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Nearly two-thirds of Americans live paycheck to paycheck, study shows

Personal finance experts offer some advice for getting spending under control

Living paycheck to paycheck concept
Photo (c) Nuthawut Somsuk - Getty Images
If you break into a cold sweat at the end of each month, hoping you have enough in your checking account to get to the next payday, you are not alone. A new study from LendingClub Corporation found that nearly two-thirds of the U.S. population lives paycheck to paycheck.

The authors describe living paycheck to paycheck as “the dominant way people manage their cash flow” in the U.S. The practice is common among all income groups.

By its very definition, living paycheck to paycheck means you aren’t putting any money in savings or building an investment portfolio. As long as they pay their bills on time, these consumers remain creditworthy, but it just takes one unexpected car or home repair bill to change that.

The problem with debt

Jay Zigmont, a certified financial planner (CFP) and founder of Live, Learn, Plan, says many people find themselves in a paycheck to paycheck pattern after they run up large credit card balances.

“The challenge for many people who live paycheck to paycheck is that they are spending too much and are stuck in the debt cycle,” Zigmont told ConsumerAffairs. “Debt steals from your future and it is never more obvious than when you are living paycheck to paycheck. Debt is used to 'make it through' week to week, but each time you use it the result is the next week is harder.”

Clark Howard, personal finance author and host of the Clark Howard Podcast, says most people living from payday to payday choose to live that way. They could probably save if they wanted to.

“Never was there more clear proof than two years ago when a lot of places in the country were on lockdown,” Howard told us. “The savings rate in the U.S. went to historical levels and people were saving $1 for every $3 they made. Spending dropped like a rock and people paid down debt.”

That’s because movie theaters and restaurants were closed and people weren’t taking trips. For a while, they weren’t even commuting to the office and spending money on gas and lunches.

Back to pre-pandemic spending

The savings rate is now back down to pre-pandemic levels, and debt is increasing. Beyond increasing financial security, Howard says saving money provides a “cushion” in life that can give people greater flexibility.

“People can choose to live their own lives however they please, but the goal is to have more choice and more freedom in life,” Howard said.

Both Howard and Zigmont have advice for people who would like to put a little money away each month. Both say it starts with cutting back on debt.

“Lock your credit cards and stop taking out any new loans,” Zigmont said. “When you don't have debt as an option, you are required to live within your means.”

“I advise that people should take a time out and try to get spending, borrowing, and saving all going in the right direction again,” Howard said. “If you are feeling the stress of the bills and feel out of control, create a budget. It's not about obsessing over a spreadsheet. It's about assessing where you are with the money you have coming in, the expenses going out, and thinking through the spending.”

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