Paycheck to Paycheck

Paycheck to paycheck is an expression used to describe an individual who would be unable to meet financial obligations if unemployed because his or her salary is predominantly devoted to expenses. Persons subsisting paycheck to paycheck have limited or no savings and are at greater financial risk if suddenly unemployed than individuals who have amassed a cushion of savings.

Persons living paycheck to paycheck are often referred to as the working poor, however that may not accurately describe the full scope of this phenomenon as it cuts across multiple income levels. The proverbial "working poor" have been described as typically having limited skills and are paid low wages.

Despite this perception, individuals living paycheck to paycheck can in fact have advanced degrees in highly technical fields, but because of mitigating factors such as industry downturns and  have had limited success in securing regular employment commensurate with their skills. Individuals who live paycheck to paycheck are more likely to work multiple jobs in order to generate enough income to meet their regular living expenses. Individuals with high paying jobs may also be in a similar situation if outgoing expenses equal (or even exceed) their incoming salary.

Due to a variety of contributing factors, a growing number of of fulltime workers in the United States have indicated they live paycheck to paycheck and the trend continues to escalate. One factor contributing to this trend is that while salaries have increased over the years, the cost of living has accelerated even faster outpacing elevations in pay.

Furthermore, personal debt levels continue to increase, even for individuals earning salaries in excess of $100,000. While individuals are often advised to track their expenses to better control their spending and to set budget limits, this does account for rate of inflation as it affects the cost of necessities and shelter versus the income opportunities available to workers.

Personal accountability does play a role in balancing a budget to avoid living paycheck-to-paycheck and allow the possibility for savings. Regular expenses can include services and items based on one's lifestyle rather than absolute necessity. Such lifestyle-driven expenses may be perceived as luxuries by others rather than necessities, which calls into question the budgeting practices of the individual. If personal spending habits escalate in addition to ongoing price inflation, then the possibility for the individual to break the paycheck to paycheck cycle diminishes if not becomes unattainable. Even with substantial increases in income, if personal spending rises, the pattern may continue.