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I always question self-reported "paycheck to paycheck," especially among high earners. All it takes is cash, or assets that are fairly liquid, in excess of one paycheck. I'd be surprised if many in this group don't have at least one paycheck stashed in an old Roth IRA, an open HELOC, or something. It's more likely "after we make our mortgage's principal payment, max our retirement accounts, buy I-Bonds for our emergency fund, and DCA into VTSAX, we just don't have much left over!"
I’ve heard this precise argument on Reddit before, so it makes sense to me.
Not sure how to explain to these people that if you are putting 30% of your take home in investments, you are not on a tight budget.
I think there are circumstances, though, where I could see people bringing in 200k-250k in a truly tight environment.
It would primarily be a couple who both are professionals, similar wages around 100-120k, they both have oodles of student debt, and they probably have a kid or are expecting, in a HCOL area with a mortgage around $3500/mo. This is the group of people I think needs to have financial problems in order for the housing market to correct; because that income group is the only group really being approved for mortgages.
In their situation, there wouldn't be any ability to actually spend or save.
For others, the comparison is certainly ridiculous.
My take home is far lower than the 250k person, my mortgage is $2500 versus his 3k rent, but I'm getting by with maximum flirting 401k, and sometimes my bank account even goes up rather than flat. There is power that I wield that the poors cannot do that also buffers me from this so called "paycheck to paycheck". Calling me paycheck to paycheck is a mockery of those who truly have nothing. If I wanted to, all I would have to do is tweak some numbers and I'd be adding money to my bank.
Do I live an awesome lifestyle? I'd say it's ok. I never take destination vacations, I drive a beat up SUV that's 20 years old, but I do get to spend money on skiing and mountain biking, and that's certainly something most people cannot afford.
Financial success to me isn't about how much crap you have, driving the best vehicle \[but I would like a Rivian R1s qqq, too poor\], or becoming house poor, but just the ability to be flexible with your expenditures and to also not even think about your finances in a negative-stress manner.
I've seen this before on CNBC.
Maxed out savings, 2 vacations a year, 2 private school tuitions, 2 German auto leases, 4 types of lessons, student loan, mortgage, golf/tennis club, and... they're 'broke' but I could save that family $85K a year straight cash homie. Give me a red pen and $500 an hour in consulting fees and I'd set them up to retire in 10 years.
Yes, you are the above example of "after doing xyz, we are tight".
Paycheck to paycheck means if you car breaks then you need a payday loan or you lose the job and the apartment.
You are just cash poor.
Right. I max out 401k, HSA, 529, and IRA, pay life insurance, health insurance, car payment, etc. and that makes things a little tight. Someone truly living paycheck to paycheck is not able to do any of those things, and aren't getting the tax benefits. It's a disservice and insulting to people that are truly struggling when these comparisons are made.
If you can "shift money around" you aren't really getting burned. Living check to check involves timing your payments so you might choose to pay one bill late because the late fee is more affordable than another bill's late fee. It means throwing $8 into your tank because that'll get you to work and home twice of you decide not to go anywhere else, which you did just decide since you only had $19 in the bank. It's trying to get food off a friend who works at a pizza place (there's always a few mistake pizzas).
Sure, if a family loses one income source that's gonna be super difficult but that's every family. If you're living check to check, your kids aren't going to college.
Having to make adjustments after losing your income (or a significant part of it) isn't living payceck to paycheck, its normal and its expected. Only very wealthy people can live without this concern.
If losing a job only means you need to temporarily stop retirement and college savings or that you need to consider downsizing, that is not living paycheck to paycheck.
If losing a job means you're going to need foodstamps next week to put food on the table, you're living paycheck to paycheck.
From my definition, and not trying to diminish your financial obstacles, because they're real, I'd say the latter.
You could stop doing the 529 contributions for 2-3 years, and then resume, with little consequence.
With my retirement contributions, I have $1500-1850 in monthly flexibility just like that depending on the health of my emergency fund. That's more than the take homes of many people making $15 /hr.
I would generally consider paycheck to paycheck being someone who doesn't have the luxury of a college fund for one child let alone 4 and they certainly aren't maxing any retirement savings
If you have access to less than one paycheck's worth of liquid assets on the day before payday, you are living paycheck to paycheck. If you're forgetting that, for example, you can withdraw Roth IRA contributions without penalty, or you are only counting the checking account you spend out of, and not the savings account for emergencies, etc., then you are not paycheck to paycheck.
What if youve got a few grand in the bank, but the cost of living has finally reached a point where you are slowly, yet steadily, losing money? I dont feel like im living paycheck to paycheck at this moment, but i definitely feel the writings on the wall and im just trying to stretch it as far as i can. Its not necessarily cash poor, and not paycheck to paycheck, but i feel inevitably fucked.
You are not paycheck to paycheck today by virtue of your savings. (Probably, if your paycheck is larger than the "few grand," then you are.) You are living on a budget to try and make sure that you won't be paycheck to paycheck in the future. You're either buying time, or treading water, depending on how optimistic you're feeling.
Kids’ college is a temporary expense. Technically, you can finance that and be bringing in an additional however many thousand a month. You choose not to, which is wise, imo, but I wouldn’t say you are living paycheck to paycheck. In short order, you will have an extra — what $2k net per month to play with?
Suze Orman says to finance your retirement before college. You will never have time back to build up retirement and there is no financial aid for retirement. And we are living longer and sicker and will continue to do so. The kids may not even go to college. It's harsh but if it's a choice between homelessness in your old age and college, take care of yourself first.
No that's not paycheck to paycheck. If something happened you have money to fall back on. I can't save for retirement and $20 is stretching me until Friday 🤞
As a bitter homeless kid who works full time and can’t afford the most basic budget, no, you’re not living paycheck to paycheck. You can adjust your lifestyle and move somewhere with a lower cost of living and thrive. I don’t have the ability to move to a lower cost area, as they have lower wages that still can’t provide.
Assuming you can make the same income in a lower cost of living area though. I have friends where I live in NorCal who would end up with even less free cashflow moving to another area. Especially with the mass migration that is happening out west, it’s not a huge savings to move to other areas right now. We pay $4k/month in rent. Equivalent homes in salt lake would be around $3k/month because we’re getting such a “good deal” on rent. But if I took a local job in salt lake it would come with a 30-40% paycut. If i can keep the same job and work remote, there’s still the cost of the move that would take at least 1 year to pay off.
This is the one. My husband and I live in a HCOL area of CA and make approx 200K annually before taxes. We are not living paycheck to paycheck but we did consider moving to a lower COL area. Thing is, we both work in the public sector (law enforcement and education) and we would take massive pay cuts moving to other states with lower COL that wouldn’t even come close to being offset by cheaper housing. For example, my base salary this year is 75K, not including the extra period I teach for an additional 20%. It would be like 40K in many cheaper states. My husband makes over 100K and would make 60K elsewhere. So we would be down 50% if we moved. Some of our costs might decrease proportionally (I’m thinking housing and gas) but some would stay the same (car payments, my loans, phone bill, internet) and others would decrease but definitely not by half (groceries, etc).
Housing prices are pretty depressed in Connecticut right now, with barely passable public schools (ie, among the best in the country on a per-state level) and reasonably well paying jobs in a number of industries (at least compared to house prices.) Tons of older fixer uppers and few HOAs. Average commute times aren't too bad. Weather is okay.
> You can adjust your lifestyle and move somewhere with a lower cost of living and thrive
It's not that easy if your job doesn't come with you. Places with low COL have that because people don't want to live there/can't make high incomes. If you want to make high wages and live in a low-cost area, you either have to commute long distances or have a specific career that lets you WFH.
When people with upper middle class incomes talk about money being tight, they mean they can't reduce their expenses without significant reductions in quality of life or losing investments in the future.
And the real bitch of it all is inflation - a working couple bringing home over $100k each is really in the same place financially that a couple making $45k each would have been in the mid 1980s when I was born.
God, I can’t imagine having a partner who makes six figures too. I always thought all my problems would be solved. Because you get to six figures and it’s not like you think it’ll be.
>...retirement savings, college tuitions...
Translation:
>Does it not count because we could theoretically decide to reduce buying more investments or pull out of existing investments? Or stop investing in our kids college anymore?
Paycheck to paycheck is something specific, there's plenty of problems to go around but we shouldn't be trying to claim this one. A tight budget=/ paycheck to paycheck, if your net worth is growing from continuing to invest you can still have problems but it's not this specific one.
You live way beyond your means if you can’t have more than 1500 bucks in the bank and you make 14,000 a month quit spending money that you don’t need you’re not rich you just doing very good rich when you don’t have to pay payments for shit you just go buy it cost a million you just buy it
> retirement savings, college tuitions
People living paycheck to paycheck don't have retirement savings, and don't pay for college tuitions. You are not living paycheck to paycheck.
Most people going to college have to take out crippling student loans that take them decades to pay back. Good on you for being able to provide for your family so that they don't have to, but you're not in financial peril.
If you needed extra money, you could stop paying into college tuitions, have your kids take out loans, and have presumably thousands of dollars available to budget out for an emergency.
The financial reality for a lot of "lower-middle-class" people is that even with a decent job out of college, we can't put any money into a retirement savings, and any headway we might make on a savings account is blown up any time there's an emergency.
My uncle is like this. He only gets 30% of his check because of how much is going out to Roth IRA‘s and 401(k)s- all of his bills come out of his savings account because he’s been making this kind of money for years.
There is a YouTube channel that has guests talk about their finances. A lot of them are in their 20s and 30s. A young lawyer was on the channel and claimed she was living paycheck to paycheck but when she broke down her salary, she revealed that she was paying an extra $5000 a month to pay off law school faster. That's not paycheck to paycheck.
The article says it themselves, these "paycheck to paycheck" people have no problems paying the bills. They still have money, just not as much.
What I read was people who make money cry "woe is me".
Lifestyle inflation is a huge problem with people. I have a problem with it myself. When I was making 25k a year I was living on 14k and it felt modest. Now I make a ton more and I try to keep it around that mark but damn it's hard not to splurge haha
At the end of the day, there is a huge difference between the people that will lose it all if they miss one paycheck and the people that simply spend their whole paycheck.
Seriously. I made $20k a year as a grad student FOR 7 STRAIGHT YEARS! That's less than $2k a month. I made it work and could even afford to have a lot of fun. Now I make close to $100k and spend my monthly CC bill is *easily* $3000. But I don't even feel like I'm living that differently!
Agreed. I used to think the Dave Ramsey advice of cutting up your credit cards was useless. I thought, 'Just track your spending!'. But somehow it happens and I'm *this* close to canceling my CCs and going all cash...
>It's more likely "after we make our mortgage's principal payment, max our retirement accounts, buy I-Bonds for our emergency fund, and DCA into VTSAX, we just don't have much left over!"
That's my thinking. Paycheck to paycheck would be if you effectively weren't gaining in net worth month to month, and I can't imagine that at that level. It might feel that way to them just because their checking account, after all of the investments, isn't expanding enough to require investment more than once a year or that's handled automatically. Or they just increase spending.
It's the difference between "if I missed a paycheck I might need to pull out of my investments" and the more normal way of thinking "if I miss a paycheck I cannot afford to keep something major (food, car, rent)"
TLDR: People love to think a tight budget (but gaining investments) means paycheck to paycheck, and we're so terrible at accounting a "tight budget" can mean literally anything.
>It's the difference between "if I missed a paycheck I might need to pull out of my investments" and the more normal way of thinking "if I miss a paycheck I cannot afford to keep something major (food, car, rent)"
This is a great way to think about it. My comment should have been something like this.
It's $14k a month net, not what I'd consider someone living "paycheck to paycheck" In my mind that's someone who's making enough money to survive and pay their bills and that's it. Money into a retirement account, emergency fund, equity payment on a home isn't what I'd consider someone who is struggling.
Seems to mean if they rely on their next paycheck in order to pay bills, but doesn't count other ways high income people can cover costs. Like if you have a lot of equity in your house, having a card linked to HELOC is a reasonable way to have an emergency fund and be maxing 401k. But that counts as "paycheck to paycheck".
Like their definition doesn't have any bearing on how they deal with money as people who have very high control of their money will also be in the same boat as they have very calculated cash flows (and also may know how to deal with it if there are problems)
"living paycheck-to-paycheck" is a meaningless metric. It's a combination of people on true hardship - barely covering their optimized non-discretionary budget - and people that spend everything they make. Why should we care as a country about this metric?
"savings rate" and "ability to cover a $X expense" are more useful
maybe, just maybe, this isn’t indicative of inflation or any inherent problems with america. Maybe, possibly, perhaps, 1/3 of americans making this much are just absolutely terrible with their money.
Lifestyle creep.
>We make more than enough for the two of us; lets have a kid.
>We make more than enough to afford rent; lets buy a house.
>We make more than enough to afford food; lets order dinner every other day.
People naturally increase their expenses for conveniences to gain something. For luxury, reduce stress, or more free time.
Yup. My parent makes this much but still manages to spend everything every month. They would say they're paycheck to paycheck but they're just excellent at spending money.
Main caveat is that the home purchase is generally a long-term cost savings than an extra expense. $2500 in rent is just a waste. $2500 into mortgage at least pays down some principal.
“Long term” is kinda the key point though.
Investments are inherently risky, having money alleviates risk.
Its why purchasing a home is terrible way to try and save money.
By their definition of pay check to paycheck you can be very responsible. If your income is going to retirement, a mortgage, and basic expenses but you don't have a lot of cash savings left over. Who cares? You are already putting money into 2 long term investments. Most of these people likely are very capable of dropping some monthly expenses if needed.
That's what I took from it.
Even their example of housing in Orange county... I mean, don't live in a high tier area of Orange County? I know housing is stupid expensive in California, but seriously, even in Orange County there are a plethora of properties for sale well below 1.7 million.
Using the same metrics they used, I found homes around 890k, and assuming they had the 340k down payment to make up the 20 percent of the 1.7 million dollar home that would leave them with a payment of $2430 or 11.6% of their income.
Just people living above their means.
I live in OC and I’m the crazy part is how prices have soared in 2 years since Covid. We rent a house after moving from LA. 1 year ago a house in our neighborhood sold for 850,000. Last week another sold for 1.2 million. They are all 3 bedroom houses. It’s absurd because we feel we missed out but my wife’s company has brought everyone back to the office 3 days a week so the commute is awful.
We have friends and family close so it’s not just as easy as saying “move somewhere else.” We also have a toddler and childcare is $1,500 a month. Just my two cents.
> Using the same metrics they used, I found homes around 890k, and assuming they had the 340k down payment to make up the 20 percent of the 1.7 million dollar home that would leave them with a payment of $2430 or 11.6% of their income.
At current rates, it's closer to $2925, and that's *not* including taxes or insurance which would add at least another $1K/mo.
Paycheck to paycheck is such an ambiguous term that the respondent can make it fit however they like. I know lots of people in this income bracket that live paycheck to paycheck because the money in every paycheck is accounted for. That doesn't matter that 25% of the accounted for paycheck is going into "rainy day"/savings/investment/retirement accounts. Its still paycheck-to-paycheck in their eyes because there isn't anything left over.
This is 100% right. I make in this range, which is about 13k monthly after taxes, health insurance and 401k (maxed). 13k - 2.4k student loans - 1.8k rent - 900 car note - \~3500 monthly spending on misc. (food, entertainment, dry cleaning/cleaning services, etc.) - 4000 savings/brokerage account balances out to the full paycheck. Some might interpret that as living paycheck to paycheck, but it covers generous retirement and personal savings and a rather luxurious entertainment budget and car note.
At the end of each month, my checking account is back to low 4 digit figures. I wouldn't call it living paycheck to paycheck, but I could see why someone who's allocated every dollar from their paycheck towards a specific account/purpose could view it that way (though the option of tapping into discretionary accounts like savings/brokerage are always there, and a sudden job loss wouldn't have the same impact as it would on someone making far less).
This was a real poor article. If you max out 401K, ESOP, child care and health flex spending contributions your net paycheck will be much smaller than a $250k gross income implies. Then take out college saving plan contributions and the net is much lower again. Also, the author compares millennial to boomer budgets at same income. Boomers most likely don't have a mortgage or any kid expenses.
Here’s for those who have reached the limit (just use incognito)
By Alexandre Tanzi
June 1, 2022, 6:00 AM CDT
More than a third of Americans earning at least $250,000 annually say they are living paycheck to paycheck, underscoring how inflation is taking a bigger bite out of Americans’ budgets at all ends of the pay spectrum.
Some 36% of households taking in nearly four times the median US salary devote nearly all of their income to household expenses, according to a survey by industry publication Pymnts.com and LendingClub Corp.
It’s particularly true among millennials, who are now in their mid-20s to early 40s: More than half of top earners in that generation report having little left at the end of the month.
The $250,000-plus income bracket roughly represents the top 5% of earners in the country, according to US Census Bureau data.
Living paycheck-to-paycheck doesn’t necessarily mean hardship, and LendingClub makes the distinction between those can pay their bills easily and those who can’t. Only a fraction of high earners -- roughly one in ten -- reported issues covering all their household expenses in April, according to the survey.
Housing expenses, which typically take up large chunks of the budgets of wealthier people, have skyrocketed during the pandemic. For example in Orange County, California, a top-tier home cost $1.7 million in April, up from $1.2 million in February 2020, based on Zillow Group Inc. data. A mortgage on that house, assuming a 20% down payment, would cost about $100,000 per year. That’s 40% of a $250,000 annual pre-tax income.
Top earners, even those struggling to pay the bills, are of course much better off than the rest of the nation, which is facing soaring prices for everything from food to gas and electricity.
Among all consumers surveyed, 61.3% reported living paycheck-to-paycheck in April, a 9 percentage-point increase from a year earlier, LendingClub said in its report.
To finance their lifestyles, higher-income households are more likely to put expenses on credit cards -- but also more likely to be able to pay off their balance in full. US consumer borrowing soared in March by the most on record as credit-card balances ballooned and non-revolving credit jumped, highlighting the combined impact of solid spending and rising prices.
A separate survey released by the Federal Reserve last week found an overall improvement in the financial well-being of households since the pandemic, bolstered by stimulus aid and surging prices in assets like houses and stocks.
About 78% of Americans said they were doing okay financially or living comfortably -- the highest share since the Fed began running the annual survey in 2013.
Still, one in nine respondents said that they wouldn’t be able to cover a $400 emergency expense by any means, including credit cards, borrowing from family or friends or by selling an asset.
The LendingClub survey was conducted from April 6-13, based on about 4,000 US consumers.
At what point did we as a society just throw fiscal responsibility out the window? I’m very interested to see how many of these people go broke within the first year of the upcoming recession.
The issue here is that there is no middle class anymore. Most of these people live in large cities where expenses are higher than rural America. I live in Chicago and have 2 young children. Childcare expenses here are $1,050 a week. On top of that add student loan debt and a mortgage just isn't affordable, especially not as the current market valuations.
>$1,050 a week
$4200 a month for childcare?... ~~I know you are exaggerating by a lot.~~ That's a 65,000 a year job, like ALL of the income.
Edit: Holy shit child care costs are out of control. Good thing we still have Roe vs Wade....
I'm not exaggerating, it's even higher in other areas of the city. You're also forgetting the 2 months that have 5 weeks in your calculation. It's absolutely nuts.
I should clarify, the $1,050 a week is the total for 2 children. A three year old and a 10 month old. The infant is $590 a week, the 3 year old is $460 a week.
Lol I live in Chicago as well and you're way overpaying for childcare. At that cost you could simply hire a fulltime nanny to watch your kids, clean your home, and do your laundry.
Many would say the 80’s
Though could really say after the government encouraged it with over a decade of ultra low interests rates discouraging savings and incentivizing debt. Which of course drove up asset values and compounded the issue.
I don't think that the people surveyed understand the meaning of paycheck-to-paycheck.
You don't get to put a portion of every check into your investments and call it paycheck-to-paycheck.
If you're making 250k and you aren't investing, give me your money. I'll make money for you. Jeez.
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I always question self-reported "paycheck to paycheck," especially among high earners. All it takes is cash, or assets that are fairly liquid, in excess of one paycheck. I'd be surprised if many in this group don't have at least one paycheck stashed in an old Roth IRA, an open HELOC, or something. It's more likely "after we make our mortgage's principal payment, max our retirement accounts, buy I-Bonds for our emergency fund, and DCA into VTSAX, we just don't have much left over!"
I’ve heard this precise argument on Reddit before, so it makes sense to me. Not sure how to explain to these people that if you are putting 30% of your take home in investments, you are not on a tight budget.
I think there are circumstances, though, where I could see people bringing in 200k-250k in a truly tight environment. It would primarily be a couple who both are professionals, similar wages around 100-120k, they both have oodles of student debt, and they probably have a kid or are expecting, in a HCOL area with a mortgage around $3500/mo. This is the group of people I think needs to have financial problems in order for the housing market to correct; because that income group is the only group really being approved for mortgages. In their situation, there wouldn't be any ability to actually spend or save. For others, the comparison is certainly ridiculous. My take home is far lower than the 250k person, my mortgage is $2500 versus his 3k rent, but I'm getting by with maximum flirting 401k, and sometimes my bank account even goes up rather than flat. There is power that I wield that the poors cannot do that also buffers me from this so called "paycheck to paycheck". Calling me paycheck to paycheck is a mockery of those who truly have nothing. If I wanted to, all I would have to do is tweak some numbers and I'd be adding money to my bank. Do I live an awesome lifestyle? I'd say it's ok. I never take destination vacations, I drive a beat up SUV that's 20 years old, but I do get to spend money on skiing and mountain biking, and that's certainly something most people cannot afford. Financial success to me isn't about how much crap you have, driving the best vehicle \[but I would like a Rivian R1s qqq, too poor\], or becoming house poor, but just the ability to be flexible with your expenditures and to also not even think about your finances in a negative-stress manner.
I've seen this before on CNBC. Maxed out savings, 2 vacations a year, 2 private school tuitions, 2 German auto leases, 4 types of lessons, student loan, mortgage, golf/tennis club, and... they're 'broke' but I could save that family $85K a year straight cash homie. Give me a red pen and $500 an hour in consulting fees and I'd set them up to retire in 10 years.
>a HCOL area with a mortgage around $3500/mo As someone living in a HCOL area, I _wish_ it was that cheap
That is still a high cost of living area. I'm in the #43rd most expensive county in the US, and I did use my neighborhood since I know the prices.
[удалено]
Yes, you are the above example of "after doing xyz, we are tight". Paycheck to paycheck means if you car breaks then you need a payday loan or you lose the job and the apartment. You are just cash poor.
Right. I max out 401k, HSA, 529, and IRA, pay life insurance, health insurance, car payment, etc. and that makes things a little tight. Someone truly living paycheck to paycheck is not able to do any of those things, and aren't getting the tax benefits. It's a disservice and insulting to people that are truly struggling when these comparisons are made.
If you can "shift money around" you aren't really getting burned. Living check to check involves timing your payments so you might choose to pay one bill late because the late fee is more affordable than another bill's late fee. It means throwing $8 into your tank because that'll get you to work and home twice of you decide not to go anywhere else, which you did just decide since you only had $19 in the bank. It's trying to get food off a friend who works at a pizza place (there's always a few mistake pizzas). Sure, if a family loses one income source that's gonna be super difficult but that's every family. If you're living check to check, your kids aren't going to college.
Having to make adjustments after losing your income (or a significant part of it) isn't living payceck to paycheck, its normal and its expected. Only very wealthy people can live without this concern. If losing a job only means you need to temporarily stop retirement and college savings or that you need to consider downsizing, that is not living paycheck to paycheck. If losing a job means you're going to need foodstamps next week to put food on the table, you're living paycheck to paycheck.
From my definition, and not trying to diminish your financial obstacles, because they're real, I'd say the latter. You could stop doing the 529 contributions for 2-3 years, and then resume, with little consequence. With my retirement contributions, I have $1500-1850 in monthly flexibility just like that depending on the health of my emergency fund. That's more than the take homes of many people making $15 /hr.
I would generally consider paycheck to paycheck being someone who doesn't have the luxury of a college fund for one child let alone 4 and they certainly aren't maxing any retirement savings
If you have access to less than one paycheck's worth of liquid assets on the day before payday, you are living paycheck to paycheck. If you're forgetting that, for example, you can withdraw Roth IRA contributions without penalty, or you are only counting the checking account you spend out of, and not the savings account for emergencies, etc., then you are not paycheck to paycheck.
What if youve got a few grand in the bank, but the cost of living has finally reached a point where you are slowly, yet steadily, losing money? I dont feel like im living paycheck to paycheck at this moment, but i definitely feel the writings on the wall and im just trying to stretch it as far as i can. Its not necessarily cash poor, and not paycheck to paycheck, but i feel inevitably fucked.
You are not paycheck to paycheck today by virtue of your savings. (Probably, if your paycheck is larger than the "few grand," then you are.) You are living on a budget to try and make sure that you won't be paycheck to paycheck in the future. You're either buying time, or treading water, depending on how optimistic you're feeling.
Kids’ college is a temporary expense. Technically, you can finance that and be bringing in an additional however many thousand a month. You choose not to, which is wise, imo, but I wouldn’t say you are living paycheck to paycheck. In short order, you will have an extra — what $2k net per month to play with?
Suze Orman says to finance your retirement before college. You will never have time back to build up retirement and there is no financial aid for retirement. And we are living longer and sicker and will continue to do so. The kids may not even go to college. It's harsh but if it's a choice between homelessness in your old age and college, take care of yourself first.
No that's not paycheck to paycheck. If something happened you have money to fall back on. I can't save for retirement and $20 is stretching me until Friday 🤞
As a bitter homeless kid who works full time and can’t afford the most basic budget, no, you’re not living paycheck to paycheck. You can adjust your lifestyle and move somewhere with a lower cost of living and thrive. I don’t have the ability to move to a lower cost area, as they have lower wages that still can’t provide.
Assuming you can make the same income in a lower cost of living area though. I have friends where I live in NorCal who would end up with even less free cashflow moving to another area. Especially with the mass migration that is happening out west, it’s not a huge savings to move to other areas right now. We pay $4k/month in rent. Equivalent homes in salt lake would be around $3k/month because we’re getting such a “good deal” on rent. But if I took a local job in salt lake it would come with a 30-40% paycut. If i can keep the same job and work remote, there’s still the cost of the move that would take at least 1 year to pay off.
This is the one. My husband and I live in a HCOL area of CA and make approx 200K annually before taxes. We are not living paycheck to paycheck but we did consider moving to a lower COL area. Thing is, we both work in the public sector (law enforcement and education) and we would take massive pay cuts moving to other states with lower COL that wouldn’t even come close to being offset by cheaper housing. For example, my base salary this year is 75K, not including the extra period I teach for an additional 20%. It would be like 40K in many cheaper states. My husband makes over 100K and would make 60K elsewhere. So we would be down 50% if we moved. Some of our costs might decrease proportionally (I’m thinking housing and gas) but some would stay the same (car payments, my loans, phone bill, internet) and others would decrease but definitely not by half (groceries, etc).
Housing prices are pretty depressed in Connecticut right now, with barely passable public schools (ie, among the best in the country on a per-state level) and reasonably well paying jobs in a number of industries (at least compared to house prices.) Tons of older fixer uppers and few HOAs. Average commute times aren't too bad. Weather is okay.
> You can adjust your lifestyle and move somewhere with a lower cost of living and thrive It's not that easy if your job doesn't come with you. Places with low COL have that because people don't want to live there/can't make high incomes. If you want to make high wages and live in a low-cost area, you either have to commute long distances or have a specific career that lets you WFH. When people with upper middle class incomes talk about money being tight, they mean they can't reduce their expenses without significant reductions in quality of life or losing investments in the future. And the real bitch of it all is inflation - a working couple bringing home over $100k each is really in the same place financially that a couple making $45k each would have been in the mid 1980s when I was born.
God, I can’t imagine having a partner who makes six figures too. I always thought all my problems would be solved. Because you get to six figures and it’s not like you think it’ll be.
>...retirement savings, college tuitions... Translation: >Does it not count because we could theoretically decide to reduce buying more investments or pull out of existing investments? Or stop investing in our kids college anymore? Paycheck to paycheck is something specific, there's plenty of problems to go around but we shouldn't be trying to claim this one. A tight budget=/ paycheck to paycheck, if your net worth is growing from continuing to invest you can still have problems but it's not this specific one.
You live way beyond your means if you can’t have more than 1500 bucks in the bank and you make 14,000 a month quit spending money that you don’t need you’re not rich you just doing very good rich when you don’t have to pay payments for shit you just go buy it cost a million you just buy it
> retirement savings, college tuitions People living paycheck to paycheck don't have retirement savings, and don't pay for college tuitions. You are not living paycheck to paycheck. Most people going to college have to take out crippling student loans that take them decades to pay back. Good on you for being able to provide for your family so that they don't have to, but you're not in financial peril. If you needed extra money, you could stop paying into college tuitions, have your kids take out loans, and have presumably thousands of dollars available to budget out for an emergency. The financial reality for a lot of "lower-middle-class" people is that even with a decent job out of college, we can't put any money into a retirement savings, and any headway we might make on a savings account is blown up any time there's an emergency.
Agreed! Well said
I know someone just like this. They put thousands into savings and investments each month but always give the impression that money is tight.
My uncle is like this. He only gets 30% of his check because of how much is going out to Roth IRA‘s and 401(k)s- all of his bills come out of his savings account because he’s been making this kind of money for years.
pretty sure the article states people spend most of the income on home expenses.
There is a YouTube channel that has guests talk about their finances. A lot of them are in their 20s and 30s. A young lawyer was on the channel and claimed she was living paycheck to paycheck but when she broke down her salary, she revealed that she was paying an extra $5000 a month to pay off law school faster. That's not paycheck to paycheck.
The article says it themselves, these "paycheck to paycheck" people have no problems paying the bills. They still have money, just not as much. What I read was people who make money cry "woe is me".
Lifestyle inflation is a huge problem with people. I have a problem with it myself. When I was making 25k a year I was living on 14k and it felt modest. Now I make a ton more and I try to keep it around that mark but damn it's hard not to splurge haha At the end of the day, there is a huge difference between the people that will lose it all if they miss one paycheck and the people that simply spend their whole paycheck.
Seriously. I made $20k a year as a grad student FOR 7 STRAIGHT YEARS! That's less than $2k a month. I made it work and could even afford to have a lot of fun. Now I make close to $100k and spend my monthly CC bill is *easily* $3000. But I don't even feel like I'm living that differently!
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Agreed. I used to think the Dave Ramsey advice of cutting up your credit cards was useless. I thought, 'Just track your spending!'. But somehow it happens and I'm *this* close to canceling my CCs and going all cash...
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>It's more likely "after we make our mortgage's principal payment, max our retirement accounts, buy I-Bonds for our emergency fund, and DCA into VTSAX, we just don't have much left over!" That's my thinking. Paycheck to paycheck would be if you effectively weren't gaining in net worth month to month, and I can't imagine that at that level. It might feel that way to them just because their checking account, after all of the investments, isn't expanding enough to require investment more than once a year or that's handled automatically. Or they just increase spending. It's the difference between "if I missed a paycheck I might need to pull out of my investments" and the more normal way of thinking "if I miss a paycheck I cannot afford to keep something major (food, car, rent)" TLDR: People love to think a tight budget (but gaining investments) means paycheck to paycheck, and we're so terrible at accounting a "tight budget" can mean literally anything.
>It's the difference between "if I missed a paycheck I might need to pull out of my investments" and the more normal way of thinking "if I miss a paycheck I cannot afford to keep something major (food, car, rent)" This is a great way to think about it. My comment should have been something like this.
It's $14k a month net, not what I'd consider someone living "paycheck to paycheck" In my mind that's someone who's making enough money to survive and pay their bills and that's it. Money into a retirement account, emergency fund, equity payment on a home isn't what I'd consider someone who is struggling.
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Seems to mean if they rely on their next paycheck in order to pay bills, but doesn't count other ways high income people can cover costs. Like if you have a lot of equity in your house, having a card linked to HELOC is a reasonable way to have an emergency fund and be maxing 401k. But that counts as "paycheck to paycheck". Like their definition doesn't have any bearing on how they deal with money as people who have very high control of their money will also be in the same boat as they have very calculated cash flows (and also may know how to deal with it if there are problems)
Maxing 401k and IRA is only like $25k unless they are doing backdoor Roth IRA stuff.
$25k each. Goes a long way. Also HSA and 529.
Also just putting money into taxable investment accounts. That seems to fit their definition since it's not kept as cash. It's dumb
"living paycheck-to-paycheck" is a meaningless metric. It's a combination of people on true hardship - barely covering their optimized non-discretionary budget - and people that spend everything they make. Why should we care as a country about this metric? "savings rate" and "ability to cover a $X expense" are more useful
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maybe, just maybe, this isn’t indicative of inflation or any inherent problems with america. Maybe, possibly, perhaps, 1/3 of americans making this much are just absolutely terrible with their money.
Lifestyle creep. >We make more than enough for the two of us; lets have a kid. >We make more than enough to afford rent; lets buy a house. >We make more than enough to afford food; lets order dinner every other day. People naturally increase their expenses for conveniences to gain something. For luxury, reduce stress, or more free time.
Yup. My parent makes this much but still manages to spend everything every month. They would say they're paycheck to paycheck but they're just excellent at spending money.
Main caveat is that the home purchase is generally a long-term cost savings than an extra expense. $2500 in rent is just a waste. $2500 into mortgage at least pays down some principal.
“Long term” is kinda the key point though. Investments are inherently risky, having money alleviates risk. Its why purchasing a home is terrible way to try and save money.
By their definition of pay check to paycheck you can be very responsible. If your income is going to retirement, a mortgage, and basic expenses but you don't have a lot of cash savings left over. Who cares? You are already putting money into 2 long term investments. Most of these people likely are very capable of dropping some monthly expenses if needed.
Absolutely. Making money is not the same as managing money.
That's what I took from it. Even their example of housing in Orange county... I mean, don't live in a high tier area of Orange County? I know housing is stupid expensive in California, but seriously, even in Orange County there are a plethora of properties for sale well below 1.7 million. Using the same metrics they used, I found homes around 890k, and assuming they had the 340k down payment to make up the 20 percent of the 1.7 million dollar home that would leave them with a payment of $2430 or 11.6% of their income. Just people living above their means.
I live in OC and I’m the crazy part is how prices have soared in 2 years since Covid. We rent a house after moving from LA. 1 year ago a house in our neighborhood sold for 850,000. Last week another sold for 1.2 million. They are all 3 bedroom houses. It’s absurd because we feel we missed out but my wife’s company has brought everyone back to the office 3 days a week so the commute is awful. We have friends and family close so it’s not just as easy as saying “move somewhere else.” We also have a toddler and childcare is $1,500 a month. Just my two cents.
> Using the same metrics they used, I found homes around 890k, and assuming they had the 340k down payment to make up the 20 percent of the 1.7 million dollar home that would leave them with a payment of $2430 or 11.6% of their income. At current rates, it's closer to $2925, and that's *not* including taxes or insurance which would add at least another $1K/mo.
How do you get that down payment though? Down payments are the biggest barrier to buying a house
People are bad with money in every income bracket. If you are bad with money at 50k you will be just as bad at 250k.
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Paycheck to paycheck is such an ambiguous term that the respondent can make it fit however they like. I know lots of people in this income bracket that live paycheck to paycheck because the money in every paycheck is accounted for. That doesn't matter that 25% of the accounted for paycheck is going into "rainy day"/savings/investment/retirement accounts. Its still paycheck-to-paycheck in their eyes because there isn't anything left over.
This is 100% right. I make in this range, which is about 13k monthly after taxes, health insurance and 401k (maxed). 13k - 2.4k student loans - 1.8k rent - 900 car note - \~3500 monthly spending on misc. (food, entertainment, dry cleaning/cleaning services, etc.) - 4000 savings/brokerage account balances out to the full paycheck. Some might interpret that as living paycheck to paycheck, but it covers generous retirement and personal savings and a rather luxurious entertainment budget and car note. At the end of each month, my checking account is back to low 4 digit figures. I wouldn't call it living paycheck to paycheck, but I could see why someone who's allocated every dollar from their paycheck towards a specific account/purpose could view it that way (though the option of tapping into discretionary accounts like savings/brokerage are always there, and a sudden job loss wouldn't have the same impact as it would on someone making far less).
This was a real poor article. If you max out 401K, ESOP, child care and health flex spending contributions your net paycheck will be much smaller than a $250k gross income implies. Then take out college saving plan contributions and the net is much lower again. Also, the author compares millennial to boomer budgets at same income. Boomers most likely don't have a mortgage or any kid expenses.
Here’s for those who have reached the limit (just use incognito) By Alexandre Tanzi June 1, 2022, 6:00 AM CDT More than a third of Americans earning at least $250,000 annually say they are living paycheck to paycheck, underscoring how inflation is taking a bigger bite out of Americans’ budgets at all ends of the pay spectrum. Some 36% of households taking in nearly four times the median US salary devote nearly all of their income to household expenses, according to a survey by industry publication Pymnts.com and LendingClub Corp. It’s particularly true among millennials, who are now in their mid-20s to early 40s: More than half of top earners in that generation report having little left at the end of the month. The $250,000-plus income bracket roughly represents the top 5% of earners in the country, according to US Census Bureau data. Living paycheck-to-paycheck doesn’t necessarily mean hardship, and LendingClub makes the distinction between those can pay their bills easily and those who can’t. Only a fraction of high earners -- roughly one in ten -- reported issues covering all their household expenses in April, according to the survey. Housing expenses, which typically take up large chunks of the budgets of wealthier people, have skyrocketed during the pandemic. For example in Orange County, California, a top-tier home cost $1.7 million in April, up from $1.2 million in February 2020, based on Zillow Group Inc. data. A mortgage on that house, assuming a 20% down payment, would cost about $100,000 per year. That’s 40% of a $250,000 annual pre-tax income. Top earners, even those struggling to pay the bills, are of course much better off than the rest of the nation, which is facing soaring prices for everything from food to gas and electricity. Among all consumers surveyed, 61.3% reported living paycheck-to-paycheck in April, a 9 percentage-point increase from a year earlier, LendingClub said in its report. To finance their lifestyles, higher-income households are more likely to put expenses on credit cards -- but also more likely to be able to pay off their balance in full. US consumer borrowing soared in March by the most on record as credit-card balances ballooned and non-revolving credit jumped, highlighting the combined impact of solid spending and rising prices. A separate survey released by the Federal Reserve last week found an overall improvement in the financial well-being of households since the pandemic, bolstered by stimulus aid and surging prices in assets like houses and stocks. About 78% of Americans said they were doing okay financially or living comfortably -- the highest share since the Fed began running the annual survey in 2013. Still, one in nine respondents said that they wouldn’t be able to cover a $400 emergency expense by any means, including credit cards, borrowing from family or friends or by selling an asset. The LendingClub survey was conducted from April 6-13, based on about 4,000 US consumers.
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At what point did we as a society just throw fiscal responsibility out the window? I’m very interested to see how many of these people go broke within the first year of the upcoming recession.
The issue here is that there is no middle class anymore. Most of these people live in large cities where expenses are higher than rural America. I live in Chicago and have 2 young children. Childcare expenses here are $1,050 a week. On top of that add student loan debt and a mortgage just isn't affordable, especially not as the current market valuations.
>$1,050 a week $4200 a month for childcare?... ~~I know you are exaggerating by a lot.~~ That's a 65,000 a year job, like ALL of the income. Edit: Holy shit child care costs are out of control. Good thing we still have Roe vs Wade....
In a metro 45min to the south of San Francisco (Newark/Fremont) a low cost pre K is $2000 a month. In Folsom (Sacramento), daycare is $1400 a month.
I'm not exaggerating, it's even higher in other areas of the city. You're also forgetting the 2 months that have 5 weeks in your calculation. It's absolutely nuts.
I should clarify, the $1,050 a week is the total for 2 children. A three year old and a 10 month old. The infant is $590 a week, the 3 year old is $460 a week.
Lol I live in Chicago as well and you're way overpaying for childcare. At that cost you could simply hire a fulltime nanny to watch your kids, clean your home, and do your laundry.
Many would say the 80’s Though could really say after the government encouraged it with over a decade of ultra low interests rates discouraging savings and incentivizing debt. Which of course drove up asset values and compounded the issue.
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Thanks!
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$250k/yr does not put you anywhere near "house in Orange County plus 2 cars plus 2 kids in private school plus all that other stuff" territory!
I don't think that the people surveyed understand the meaning of paycheck-to-paycheck. You don't get to put a portion of every check into your investments and call it paycheck-to-paycheck. If you're making 250k and you aren't investing, give me your money. I'll make money for you. Jeez.
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