Who Is the Paycheck-to-Paycheck Consumer in America?

A six-figure income, a house in a nice neighborhood, two cars in the garage and kids in private schools — yet still feeling panicked when an emergency expense hits. And while the Fed once held out $400 as the average emergency expense threshold, that unexpected expense is now more likely to be about three times as much.

For millions of Americans, this isn’t a hypothetical — it’s their reality.

Today, some 67% of Americans say they live paycheck to paycheck, according to a recent PYMNTS Intelligence study. The paycheck-to-paycheck lifestyle spans income brackets, education levels and professions. The every-other-week rhythm of waiting for the next paycheck has become America’s most common financial heartbeat.

Read More: Paycheck-to-​Paycheck Ranks Swell as Rising Prices Erode Savings

Living paycheck to paycheck means consumers need their next paycheck to meet their monthly obligations. How much of a cash cushion they have is hugely important in determining how far consumers are willing to push their paychecks every month — and how stressed out they might be if faced with an unexpected financial shock.

A possibility that could become more of a certainty as the latest news out of Washington is that President Trump declines to rule out the possibility of a recession in 2025 — and lots of analysts agree.

Not Your Typical Paycheck-to-Paycheck Consumer

For me, the paycheck-to-paycheck conversation was turned on its head about nine years ago.

In May 2016, I came across a cover story in The Atlantic titled “The Secret Shame of Middle Class Americans.” The author, Neil Gaber, described his personal story of living paycheck to paycheck, despite a career as a successful writer, and — in his words — being “reasonably prosperous.”

Although he was “nowhere near rich,” he earned a “middle to upper-middle income” salary, lived in Manhattan and sent his two daughters to private school. Yet, he describes being unable to cobble together enough money to cover a $400 emergency expense without having to ask friends or family members, including his own grown daughters sometimes, to pitch in.

His 6156-word story wasn’t intended to garner sympathy. It was intended to shed light on the paycheck-to-paycheck treadmill that he and his family — and, he contended, many middle-income Americans — were on.

Gaber described the emotional toll that his “financial impotence” took as he tried hard to shield the family from the many financial bumps in the road.  He admits that most of his financial issues were related to the lumpy nature of how he was paid: lump sum book advances that created tax issues and the need for disciplined financial management over several years as he completed his novels.

Then there were unexpected ups and downs of life that delivered painful financial gotchas.

Selling his co-op in Manhattan to reduce his monthly housing costs took two years, during which time he paid double housing costs; book deals took longer to finalize and writing gigs got axed. Saving money was a challenge. Credit cards helped stretch his income but came with revolving debt at high interest rates that only compounded the problem.

But mostly, Gaber said, his paycheck-to-paycheck lifestyle was his choice.

His choice to be a writer, and specifically a novelist, with the unpredictable income swings and caps inherent in that profession. His choice to live in New York rather than a cheaper place. His choice to pay for private school and college for his girls, their weddings and childcare as they grew up.

Gaber said that his paycheck-to-paycheck lifestyle wasn’t the result of living “an extravagant lifestyle” but something more fundamental: too little income, too many expenses in the choices he and his wife made. And those choices had consequences over time, including an inability to save as much as he needed or wanted to.

His story stuck with me, mostly because it was antithetical to the stereotypical paycheck-to-paycheck persona: poor, uneducated, unemployed, with few future prospects.

And Gaber’s claim that more middle-class Americans fit that definition than were willing to admit it.

Unpacking the Paycheck Economy

In March of 2020, the PYMNTS Intelligence team began to benchmark the paycheck-to-paycheck status of Americans as part of our monthly consumer studies related to COVID, the digital shift and how people spent and saved their money.

It seemed  like a good time to gather and benchmark intelligence about how consumers would spend and save their income.

The U.S. was entering a once-in-a-hundred-year global pandemic, a period of instability and uncertainty. Documenting all the puts and takes would offer important insights for businesses, startups and investors. To our knowledge, this effort is the largest dataset documenting the shift to digital and the related spending and payments behaviors over that period — and those studies continue to this day.

To capture the paycheck-to-paycheck sentiment, we asked U.S. consumers to self-report their financial lifestyle against whether they need their next paycheck to meet their monthly financial obligations. And if they say they do, whether they can do that comfortably or whether they will struggle to make all payments on time.

Our results over this five-year period are remarkably consistent with the personal story Gaber recounted in May 2016.

They suggest that the American consumer’s relationship with money goes well beyond simple income calculations. It speaks to their values, priorities and the complex balancing act between choice and necessity that shapes those personal financial decisions.

Who is the Paycheck-to-Paycheck Consumer?

Like Gaber’s account in 2016, the American consumer’s paycheck-to-paycheck status is shaped by financial obligations and lifecycle, not just income. It is often based on the choices people make about how they align their expenses to their paychecks.

It’s not about being “poor.” And alternatively, not living paycheck to paycheck isn’t about being “rich” — even though most people prefer to define it in those stark terms.

It isn’t even about whether consumers save or don’t. In fact, 4% of people living paycheck to paycheck and who report having issues paying their monthly bills and 5% of those say they live paycheck to paycheck without issues say that savings and investments are part of how they allocate their monthly income.

Instead, we find that paycheck-to-paycheck living spans all income levels, including half of high earners (defined as those earning $100,000 or more each year) as of January 2025. Across all income groups, people report similar abilities to pay their monthly bills without a struggle but needing the next paycheck to stay on track. This implies that living paycheck to paycheck isn’t solely about financial hardship or an inability to meet basic needs, but how people choose to manage their monthly income.

Here’s an example.

In November 2024, high-income individuals (those earning $100,000+ annually) constituted a larger portion of struggling paycheck-to-paycheck consumers than middle-income earners. At the same time, from January to April 2023, nearly 25% of lower-income individuals reported not living paycheck to paycheck, a figure that declined to just 16% by January 2025.

Conversely, the proportion of higher-income people not living paycheck to paycheck increased slightly, though with significant fluctuations throughout this period. This disparity between lower-, middle- and higher-income groups indicates either similar cost pressures across income levels or potentially different spending choices among higher earners.

That suggests that paycheck-to-paycheck living is a continuum between choice and necessity. This choice-necessity framework provides a unique lens for understanding the dynamic nature of paycheck-to-paycheck behaviors.

Our research reveals that 21% of American consumers (37 million) live paycheck to paycheck primarily out of necessity — there is a significant mismatch between money in and money out every month. More than half — 54%,or some 93 million consumers — do so due to a blend of choices about how they spend their paychecks and circumstances that create unexpected financial events. And 25% live this way predominantly by choice.

Higher earners cite family support obligations (such as kids at home and their attendant expenses), debt payments and higher spending on discretionary items — food out, vacations, clothes — for living paycheck to paycheck by choice. Lower-income earners point to wages that are insufficient to cover the rising costs of basics like housing and food for living paycheck to paycheck out of necessity.

A quarter of middle-income paycheck-to-paycheck consumers live this way by choice, unforced by necessity. Like their higher-income counterparts, their decisions, by default, become necessities as they have defined them. Sending their kids to private school, like Gaber did, was a choice, but one that he and his wife considered a necessity.

By contrast, over half of lower-income paycheck-to-paycheck consumers report necessity as their primary driver, because so much of their paycheck is allocated to paying for basic essentials.

Notably, the proportion of low-income consumers living paycheck to paycheck by choice has increased 5% since 2023, while necessity-driven cases rose 3%, indicating a growing polarization in how lower income consumers now manage their income to expense ratio every month.

Although these lower-income individuals are more likely to be living paycheck to paycheck by necessity, almost 1 in 4 are living this way by choice. The choice-driven group tends to be younger (Gen Z or millennials), and they are more likely to have children.

Whether consumers are driven by choice or necessity varies by income and generation, and by how much money they have in the bank.

People who live paycheck to paycheck by choice have about $1,400 more in savings than those living paycheck by necessity. And, although inadequate savings correlate with financial hardship for some, others maintain substantial savings, yet still spend most of their income each pay period.

Choice versus necessity determines how consumers spend their paychecks every month. Regardless of how consumers define their paycheck-to-paycheck status, everyone allocates some of their income to the basics — housing and groceries. However (and not surprisingly), consumers whose paycheck-to-paycheck lifestyle is shaped more by more choice than necessity allocate more of their income to discretionary expenses.

More than two-thirds of those consumers chose to spend money on social activities at least once a month in the past year, compared to 43% of those who live paycheck to paycheck out of necessity. Consumers who live paycheck to paycheck out of necessity are half as likely to be planning to spend on leisure, entertainment and recreational activities because they lack the cash to spend on discretionary items.

How paycheck-to-paycheck consumers use credit cards varies. We know that 90.5% of American consumers who want credit cards have and use them. According to the latest Federal Reserve data, American consumers have more than $1.4 trillion in credit card outstandings. Consumers have always used credit to leverage their spending power, and consumers across all paycheck-to-paycheck personas use it for that reason.

Consumers living paycheck to paycheck either by choice or necessity have higher credit card balances than those who say they don’t — and obviously for different reasons. Those who say they struggle with meeting their monthly financial obligations are much more likely to revolve their balances, using credit to fill in the gaps between paychecks or to ride the storm when unexpected expenses arise.

A third more consumers who report struggling to meet their monthly obligations say they always revolve their credit card balances than those who say they comfortably pay their bills each month. The share of struggling paycheck-to-paycheck consumers who usually or always revolve their credit card balances has risen 7.4 percentage points since 2023.

Savings tips the balance of the paycheck-to-paycheck lifestyle. Having cash savings significantly changes how people view their financial situation and how they save or spend accordingly. Living paycheck to paycheck — or not — is also influenced by how confident people are about the adequacy of their cash cushions if something goes haywire.

During COVID-19, fewer American consumers reported living paycheck to paycheck despite higher unemployment. This unexpected trend occurred because stimulus checks and enhanced unemployment benefits provided many households with unprecedented cash reserves. Between 2021-2023, the percentage of Americans reporting paycheck-to-paycheck living dropped to 54.5% as debts decreased and savings grew.

Having savings doesn’t automatically change whether people still think of themselves as living paycheck to paycheck, but it’s an important factor, especially for those living paycheck to paycheck by choice.

We find that just over 40% of people with $2,500 to $5,000 in savings still choose to live paycheck to paycheck. Those with less than $1,000 in income are both more likely to live paycheck to paycheck and more likely to do so by necessity. And with $1,000 to $5,000 in savings, they  feel they have some security but are more nervous, and an emergency expense of $1,200 might be enough to tip those scales.

The data also reveals a significant decline in self-reported paycheck-to-paycheck status once savings exceed $5,000. Those who continue identifying as paycheck to paycheck despite having over $5,000 saved appear to do so by choice rather than necessity, as they report comfort with their bill-paying ability including spending on discretionary items, while maintaining a safety net for unexpected expenses.

The largest generational cohort of consumers who report living paycheck to paycheck out of necessity are single millennials, many of whom live in rural locations. A third of those millennials have dependent children living at home — spending is about providing for their families, with little room for much else.

The $45,000 Paycheck-to-Paycheck Tipping Point

Analyzing five years of PYMNTS Intelligence data reveals two critical income thresholds in describing the financial lifestyle of consumers.

The data finds that the first significant threshold occurs at $45,000-$49,999, when individuals begin to shift from struggling paycheck-to-paycheck living to a more comfortable paycheck-to-paycheck lifestyle.

The second critical threshold appears in the $125,000-$149,999 range, where people become increasingly likely to say they no longer live paycheck to paycheck either by choice or necessity.

As income climbs to more than $85,000 per year the incidence of living paycheck to paycheck by choice begins to decline as more and more consumers indicate they no longer live paycheck to paycheck at all. What’s particularly interesting is that this shift is not universal, and many individuals with moderate to high incomes continue living paycheck to paycheck despite having the financial capacity to do otherwise. They’re comfortable paying bills but still spend most of their income monthly because of their monthly income and savings backstop.

Since these individuals can pay their bills comfortably, their continued paycheck-to-paycheck status suggests deliberate spending choices on more or more expensive things, rather than pure income constraints. These choices might include supporting dependents, purchasing larger homes or even second homes, or using private schools.

If paycheck-to-paycheck status were solely dictated by income necessity, we would expect to see a much steeper decline in all paycheck categories as income increases. However, the gradual nature of this decline suggests other factors at play, including the fact that consumers with incomes over $250,000 are 30% more likely to continue to live paycheck to paycheck (generally by choice).

The key insight is that even as financial capacity increases with higher incomes, many individuals continue to choose to live paycheck to paycheck rather than transitioning to non-paycheck-to-paycheck status.

Why Paycheck-to-Paycheck Status Matters Right Now

It’s been 15 years since the U.S. experienced a great recession, even though there was a slight dip in 2020 owing to the COVID shutdown. Today’s environment of economic uncertainty and rising prices, the threat of tariffs and the current administration’s hints at a likely recession have significant implications for all consumers and how they will spend their paychecks in the weeks and months ahead.

Consumers across all income brackets are likely to pull back on spending, but for different reasons. Those with savings cushions may voluntarily push pause on spending until they have more certainty in order to preserve cash and income, while those without financial shock absorbers in the form of savings will be forced to cut back out of necessity.

The “comfortable paycheck-to-paycheck” group faces particular vulnerability as economic pressures mount. The Fed is unlikely to lower interest rates in the foreseeable future, and if there is inflation because of tariffs, rates might go even higher. That’s bad news for consumers with adjustable mortgage rates that are set to rollover from historically low levels around 3% — just as interest rates on their credit cards and other loans rise. That means new monthly paycheck pressures owing to the increased cost of housing and credit card debt, especially if wages don’t keep pace.

As basic goods become more expensive due to tariffs and rising production costs, these consumers could also see their discretionary income significantly reduced.

PYMNTS Intelligence finds that more than half of consumers surveyed in February 2025 who are knowledgeable about the proposed tariffs said their wallets would take a beating; 78% said because of higher prices, and 75% because of product shortages. Many who were previously managing comfortably may find themselves sliding into the “struggling paycheck-to-paycheck” category as more of their paychecks are allocated to the basics whose monthly costs continue to rise.

Read more: What American Consumers and Small Businesses Think About Tariffs

That, of course, assumes consumers have a paycheck.

The Paycheck Economy

The labor market is starting to soften — and not because of the government layoffs, which impact a relatively small part of the American workforce overall. As businesses face their own uncertainty, they will likely freeze hiring, expenses and investments to grow the business. The ripple effect of this uncertainty itself is its own force.

As more consumers shift from choice-based financial decisions to those driven by necessity, overall consumption could contract, challenging economic growth. Retailers and service providers may need to adjust their strategies to address a growing segment of more price-sensitive consumers across income brackets if they hope to make a sale. Even wealthy consumers who don’t live paycheck to paycheck may pull back after looking at their stock portfolios and feeling less wealthy. Even the billionaires. Bloomberg reported yesterday (March 10) that the billionaires who attended President Trump’s inauguration have lost $210 billon collectively over the last seven weeks.

That detail aside, the data emphasizes that you can’t judge a paycheck-to-paycheck consumer by its cover. High earners who have structured their lifestyles around their full income with minimal savings could face similar challenges to lower-income households when economic conditions tighten.

The impact of economic uncertainty will be felt across the spectrum, with similar outcomes despite very different income and paycheck-to-paycheck starting points.

As Gaber said in his article back in May 2016, it’s about choices. It isn’t just how much money comes in, but the set of choices, obligations and priorities that determine where it goes.

In an economy increasingly characterized by unpredictability, understanding this nuanced reality isn’t just navel gazing. It also isn’t distorting the definition of paycheck to paycheck or its importance in understanding how consumers manage spending. It’s essential for understanding how consumers will react to financial pressures, and how vulnerable large swaths of the American consumer may be.

The economy’s resilience depends on their ability, in mass, to spend the paychecks they have — and knowing they’ll keep getting them.