Gerald Storch, CEO of Storch Advisors, has analyzed the condition of consumers, offered predictions for the holiday season, and responded to the September retail sales report. According to a recent study released by the Bank of America Institute, the proportion of U.S. households living paycheck to paycheck has increased across all income levels over the last five years. The study, published on Tuesday, revealed that more than 25% of Americans spend over 95% of their take-home pay on essential expenses. In addition, almost 30% of households use more than 90% of their income on necessities such as groceries, housing, utilities, gas, insurance, and childcare.
The research indicated a 10% rise in the number of people living paycheck to paycheck in 2024 compared to 2019. Irrespective of definitions used in the study, nearly half of Americans currently feel that they are living paycheck to paycheck, a figure that has been increasing over the past two years. David Tinsley, senior economist at the Bank of America Institute and lead author of the study, noted the difficulty in accurately determining the impact of elevated inflation, although rising prices for essential items such as groceries clearly play a significant role.
For some households, income increases have almost matched inflation, providing some degree of protection, Tinsley explained to FOX Business. However, those already on the brink of a paycheck-to-paycheck lifestyle may not be as fortunate, resulting in more individuals being caught in this cycle. Lower-income households have been affected the most, with 35% of individuals earning less than $50,000 annually falling into this category. However, at least 20% of people across all income brackets, including those earning more than $150,000, have little leftover after essential spending.
The number of households living paycheck to paycheck has increased across every generation from Gen Z to Baby Boomers, although it has decreased slightly among those born before 1946. Tinsley emphasized that rising prices have affected all income levels and generations, leading to an increase in the proportion of people living paycheck to paycheck within these groups. He added that housing costs are a significant factor and that older generations and those with higher incomes often have larger mortgages, meaning some individuals might live paycheck to paycheck despite earning higher wages.