A recent analysis by the Bank of America Institute reveals that approximately 26% of U.S. households allocate over 95% of their income to essential expenses, leaving minimal funds for discretionary spending or savings.
The study indicates a rise in paycheck-to-paycheck living across all income brackets since 2019. Notably, about 35% of households earning below $50,000 annually are in this category, up from 32% five years ago.
Surprisingly, higher-income households are also affected. Approximately 20% of those earning over $150,000 per year spend nearly all their income on necessities, often due to larger mortgages and associated costs.
Generationally, the prevalence of paycheck-to-paycheck living increases with age, peaking among Baby Boomers. This trend suggests that older generations may face higher essential expenses or fixed incomes.
Geographically, the South Atlantic region, including states like Georgia and Florida, has the highest proportion of households living paycheck to paycheck, at around 28%.
The analysis attributes this financial strain to rising costs in housing, food, utilities, and childcare, which have outpaced income growth for many families.
Experts warn that this trend could have broader economic implications, as reduced discretionary spending may impact overall economic growth.
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