Nearly a quarter of all U.S. households are living paycheck to paycheck and the number has risen over the last year, though the rate of growth has slowed, according to a new report.
The Bank of America Institute report found that almost 24% of households would be classified as living paycheck to paycheck so far in 2025, an increase of 0.3 percentage points from 2024 – although the growth rate is nearly three times lower than it was a year ago.
It defines living paycheck to paycheck as households spending over 95% of their income on necessities like housing, groceries, gas, utilities, internet plans, public transit and childcare. That leaves them with little or no leftover funds for savings or “nice-to-have” discretionary purchases.
“Although the number of households living paycheck to paycheck is increasing this year, the pace of growth has slowed significantly,” Joe Wadford, an economist at the Bank of America Institute, told FOX Business. “That’s because it seems like a lot of the financial stress that has been increasing has been concentrated in these lower-income households as these families struggle to keep up with cost increases.”
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Inflation has grown faster than middle- and lower-income households’ after-tax wages since January 2025, the Bank of America Institute found.
That trend has led to the share of lower-income households living paycheck to paycheck rising to 29% this year, from 28.6% last year and 27.1% in 2023. Among middle- and higher-income households, there has been little to no increase in the proportion living paycheck to paycheck.
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“For middle- and lower-income households, I think inflation is the primary driver. Especially this year, we’ve seen the gap between wages and expenses continue to widen for lower-income households,” Wadford explained.
“In October we saw a 1% wage increase, whereas the latest inflation data has the cost of living increasing by 3%,” he added. “Put another way, if your bills are increasing by $300, but you’re only making $100 more, how are you supposed to keep up with that? And I think the short answer is that some families are really struggling to.”
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About 19% of higher-income households are living paycheck to paycheck, which Bank of America attributed to lifestyle creep causing bills to rise.
“When you talk about the higher-income households that are living paycheck to paycheck, it could be that lifestyle creep is maybe the main driver,” Wadford said. “You bought a house, you bought a couple of cars and before you know it, all your money is going out to bills.”
The report also found that wage growth for lower-income earners has been easing compared to higher-income counterparts since the start of 2025, after they rose faster in 2021-22, before cooling in 2023-24.
“This K-shaped economy is largely dependent on wage growth,” Wadford explained. “As long as you continue to see this gap between higher-income wage growth and lower-income wage growth, you’re going to continue to see this.”
“The gap between higher- and lower-income wage growth is the highest we’ve seen since 2016,” he added. “If we continue to see the labor market behaving differently for these two groups and cooling overall, I think this is kind of the situation for the foreseeable future.”
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