Why Upper-Middle Earners Are Living Paycheck to Paycheck (2024)

Living paycheck to paycheck is an unpleasant financial reality for many Americans. In fact, 59% of adults in the U.S. admit to living paycheck to paycheck, according to Charles Schwab's 2019 Modern Wealth Index Survey. Almost half (44%) have credit card debt and only 38% have an emergency fund.

A surprising number of upper middle-income earners—those making six figures—are also scrambling to make ends meet, other research shows. A recent study by global advisory firm Willis Towers Watson found that 18% of employees making more than $100,000 annually live paycheck to paycheck.

With household debt ballooning and the cost of living skyrocketing in some parts of the country, a six-figure income doesn’t always translate into financial security. The 2020 economic crisis has, of course, made everything worse; all kinds of families are now worrying how they will pay their bills. This article looks at the underlying problem that magnifies the impact of a global crisis or other major financial situation.

Ket Takeaways

  • Almost one-fifth of Americans with a six-figure income live paycheck to paycheck.
  • A majority of Americans who consider themselves middle class have an optimistic view of their finances, even though many don’t have a substantial emergency fund.
  • A high cost of living, due to housing and education costs, is among the reasons why some high earners live paycheck to paycheck.

Living Paycheck to Paycheck: Middle vs. High Income

According to Northwestern Mutual’s 2018 Planning and Progress Study, 68% of Americans identify themselves as middle class. A majority (78%) said that incomes under $100,000 qualify as middle class.About half (52%) said middle class ranged between $50,000 to $99,999, while 26% said less than $50,000.

Interestingly, the study showed that middle-class Americans tend to have an optimistic view of their finances. They are more likely to feel confident that they can strike the right balance between spending now and saving for the future (71%) than those who aren't middle class (42%). The question is whether their expectations and beliefs are an accurate reflection of their situation.

With more financial resources at their disposal, it’s natural to assume that higher-income earners would have significantly more in savings, but that’s not always the case as the study by Willis Towers Watson and other research show.

In the the Federal Reserve’s 2018 Survey of Household Economics and Decision Making, 40% of Americans said they would struggle to come up with $400 to pay for an unexpected expense. And 17% of households with an income of $100,000 or more said they would have trouble coming up with $400.

Financial planners often recommend that an emergency fund should have three to six months' worth of expenses.

What’s Behind the Cash Crunch?

Understanding why so many high earners struggle begins with pinpointing potential causes for their financial woes. Debt could be one culprit. According to the Federal Reserve Bank of New York, total household debt in the U.S. reached $14.15trillion in the fourth quarter of 2019. That figure exceeds the previous peak reached in 2008. Most of the debt is mortgage-related, although student loans represent an increasingly larger share of what Americans owe.

Research on the Fed’s 2018 survey conducted by the Center for Retirement Research at Boston College cites debt—credit card balances, mortgages, and/or student loans—as the reason why households earning $100,000 or more would struggle to come up with $400 to pay an unexpected bill.

$ 1 trillion

The amount of credit card debt in the U.S., according to the Federal Reserve Bank of New York.

That doesn’t necessarily mean that higher earners are racking up debt because of poor personal spending habits. For some Americans who earn six figures or more, the root cause may be a too-high cost of living.

Home values, for example, have increased by almost a third since 2012. The median sales price of a house rose to $327,100 at the end of 2019, compared to $251,700 at the end of 2012, according to the Federal Reserve Bank of St. Louis.

In certain markets the demand for housing has pushed both purchase and rental prices through the roof, eating up a larger share of high earners’ salaries. A Magnify Money study, for instance, found that San Jose, Calif., is the worst city for living on an annual income of $100,000. After deducting housing and other monthly expenses, residents end up with a deficit of $454 a month.

Those monthly expenses include payments to student loans and other debts, healthcare, transportation, and childcare. As children get older and prepare to go to college, the burden for some high-income families increases because those from affluent families qualify for limited financial aid. For the 2019-20 academic year the average cost of tuition, fees, and room and board at a public four-year university was $38,330 for out-of-state students. Needless to say, this can add to the strain on six-figure earners.

The Bottom Line

As the data show, a paycheck-to-paycheck lifestyle isn’t exclusive to lower-income earners. A higher salary may not stretch as much for those facing a higher cost of living, especially if they rely on credit to cover the gaps.

Finding ways to break the paycheck-to-paycheck cycle is vital to long-term financial health. Increasing family income is an obvious—though not necessarily possible— solution, especially in difficult times. Reducing expenses and eliminating debt are more immediately useful in making the most of what people earn.

Why Upper-Middle Earners Are Living Paycheck to Paycheck (2024)


Why Upper-Middle Earners Are Living Paycheck to Paycheck? ›

Respondents to our 2023 survey cited high monthly expenses—including rent or mortgage, insurance, utilities and more—as the primary cause of living paycheck to paycheck.

What is a reason for why so many people live paycheck to paycheck? ›

More than half of Americans earning over $100,000 a year live paycheck to paycheck. So what's going on? Many experts point to a phenomenon called lifestyle inflation as one of the culprits. Lifestyle inflation, or lifestyle creep, is the pattern of spending a little more as a person's income increases.

Do some rich people live paycheck to paycheck? ›

Sizable portions of high earners live paycheck to paycheck.

Even though they tend to have higher incomes, millennials are more likely to live paycheck to paycheck, as do urban consumers.

What is the main idea of living paycheck to paycheck? ›

Living paycheck to paycheck means you spend all your income on your monthly living expenses – like your rent or mortgage, utilities, groceries and transportation – and have little to no money left over.

What percent of Americans say they are living paycheck to paycheck? ›

A majority, 65%, say they live paycheck to paycheck, according to CNBC and SurveyMonkey's recent Your Money International Financial Security Survey, which polled 498 U.S. adults. That's a slight increase from last year's results, which found that 58% of Americans considered themselves to be living paycheck to paycheck.

Do most Americans really live paycheck to paycheck? ›

According to a recent PYMNTS report, as of November 2022, 76 percent of U.S. adults who make less than $50,000 are living paycheck to paycheck, compared to 65.9 percent of those making $50,000 to $100,000 and 47.1 percent making more than $100,000.

Is everyone struggling financially in 2024? ›

99% of Americans will be financially worse-off than they were pre-pandemic by mid-2024, JPMorgan says. JPMorgan said the vast majority of Americans have burned through excess savings.

Are you poor if you live paycheck to paycheck? ›

People living paycheck to paycheck are sometimes referred to as the working poor. Living paycheck to paycheck can occur at all different income levels. The working poor are often low-wage earners with limited skills but can include those with advanced degrees and skills.

Do the rich really pay less taxes? ›

According to a 2021 White House study, the wealthiest 400 billionaire families in the U.S. paid an average federal individual tax rate of just 8.2 percent. For comparison, the average American taxpayer in the same year paid 13 percent.

Is $200,000 a year a good salary? ›

It's not a great income (like the top 10% or higher), but it's also better than the median income. It is a good income. If you accept my definition, then a good household income would be $130,000 per year (in 2022) and a good individual income would be $82,000 per year (in 2022).

How many Americans have no savings? ›

As of May 2023, more than 1 in 5 Americans have no emergency savings. Nearly one in three (30 percent) people in 2023 had some emergency savings, but not enough to cover three months of expenses. This is up from 27 percent of people in 2022. Note: Not all percentages total 100 due to rounding.

What does the Bible say about living paycheck to paycheck? ›

I explained the verse in Proverbs 22:7 – “the borrower is slave to the lender”. The Bible says we're enslaved because debt prevents us from being completely free. It's like having a cloud hanging over your head all the time.

How much does the average American have in savings? ›

In terms of savings accounts specifically, you'll likely find different estimates from different sources. The average American has $65,100 in savings — excluding retirement assets — according to Northwestern Mutual's 2023 Planning & Progress Study. That's a 5% increase over the $62,000 reported in 2022.

How many Americans are broke? ›

Key Findings. 48.6% of Americans consider themselves to be “broke,” and 66.2% feel they are “living paycheck to paycheck.” There is a gender gap in the results: Females are more likely to consider themselves “broke” at 55.8%, compared to males at 41.1%.

How many Americans can afford a $1000 emergency? ›

According to the newest survey, only 44% of U.S. adults say they would pay an emergency expense of $1,000 or more from their savings.

How to avoid living paycheck to paycheck? ›

7 Steps to Stop Living Paycheck to Paycheck
  1. Start by Creating a Budget. If you don't already have a budget, now is the perfect time to create one! ...
  2. Cut Expenses and Increase Income. ...
  3. Build an Emergency Fund. ...
  4. Stop Accruing Debt. ...
  5. Open a High-Yield Savings Account. ...
  6. Join a Credit Union. ...
  7. Use Free Financial Wellness Resources.

Why is everyone struggling financially? ›

The US Bureau of Labor Statistics indicated that the shock to food and energy prices, supply chain issues, and an increased demand for products all contributed to the sharp rise in inflation. Fast forward four years and most Americans are still struggling.

Why do people get paid more than others? ›

People supply their labor, and companies demand it, creating a market for labor. When a lot of people can do the same job, the wage for that job is pushed down. And on the demand side, employers are willing to pay more for an employee that can make them more money.

What percent of people who make $200,000 live paycheck to paycheck? ›

The report drew on insights that 4,285 U.S. consumers shared with us, as well as supplementary economic data. It found that 62% of all consumers now live paycheck to paycheck, including 36% of those whose annual incomes exceed $200,000. PYMNTS Intelligence has tracked paycheck-to-paycheck data for nearly four years.

Can you live off $1000 a month after bills? ›

Living on $1,000 per month is a challenge. From the high costs of housing, transportation and food, plus trying to keep your bills to a minimum, it would be difficult for anyone living alone to make this work. But with some creativity, roommates and strategy, you might be able to pull it off.


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