Cash-Strapped During COVID-19: Here’s How Many Americans Are Living Paycheck to Paycheck
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For a closer look at how Americans are living paycheck to paycheck, the payroll, human resource, and benefits outsourcing company Paychex conducted a new survey which asked 1,033 working people about their monthly finances, including savings and spending. The study reveals who’s most likely to rely on each paycheck, how long this financial tightening may last, and the actions people believe they could take to make a significant change.
Counting on Every Dollar
How many people live paycheck to paycheck? According to the study, 56% of people live in this manner. Respondents in their 20s and 40s were the most likely to not have enough money in their savings account.
Looking at families with children, even more people had restrictive cash flows. About 61% of people with children reported living paycheck to paycheck, compared to 53% of people without kids.
Those who worked an hourly job (63%) were 13 percentage points more likely than those with a yearly salary (50%) to have just enough money each week to survive.
Nearly half (49%) of people currently living paycheck to paycheck grew up living this way, compared to the 35% who did not. Overall, just over two in five respondents grew up with limited funds.
The top three reasons people are living paycheck to paycheck are due to their income level (35%), housing expenses (29%), and lack of savings (28%).
Overcoming Financial Hardship
On average, respondents have been living paycheck to paycheck for more than three years. Nearly one in three people have been doing so for less than a year, and 21% have been in the same financial situation for five or more years.
Younger generations are more likely to report being financially unstable—48% of people in their 20s claimed to be living paycheck to paycheck, compared to 28% of those in their 50s. Hourly workers reported higher rates of living with lower incomes than those on salary. Nearly three in four hourly workers lived paycheck to paycheck for more than a year—just 61% of salary workers could report the same.
Breaking the Cycle
How much money do people need to break this cycle? The study revealed that, on average, respondents required another $1,086 per month in order to save any money. Overall, 34% of people said they would only need an extra $301 to $500 a month to feel secure.
To alleviate feelings of being strapped money-wise, the survey reported people would need a 31% increase to their monthly income. Of those living paycheck to paycheck, one in four have never received a raise at their job. Approximately 27% received an increase in pay less than six months ago.
People receiving a recent raise reported the increase added $370 to their monthly income.
Taking Matters Into Your Own Hands
Getting a higher paying job (35%), getting a second job (26%), and using a budget (26%) were the most popular actions people took to stop living paycheck to paycheck. Some people even asked for a raise (11%) or downsized their living situation (10%).
More than half of respondents felt that they could stop living paycheck to paycheck after five or more years. Of those living paycheck to paycheck, more than two in five had no savings account. Just 1% of people not living with limited funds said the same.
More than one in four respondents reported no longer having to live paycheck to paycheck, while only 9% of survey participants claimed they never had to live this way.
People were able to dig themselves out of this hole by budgeting more (67%), getting a higher paying job (50%), or increasing their savings (41%).
Breaking the paycheck to paycheck cycle can be difficult, but with some hard work and planning, people can successfully see their way out of this lifestyle.