Even Wealthy Households Are Living Paycheck to Paycheck

If you've found it impossible to save money as living costs have surged over the last few years, you're far from alone. According to a Bank of America Institute analysis, around a quarter of American households live "paycheck to paycheck," which the institute defines as households "where necessity spending is more than 95% of their household income, leaving them relatively little left over for 'nice to have' discretionary spending or saving."

• Lower-income households were most likely to live paycheck to paycheck—35% of households with an income below $50,000 fell into the category, up from 32% in 2019. But pressures didn't disappear with fatter paychecks. Some 20% of households with incomes higher than $150,000 also spend almost all their income on necessities like housing costs and groceries, according to the analysis, which used Bank of America customer data. "One reason is that higher-income households may have bought larger, more expensive, homes and consequently have bigger mortgages," the institute said. "And often along with bigger homes come bigger insurance costs, property taxes, and utility bills."

• "Many of these spending pressures are likely unavoidable, as they relate to family and housing costs," David Tinsley, a senior economist at the institute, tells CBS MoneyWatch. "The share of households that are living paycheck to paycheck has been rising slightly over the last few years, which is not terribly surprising, because prices have risen for a lot of essential goods—groceries are more expensive, the cost of car insurance is up, and child care is up, too," Tinsley says.
• Tinsley notes that living paycheck to paycheck is stressful and it's a hard situation to get out of. "For most people, they can't do much about where they live and how much they pay for their home, if they have kids at a school in a particular neighborhood," he says. "A lot of these costs are sticky, and there isn't much to do about it."

(More household income stories.)