Living paycheck to paycheck refers to people whose entire salary is devoted to the necessary expenses, who have little or no savings and emergency funds. In case of emergency, they either need to borrow or wait for the next paycheck.
For the past couple of years, we all have heard the phrase living paycheck to paycheck quite often. Due to the rise in living costs, we will even hear it more often.
Generally, living paycheck to paycheck indicates the financial condition of the working poor. However, that’s not always the case. So, what does living paycheck to paycheck mean and how can we avoid it?
What Does Living Paycheck To Paycheck Mean?
Living paycheck to paycheck is a term used to describe someone who is barely surviving financially. The person may only be able to afford the most basic necessities every month and has no money left over to save.
A living paycheck to paycheck synonym can be a person barely making ends meet every month.
Most people in the United States nowadays live paycheck to paycheck. This means they are struggling to make ends meet and their monthly take-home pay is just enough to cover their expenses. In unexpected or emergency situations they either have to borrow money or wait for the next paycheck to come in order to cover unexpected expenses.
An example of living paycheck to paycheck can be like this. Let’s suppose Jerry earns $2000 each month. However, his rent, bills, food, transport, and other necessary expenses cost $1900. The rest of the $100 goes to regular expenses. So, he can not save at all, and at the end of each month, he has no money left, even for an emergency.
In the current situation, this can happen to anybody. Because the inflation is record high and income has not gone up. That’s why a record number of middle-class or even higher-middle-class people are now living paycheck to paycheck.
As a result, not only the working poor are living paycheck to paycheck. But the higher paid employees too.
What Percent Of People Who Make $100,000 Live Paycheck To Paycheck?
According to a survey by Willis Towers Watson,
“Around 36% of the higher paid U.S. employees with salaries of $100,000 or more are living paycheck to paycheck.”
This clearly indicates the situation is pretty bad. Because $100,000 is almost two times the median US household income. So, what about other living paycheck to paycheck Statistics 2022?
A LendingClub study shows
“Almost 64% of Americans are living paycheck to paycheck in 2022”
Meaning 64 out of 100 Americans or two third of the entire American population is now living paycheck to paycheck. So, the Paycheck to paycheck percentage of US citizens is on the rise and the situation is quite alarming.
Now that we know what does it mean to live paycheck to paycheck? and living paycheck to paycheck statistics in 2022. So, how to avoid living paycheck to paycheck?
Before finding out how to avoid this we need to properly understand why so many people are living paycheck to paycheck nowadays.
Why Are People Living Paycheck To Paycheck?
Some of the main reasons behind living paycheck to paycheck are rising inflation and living costs, high debt, lack of financial literacy, and not managing money properly.
There could be many reasons why someone might find themselves living paycheck to paycheck, but some of the most common ones include:
High Inflation
This is probably the most common reason why people find themselves living paycheck to paycheck. Because the living costs are on the rise. But people’s income has not gone up accordingly.
That’s why almost 64% of Americans are now trying to make ends meet.
Debt
Another common reason behind this is debt. Credit card debt is at a record high. So, most of the people’s salary goes to pay the debt. As a result, they end up living paycheck to paycheck.
Lack of Financial Literacy
People find themselves in this situation because they’re spending more money than they earn. This is caused by a lack of financial literacy.
This is why people are making expensive lifestyle choices even though they do not have enough income and end up living paycheck to paycheck.
Not Managing Money Well
Even if you’re earning a good salary, you can still find yourself living paycheck to paycheck if you’re not good with money. This could be because you’re not budgeting properly, you’re not paying your bills on time, or you’re not saving for the future.
Even though Living paycheck to paycheck in your 20s might seem cool, when you get adult living paycheck to paycheck can be very stressful because of increased responsibilities. So, how can you avoid living paycheck to paycheck?
How To Avoid Living Paycheck To Paycheck
To avoid living paycheck to paycheck you need to create an efficient budget, cut unnecessary expenses, start to save at any cost, avoid taking bad debts, and live below your means for some time.
To be frank, in my early college days I was also living paycheck to paycheck and this is how I stopped living paycheck to paycheck and saved my first $1,000.
- First, start by creating an efficient low-income budget and stick to it. This will help you figure out how much money you have coming in and going out each month.
- Then start saving money. You should try to save at least 10% of your take-home pay each month.
- If your income is not enough then get skilled up and start a side hustle.
- Avoid taking debt and get rid of your debts. Because the more debt you have, the more money you’ll need to live.
- Bring in financial discipline and start to avoid any unnecessary costs. Try to live below your means for a while.
- Avoid making big purchases until you have an emergency fund and sufficient money saved up for the future.
If you follow the above steps properly then you will be able to avoid living paycheck to paycheck.
In Summary
Living paycheck to paycheck or making only ends meet financially each month is never good. Because it puts you at risk of an uncertain future. So, take steps and avoid living paycheck to paycheck.
I hope this post on what living paycheck to paycheck means is helpful. If you have any questions, let me know in the comments.
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