The difficulties of living paycheck to paycheck are more widespread than we tend to think, as revealed in Reality Check: The Paycheck-To-Paycheck Report, a PYMNTS and LendingClub collaboration, and part of a study series based on surveys of nearly 29,000 U.S. consumers.
Of three personas researchers identified — those not living paycheck to paycheck, those living paycheck to paycheck but making it, and those living paycheck to paycheck and struggling with bills — over 20 percent of all respondents alarmingly fall into the “struggling” category.
Breaking these groups out by their earnings, findings get somewhat more startling as we see a higher number of higher earners also struggling. “Our data shows that 53 percent of consumers who make between $50,000 and $100,000 per year are living paycheck to paycheck, including 18 percent who struggle to pay their bills,” according to the Reality Check Report.
Savings — or lack thereof — emerges as a key determinant in paycheck to paycheck living.
Per the report, “Having savings inherently mitigates paycheck-to-paycheck challenges, ensuring consumers have resources for large, unexpected or discretionary purchases. Most Americans have limited savings, however: 70 percent of consumers have less than $15,000 in savings, and one-third of all consumers have less than $1,000. This modest financial cushion helps explain why such a large portion of the population lives paycheck to paycheck.”
While savings for those not living paycheck to paycheck rose sharply last year — an effect seen in all personas — “The average savings of struggling paycheck-to-paycheck consumers increased nearly threefold over the past year, rising from $2,400 in March 2020 to $6,200 in April 2021,” and their better-paid counterparts saved accordingly.
In a telling finding that signals economic recovery, the report states that “Savings levels for paycheck-to-paycheck consumers recently declined sharply, dropping by approximately 40 percent between April and May 3. This could indicate that this group feels comfortable opening their wallets again as businesses fully reopen and conditions steadily normalize.”