‘The Big Money Show’ panel reacts to Brian Moynihan’s declare that Individuals maintain spending regardless of rising pessimism in regards to the economic system.
Practically 1 / 4 of all U.S. households are residing paycheck to paycheck and the quantity has risen over the past 12 months, although the speed of development has slowed, based on a brand new report.
The Financial institution of America Institute report discovered that just about 24% of households can be categorised as residing paycheck to paycheck thus far in 2025, a rise of 0.3 share factors from 2024 – though the expansion price is sort of thrice decrease than it was a 12 months in the past.
It defines residing paycheck to paycheck as households spending over 95% of their earnings on requirements like housing, groceries, gasoline, utilities, web plans, public transit and childcare. That leaves them with little or no leftover funds for financial savings or “nice-to-have” discretionary purchases.
“Although the number of households living paycheck to paycheck is increasing this year, the pace of growth has slowed significantly,” Joe Wadford, an economist on the Financial institution of America Institute, instructed FOX Enterprise. “That’s because it seems like a lot of the financial stress that has been increasing has been concentrated in these lower-income households as these families struggle to keep up with cost increases.”
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Practically one in 4 Individuals live paycheck to paycheck, although the expansion price has slowed, based on the Financial institution of America Institute. (iStock)
Inflation has grown sooner than middle- and lower-income households’ after-tax wages since January 2025, the Financial institution of America Institute discovered.
That development has led to the share of lower-income households residing paycheck to paycheck rising to 29% this 12 months, from 28.6% final 12 months and 27.1% in 2023. Amongst middle- and higher-income households, there was little to no enhance within the proportion residing paycheck to paycheck.
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“For middle- and lower-income households, I think inflation is the primary driver. Especially this year, we’ve seen the gap between wages and expenses continue to widen for lower-income households,” Wadford mentioned.
“In October we saw a 1% wage increase, whereas the latest inflation data has the cost of living increasing by 3%,” he added. “Put another way, if your bills are increasing by $300, but you’re only making $100 more, how are you supposed to keep up with that? And I think the short answer is that some families are really struggling to.”
Wage development for lower-income employees has eased relative to high-income counterparts lately. (Yuki Iwamura/Bloomberg by way of Getty Photos)
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About 19% of higher-income households live paycheck to paycheck, which Financial institution of America attributed to life-style creep inflicting payments to rise.
“When you talk about the higher-income households that are living paycheck to paycheck, it could be that lifestyle creep is maybe the main driver,” Wadford mentioned. “You bought a house, you bought a couple of cars, and before you know it, all your money is going out to bills.”
Inflation has continued to pressure the budgets of American households. (Justin Sullivan/Getty Photos)
The report additionally discovered that wage development for lower-income earners has been easing in comparison with higher-income counterparts for the reason that begin of 2025, after it rose sooner in 2021-22, earlier than cooling in 2023-24.
“This K-shaped economy is largely dependent on wage growth,” Wadford mentioned. “As long as you continue to see this gap between higher-income wage growth and lower-income wage growth, you’re going to continue to see this.”
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“The gap between higher- and lower-income wage growth is the highest we’ve seen since 2016,” he added. “If we continue to see the labor market behaving differently for these two groups and cooling overall, I think this is kind of the situation for the foreseeable future.”
