Remember when payday was something you could look forward to? For many people, it’s now become a “whatever” thing. You’ll get your money, pay this bill and that one, fuel up your car, grab some groceries, and then you’re pinching pennies until the next check comes in.
That’s the reality for almost a quarter of U.S. households, according to a recent report from the Bank of America Institute. If you’re a paycheck-to-paycheck family, you’re part of a bigger margin than you may realize.
What Does Living Paycheck to Paycheck Really Mean?
It’s not just about having zero dollars left over at the end of the month. The Bank of America Institute uses a specific threshold: If you’re spending more than 95% of your income on necessities — rent, groceries, gas, utilities, internet — you’re in paycheck to paycheck territory. That leaves less than 5% for everything else: emergencies, savings, or anything remotely fun.
Nearly 29% of lower-income households fit this description in 2025. Two years ago, that figure was 27.1%. When all income thresholds are considered, Bank of America estimates that 25% of all U.S. households fall beneath that.
The Math Isn’t Mathing
Here’s the brutal reality: Your grocery bill is climbing faster than your paycheck. Much faster. While inflation has cooled considerably from its 2022 peak of over 9%, it’s currently hovering around 3%, which is still above the level the Federal Reserve wants it to be.
Meanwhile, wage growth for lower-income workers has essentially flatlined at just 1% year-over-year as of October. Think about that gap. Every month, the cost of keeping your household running increases by approximately 3%, but your ability to pay for it grows by only 1%. You’re not imagining it — you really are falling behind, month after month.
Why Your Raise Disappeared
During the pandemic, lower-wage workers actually had some bargaining power. Companies were desperate to hire, and workers could jump ship for better pay. That leverage is gone. Job openings have declined, and fewer people are quitting their jobs — which might sound like stability, but it’s actually a red flag for wage growth. When workers aren’t shopping around for better offers, employers don’t have to compete on salary. That creates a domino effect of smaller raises, or none at all.
Your Situation Might Be Even More Common Than Data Shows
There’s another factor worth considering: Bank of America’s analysis only includes people who have bank accounts. Many of the most financially vulnerable Americans don’t. Elise Gould, a senior economist at the Economic Policy Institute, points out that the data likely misses some of the households experiencing the most severe financial distress. That means that (unfortunately) the real number of Americans living on the edge could be significantly higher than 25%.
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- How Kakeibo, a 120-Year-Old Japanese Budgeting Technique, Is Saving People Money — To combat overspending, people are turning to a budgeting style that resembles journaling.
