Inflation is stretching budgets across the class spectrum. More and more people are struggling to pay their bills, relying on credit or dipping into savings to pay for living expenses.
According to a recent MetLife survey, over half of all Americans now describe their financial situation as “paycheck to paycheck,” while a survey conducted by Payroll found that 80% of Americans say they’re “paycheck to paycheck.”
However, despite these reports, about 64% of Americans own their homes, and 78% contributed to a retirement savings account in the last year (albeit the majority still reported feeling behind on their savings despite their contributions).
These reports of varied financial stressors and resources beg the question: what does living paycheck to paycheck mean?
What Does Living Paycheck to Paycheck Mean?
In the traditional sense, living paycheck to paycheck means you only make enough money to cover your monthly bills. After buying food and housing, you have no money to save for a rainy day.
Using this definition, the 78% of Americans who contributed to a retirement account last year are not actually living paycheck to paycheck, but if you believe the other surveys, they think they are.
Can You Live Paycheck to Paycheck if You Own a Home?
Homeownership is the status symbol of the middle class. Many believe you can’t claim you live paycheck to paycheck if you own a home.
When you own rather than rent, you can view your mortgage payment as an investment. Every month, you build more and more equity, giving you a slight financial cushion you could tap into if needed.
Those who own homes could call themselves house-poor, meaning they have little precious little to spare after paying the monthly bills, but can they really claim they live paycheck to paycheck when they’re investing in their future via equity?
Homes are Expensive
Some argue they can’t, but others say it’s unfair to gatekeep feeling paycheck to paycheck. Many homeowners struggle to pay the mortgage and utilities while navigating ever-increasing taxes, insurance, and maintenance costs.
They may be building equity, but it’s at such a slow rate that it would take at least five years to have anything substantial they could tap into. The house may be an investment, but they sure feel like they’re living paycheck to paycheck.
Upper Middle-Class Claims of Paycheck to Paycheck
The entire meaning of paycheck to paycheck gets lost when the wealthy upper middle class claims to have the same struggles.
We’ve all read the stories: “Couple making $250,000 per year lives paycheck to paycheck,” read the headlines.
When you dive deep into the article, you can’t help but roll your eyes at the delusion. These people live in the most expensive metropolis in the country, drive luxury vehicles, and send their kids to top-rated private schools while squirreling away 20% of their paychecks for retirement.
We can absolutely agree they’ve stretched their budgets too thin, but it’s ridiculous to say they live paycheck to paycheck like the family who has to float the mortgage to keep food on the table and can’t afford a $400 emergency.
What is Paycheck to Paycheck?
There’s no standard definition of living paycheck to paycheck. People use it to mean anything from living hand to mouth and waiting on the next paycheck to survive to having stretched budgets and feeling like there is nothing left over, even though they could save a ton if they made substantial cuts.
Although we agree the latter probably isn’t really paycheck to paycheck, we think there’s some wiggle room on the former. If you own a home but struggle to pay the mortgage and can’t put money into savings, you’re paycheck to paycheck.
If you contribute a small sum to an employee-sponsored retirement account but struggle to keep all the bills paid with the remainder of your income and can’t afford luxuries, you’re paycheck to paycheck.
Everyone’s experiences living check to check will vary, so we shouldn’t gatekeep anyone from feeling this way unless, of course, they make $250,000.
Those folks have a budgeting problem, not a paycheck problem.
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