The living paycheck to paycheck stat is meaningless. It generates headlines, because bad news wins, but if you dig in, even the surveys that ask about this reveal that a large percentage of people living paycheck to paycheck are very financially secure, both objectively, and according to their own assessment. I don't have time right now, but I'd encourage anyone reading this to go find the actual source for this stat and read their full report. Last time I looked, it was freely available.
Many of those people living paycheck to paycheck have a budget where they're saving or investing a significant amount of their money, and accordingly, money feels tight. This is the financially sound way to avoid lifestyle creep, but it doesn't mean you're in a precarious position. Or alternatively, they're paying for really expensive, but optional things like private schooling and expensive cars or vacations.
Obviously some people are struggling, but this paycheck-to-paycheck stat is not an accurate way to quantify that. It's best IMO to look at objective metrics like the poverty rate, or people's objective financial picture (available via surveys.)
The most common one is saying that someone is paycheck to paycheck but they're also funding their 401(k) up to company match, etc.
It's usually just the inverse of saying most people don't have ready cash savings laying around; because there's no need to when you have credit every which way all the time.
Much better to look at the debt load on people and how that changes over time. Someone who makes $5k a month and spends $3k on debt service and lives off $2k is going to feel much different from someone who makes the same $5k, lives on $2k, and spends $3k on candles or whatever (since they can stop buying candles anytime but you can't easily stop paying down debt).
When I hear "living paycheck to paycheck" I think it means your recurring expenses (rent, utilities, food, etc.) consume all your income every month and you have nothing left to save. No savings. No investments. No 401K. If you don't get your next paycheck you can't pay the rent.
I think your definition is completely reasonable, but it's not how people answer the question (again, based on reading the report, which has a lot more detail.)
> It's usually just the inverse of saying most people don't have ready cash savings laying around; because there's no need to when you have credit every which way all the time
This is quite a precarious situation to me. People should not need nor be encouraged to rely on debt to live life, especially month to month.
The default mode should be working people make enough to, if budgeted moderately well, can pay for everything plus save money away post tax[0]
Anything less and you’re only growing systemic issues over time
[0]: including tax exempt savings like 401Ks is ill-reflective of people’s ability to save money aside for emergencies and unexpected costs
That's exactly the point he's making. That exact slight of hand underpins all those "huge percent of population living paycheck to paycheck" headlines.
I love seeing this in those periodic ragebait articles about how a family earning 400k+ is "paycheck to paycheck" after maxing out their retirement accounts, paying for private schools and vacations, mortgage on a $2m house, car notes on two newer luxury cars, etc. etc.
"After long term saving and paying for my indulgent lifestyle, I just don't have anything left at the end of the month!"
Somewhat offtopic, but I call these articles "parading the idiot". Where a newspaper or other media outlet runs an article interviewing a person where the subject is clearly out of step with everyone else in their assumptions.
See also articles where a property investor complains about how hard they are doing financially because they have to sell one of their eighteen investment properties.
I find it pretty egregious that someone who is saving/investing a chunk of every paycheck could be considered to be "living paycheck-to-paycheck." I feel like the most obvious definition most of us would assume is that nearly 100% of your paycheck gets spent on goods and services, and/or bills and debts, before your next paycheck.
The Federal Reserve has pretty detailed studies on this that take a nuanced view of spending behavior. Households with no excess income after necessary expenses are in the 10-15% range. The methodology is designed to exclude the diverse scenarios under which having no apparent excess income is an artifact of lifestyle rather than an economic reality.
This is literally me. I live paycheck to paycheck but also have a six figure sum of money I can tap into if needed.
How I got here is living way below my means in my twenties, saving up tons of money, and nowadays living at my means while still maxing retirement. I also have almost all that saved money invested, which just grows the pot as it sits.
So basically I spend all of every paycheck, after retirement has been deducted, but if I lost my job I could maintain my current life with zero income for a few years before running dry.
That is not living paycheck to paycheck by any reasonable definition. If you could stop contributing to savings/retirement/investments and suddenly have a ton of additional disposable income, then it's not that.
>That is not living paycheck to paycheck by any reasonable definition
Well then now we know that the media will happily use unreasonable definitions to bolster stats for click bait stories and headlines.
People assume paycheck to paycheck means "Spending each paycheck entirely on absolute necessities to live" but the survey definition is "Do you save any money from your take home pay every pay period".
This is how you get people at every income level reporting they live paycheck to paycheck.
I think you really underestimate how much people spend on stuff that is a non-necessity. People at every income level fall prey to the “if I’ve got extra money in my account, guess that means I can spend it”. There are, 100%, people living paycheck to paycheck that make 200k because they’ve made some terrible life choices and have outrageous debt to service, essentially.
I know several people who spend 100% of their income, saving none of it. Not because they have poor saving habits but because they've already saved more than they'll likely ever need for a comfortable retirement.
At which point, it actually kind of makes sense to blow your entire income on lifestyle.
where is this implication from? to me living paycheck to paycheck means you are living THE LIFE to the fullest. no “savings” or any BS like that. you make $50k a month, spend it all - wait for next paycheck. paycheck to paycheck
In the context of economics and poverty, paycheck to paycheck is defined as having no ability to save because necessary spending is consuming the entire paycheck.
Necessary spending is food, utilities, clothes, rent. But not eating out, fancy housing is a nice neighborhood, designer clothes, etc.
> Many of those people living paycheck to paycheck have a budget where they're saving or investing a significant amount of their money, and accordingly, money feels tight.
I don’t understand. Isn’t everybody living paycheck-to-paycheck then?
From that article: "As Dogen puts it, they’re effectively “scraping by,” in part because they’re still living “paycheck-to-paycheck,” despite their generous salaries."
That's right: they're each making $250K/yr, and living paycheck-to-paycheck as they describe it.
Yes, of course, but that’s if you are eating out frequently, have a recent model year car payment, have a pretty loose leisure budget (or lack of), live in above average cost of housing, etc. Raising your spending to you means doesn’t make you living paycheck to paycheck. One can live in SF for less than 100k.
At that point, it's not really the company that's the problem...