of their bills, while stable households saw increases in 37% of their bills.

Utility costs were a concern, with 56% of consumers reporting higher electricity bills, 52% seeing increased insurance costs and 51% facing rising gas prices. Housing costs also surged, with 49% of renters reporting rent hikes.

As essential expenses rose, many consumers were forced to prioritize spending, stretching their disposable income. Insufficient income was the primary reason for living paycheck to paycheck for 35% of consumers, with high debt and family financial obligations adding to their financial instability.

Short-Term Strategies of Struggling Consumers

The financial pressures of costly bills led struggling consumers to adopt more reactive measures to manage their expenses. On average, those living paycheck to paycheck took 5.9 actions in response to rising bills, almost double the 3.2 actions taken by financially stable consumers. These actions often involved emergency measures like skipping or partially paying bills (33%), compared to solutions such as negotiating rates (12%). Many struggling consumers also reported canceling services (22%) or applying for financial assistance programs (24%).

In contrast, consumers who were not living paycheck to paycheck tended to focus on long-term strategies to reduce their bills. These included negotiating better rates (17%) or bundling services (12%). Income stability played a role in this financial adaptability. Even among higher-income households, nearly half of six-figure earners reported living paycheck to paycheck. Therefore, income alone did not guarantee financial flexibility, as financial discipline and the adoption of proactive strategies were key to escaping the paycheck-to-paycheck cycle.

The Impact of Payment Methods on Financial Stability

How consumers paid their bills illustrated the disparity between financially stable and struggling households. Those living paycheck to paycheck were less likely to use automatic payments, with only 26% relying on autopay for most of their bills. This contrasted with half of consumers who did not live paycheck to paycheck. The adoption of autopay was low for essential expenses, such as rent (22%) and utilities like electricity (33%).

Consumers using manual payment methods were more likely to notice price increases on their bills. For example, 55% of those manually paying insurance bills saw price hikes, compared to half of autopay users. While manual payments made consumers more aware of price changes, they also exposed them to higher risks like late fees. Encouraging autopay for essential services could help consumers manage their finances and avoid these additional costs.