Is Living Paycheck to Paycheck Now a Luxury? Experts Weigh In

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According to a recent survey shared by Talker Research, 39% of American workers admitted that living paycheck to paycheck would be seen as an improvement to their financial situation. The survey also found that 44% had overdrafted their bank accounts in the prior month and that 38% had less than $1,000 in their bank accounts.

These results clearly display how Americans are struggling with the point that it’s a luxury to just get by for some. GOBankingRates consulted with experts to determine whether there are merits to living paycheck to paycheck and what consumers can do about it.

What’s Driving This Shift? 

What’s driving this shift in American finances? Leslie Tayne, head attorney and founder of Tayne Law Group, noted that with inflation outpacing consumer wages in most parts of the country, living paycheck to paycheck has become a reality for an increasing number of Americans, with many consumers already in debt before their next paycheck arrives.

Aaron Razon, a personal finance expert at Couponsnake, attributed this shift in American finances to several key factors, including the rising cost of living, increasing debt, stagnant wages and economic uncertainty. He said he believes that the combination of these factors makes financial stability seem like an impossible dream for many Americans who struggle and fail to save money due to the strain on their ever-limited financial resources.

Are There Merits to Living Paycheck to Paycheck?

While this cycle can be stressful, having enough money to get through until the next payday has its merits. 

You’re Getting By Financially 

“A merit that comes with living paycheck to paycheck is hopefully being able to make ends meet when bills are due,” Tayne said. “Not having the funding to make ends meet can be incredibly stressful, and can wreak havoc on the mental health of financially unstable consumers, as well as disrupting relationships, whether personal or family.”

When you get by financially, you don’t have to worry about falling behind or trying to borrow money from family, which could be much more stressful. 

“When compared to falling behind every month, paying your regular bills without adding to or getting into debt can feel special,” said Erica Sandberg, a consumer finance expert at BadCredit.org. “In one sense, living paycheck to paycheck indicates that you’re making ends meet. Barely, but it shows you have enough cash coming in to cover your expenses.”

When you can cover all of your bills, you feel much more empowered compared with if you weren’t able to get through another pay cycle.

You Have Room for Improvement

Tanye noted that living paycheck to paycheck can also help consumers develop their financial skills and learn how to manage their expenses within their means.

If you can develop healthy financial habits when your finances are limited, you’ll be better equipped to handle money when your finances grow.

You Become More Aware of Your Spending

“Living paycheck to paycheck doesn’t have many merits, but it does force awareness of every dollar,” said Jeff Herman, an investment advisor at The Jeffrey Group. “The key is to take that awareness and turn it into action.”

When you’re making just enough to get by until the next paycheck, you’re forced to figure out what’s happening with your money, which can allow you to create a financial plan since you know the purpose of every dollar. 

How You Can Escape This Cycle

The good news is that you can take proactive steps to try to escape the cycle of barely getting by until the next payday.

Focus On Increasing Your Income

Tayne acknowledged that escaping this cycle can be challenging on a limited income, so consumers may want to consider improving their earning potential since there are only so many hours in a week that one can work.

With 34% of hourly workers relying on more than one income stream to get by, per Talker Research, it’s worth looking into finding out if you can upgrade your skills through your employer to increase your income. By finding ways to make more money at your current company, you can also limit the amount of time that you dedicate to extra gigs. 

Look For Ways To Reduce Your Expenses 

The survey found that 38% of American workers had to cancel subscriptions between paychecks and that 31% couldn’t make any purchases.

With 50% of Americans feeling that their financial health is out of control, it’s essential to live below your means by figuring out what you can afford to spend money on. This might require you to consider downsizing from a home to an apartment or switching from an expensive car payment to public transportation.

The main objective is to find significant ways that you can reduce your expenses so that you’re not just barely getting by. 

Sell Assets or Items You No Longer Use

Tayne suggested liquidating assets that you don’t often use, such as yard tools, to look for extra income to cover unexpected expenses.

There are great opportunities these days to utilize online marketplaces to gain extra income from unused items you may have around the house.

Avoid New Debt

Tanye emphasized that it’s of the utmost importance for consumers living with limited income to avoid accumulating new debt. She believes that taking out a new credit card to fund expenses is not the answer, no matter how limited someone’s income may be.

“If the consumer doesn’t have a thorough financial plan to pay back the credit card balance, it can lead them deeper into the cycle of debt. Budgeting can’t be overlooked, along with creative ways to manage the income and expenses you have,” she said.

Create a Cushion

Sandberg suggested creating a cushion in the good times by making every effort to live within your means. She believes that almost everybody has some waste in their budget, so figure out where yours is and start to eliminate it. 

Herman pointed out that escaping the cycle usually doesn’t come from a big income jump, but from rethinking spending habits and making intentional choices with what you already have. If you’re able to create a financial buffer over time slowly, you’ll eventually break the cycle of just getting by. 

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