What is meant by paycheck-to-paycheck? If a worker has HSA/401k/ESPP/401k MBR deductions, they have artificially made their paycheck small. The net amount remaining goes covers living expenses, and whatever is left might be swept into after-tax investments. Money in is money out. It is paycheck to paycheck: with a great deal of investing taking up the cashflow.
If there is no technical definition, and you simply ask people if they live paycheck-to-paycheck, you could have quite different interpretations-- and the underlying financial health might differ demonstrably between survey respondents.
It would be extremely odd for anyone making after-tax investments to say they live paycheck-to-paycheck.
To most people, it means that you have little to no surplus after usual monthly expenses.
That means no elective investment contributions and — more importantly — no contributions to liquid savings.
Failure to maintain liquid savings can turn an unexpected event into a catastrophic tailspin.
EDIT: That said, the other comments here are elucidating. I wonder if there is an unnoticed shift in the language used among young professionals and that this survey is accidentally measuring that instead of real financial change.
But it’s the same in some key respects. Most of those elective deductions are hard to get the money back out of. So, for practical purposes — like if you lose that job — it’s just as if you had been living paycheck-to-paycheck, assuming you hadn’t built up liquid savings.
Yeah, I do something similar which I call "save yourself poor". Artificially live paycheck to paycheck but this is because I immediately deduct investments, savings, tax portion (my country / visa status just makes you pay at the end of the tax year without employee income witholding) and then have to get through the month on what's left. I know it's a privileged position to be in but it works and never makes me forget that nothing is guaranteed.
Yeah I’ve set myself up in a similar position. I’ve worked out how much I want to save, maxed employer matching etc and so what’s left at the end of the month is my ‘free’ spending.
Then what it would it mean to not be paycheck to paycheck?
If investing counts as spending, doesn’t that mean that 100% of people are living “paycheck to paycheck”? You’re either spending it or you’re investing it, there’s nothing else to do with money.
Most people would define “investing” as putting money into illiquid assets, like stocks, etfs, real estate, etc. where the money cannot be used to buy things. Money sitting in a checking or savings account (even one that earns a meager interest rate) is not considered “invested”.
ok so someone who puts money in a savings account is not living paycheck-to-paycheck, but someone who puts that money into the stock market is? it makes no sense.
To be pedantic, you probably can’t pay your mortgage on credit, or cash flow from paychecks if you lose your job.
Maybe I just come from an old school financial philosophy, but I don’t understand this aversion to being financially independent. The idea of someone making 6 figures but being completely reliant on the credit card company in an emergency is pretty wack.
The idea might be to maximize your expected wealth, e.g. if you consider this kind of emergencies as relatively unlikely and that even then you'd just have to pay interests on a credit card while you're recovering for a few months, it could be worth it to invest some of the money you currently have as an emergency fund into something other than cash.
Paycheck to paycheck means you have almost no liquid money left until your next pay. insurance and taxes don't count (they'reexpenses just like rent, and you can't live if don't pay your rent right?!).
Since i started in my current job, gas has gone from $1 to $2.5+. And every commodity has followed that trend. My pay? Virtually the same
I suppose those with multi 100Ks feel the same. Its not the same money you had last year.... and the year before
If they used the same setup as the LendingClub survey mentioned in the article, it was self-reported. The other notable thing I saw with the LendingClub survey (other than it being sponsored by a business that probably benefits from people living paycheck to paycheck, or the perception that lots of people live that way) was that the majority of the people who self-reported as living paycheck to paycheck also said that they had enough money on hand to cover a $1,000 emergency without having to borrow money or carry a balance on their credit card... So I'm kinda skeptical of the results.
Edit: it looks like the full Willis Towers Watson report defines paycheck to paycheck as "using most or all of their monthly income for expenses".
We do that at home - automatically wire a fixed amount, weekly, off of the margin account. All incomes get deposited in the margin account and invested. During the first half of the year, I max out most contributions that I can at work and end up with many 0$ take-home paychecks. The margin loans help us smooth out that period while keeping a steady, stable and frugal weekly "paycheck" to ourselves. As the year progresses, the margin loan gets paid back and then we grow our investments.
I used to do this automated wire transfer twice a month, but switched it to weekly as it's harder to run out of money this way. And the amount we wire to ourselves is just enough to do groceries, pay bills, eat out every now and then, be happy, but not decadent.
If asked I would say we live paycheck to paycheck because I still worry about bouncing a check. But long-term we are pretty wealthy. It doesn't make financial sense to keep a ton of cash around.
My family is high earning, about 4-5x the threshold they are talking about, and our budget is tight enough that it feels like it's paycheck to paycheck.
We max out the 401k and IRA and invest as well, but I don't see our savings growing. High rent, taking care of my parents, and home child care almost as high as rent are the big outlays, I know these are just choices we made, we're super lucky to be in this situation, but I kind of get it. Your life starts to take the shape of the container it's in, and when you raise the cost of everything 5% a month but the income doesn't change, it does weigh on things.
Add this to the cost of homes where I live have almost doubled, from a small 1000sq foot home being priced around 1.3M now selling for over 2M and we feel like we're priced out of home ownership without doubling our salaries.
I remember being abjectly poor, and while I don't worry about money for rent or food now, I never cared about retirement back then and just had to look at what is in front of me, make rent, buy ramen, etc. I know this isn't worse, but it sure feels similar.
I know. I’m not saying I am. I’m just saying it feels similar, because I remember making a thousand dollars a month and having to do odd jobs to cover rent and food. I have the same urge now.
Look, I’m not looking for sympathy. I was honest about that. I’m just trying to add some color from my perspective to this article.
400 - 500K income is a lot of money. Of course wealthy people can have high expenses and live beyond their means, but at that level, I fail to see how a non-extravagant lifestyle can produce an outcome of no savings even in the highest COL areas. Unless, of course, most of the money goes to taking care of your parents.
Laying out all my expenses would be like a meme, it's like I'm asking someone to feel bad for me for being privileged. I'm not. I'm also not spending on an extravagant lifestyle, I rent a small 1000sq foot house, I have a family, one paid off car and one car I have a loan on. I don't really look at prices at the grocery and I buy organic food and decent coffee that I grind and brew myself, but the idea of say, having a sports car to drive around with the top off, designer clothes, or even eating at fancy restaurants (or any restaurant more than once a week) sounds nuts to me. I'm not spending money on avocado toast or whatever the meme is. I'm trying to save to be able to buy a modest home where I live, and I can't. It's out of reach. Don't feel bad for me, I could move 1.5 hours away and live a super comfortable life, but the commute would of course take me away from my family.
My family is relatively high earning, but that extra income has allowed us to access health care that is not relatively available in the US... IVF. This costs > $1200 / month, and has forced us to live paycheck to paycheck.
Of course, we could choose to promote the ideocracy cycle, but we couldn't walk away from trying at least once
Perhaps, but then, look at all the hate I'm getting for trying to start a family at 40. It's apparently a choice I met my (now) wife in our 30s, and it's a choice for us to have a child... However, if we meet 10 years prior and she _accidentally_ had a child, and had to pay $1500/month for daycare... That's different... In that situation they _might_ not have wanted a family, so they were forced... But we want a family, so we're not forced.
But it’s not the “ideocracy” hassling you about trying to start a family, it’s young urban people on HN who think children are optional or something about climate change. I was fortunate enough to meet my wife in my 20s and have our three kids already, but it doesn’t always work out that way in our modern age. I hope you and your wife are successful.
Good luck with the IVF process - it's a hard journey but the reward is incredibly worth it. Sending you and your wife lots of luck and positive thoughts to have success with it.
Just like the people making 125k but refusing to leave an expensive city are "forced" to live paycheck to paycheck.
You could argue ANYONE making 100k is "choosing" to live paycheck to paycheck.. they could move to Thailand and live comfortably for $1500/month, but they _choose_ to only live in countries where they don't have to learn another language, or leave their family... So we're arguing over what people can reasonably expect from life, and for many, a kid is in that just as much as living in a city.
If we NATURALLY had a kid, most people would argue that $1,500-2,000/month in daycare costs is a forced expense, but because we have not been successful naturally have kids, $1,500-2,000/month to have a kid we want is a choice?
I think software development in general makes thinking about anything that isn't immediately pragmatic very difficult. HN tends to be pretty rough when it comes to Politics or the harder parts of Philosophy.
I'm going to play the devil's advocate here and put out an opinion that having children is a choice (hopefully), and so living paycheck-to-paycheck also seem to be a choice in this case. It may boil down to defining what choice means, in the extreme "choice is doing something that I don't need to survive" and then IVF meets the definition (but then almost everything else meets it as well...).
Definitely not going to defend the way the original opinion was communicated though...
good luck as well. Sometimes we don't meet the right one until we've found ourselves, I'm happy for you. I'm in a similar boat, 1st kid a couple months before my 40th birthday. My only recommendation is get your butt to the gym, being a parent is an active sport and you don't want your kids running circles around you until it's their time.
neither of those are true. my issue with the above comment is there are many people who are truly forced to live paycheck to paycheck without luxuries like choosing many thousands of dollars per year IVF. that’s a choice. you can make a lot of choices to live as close to cash flow zero as possible but that doesn’t make it forced. and really it degrades the troubles that many other workers go through who work very hard for their money
You're basically saying it's a choice to live with someone you love, and to raise someone you love, and you should only do so if you are already financially stable.
If I chose to live with and marry the love of my life, and the results is that I live paycheck to paycheck, is that still a choice? I already said that we BOTH work second jobs to pay for our choice, and I'd argue your comment degrades the troubles that my family is going through to achieve our goals with the money that we're working hard for.
I can see people viewing the cost of IVF and seeing it as being wasteful, but when you're in this situation and you've been trying for 5+ years, it's a hard feeling and situation to convey. And ultimately, I find it unfair to say a couple that naturally has a child is "forced" to pay for daycare -- and that is acceptable... but a family who wants to have a child can't pay near the same amount to have the child they want -- that's a choice!....
So to express your perceived degrading of the struggle of poorer people, you figured the best approach was to take exception of their attempts at having children. You could also have taken a pass. You weren't forced to comment, you made that choice.
I think it's reasonable to point out that it's not forced though. Unless all decisions are forced by the relentless march of time, in which case everything is forced.
If you don't have a paycheck you're also not living paycheck to paycheck?
It comes down to how you want to live, and what you want from life.
For our family having 1 kid was something we wanted / expected. It didn't happen naturally for several years. In 5 years, it would be nearly impossible for us to have a family (of our own genetics), so we were "forced" to go to IVF to have such a kid, or accept that she can't give birth to a child and her family line ends.
Certainly, not everyone wants kids, and that's their choice -- I respect that -- I'm just saying it's not REALLY a choice sometimes... Which makes it "forces" about as much as the news article says.. because again, most IT people could remote work from the middle of nowhere.. but that's not what most people "accept".
Not surprising considering housing costs. It would be interesting to see more granular data though; this sort of number is nice for vapid, sensational headlines that generate lots of clicks but don’t really further our understanding of anything.
Move to a town with good schools despite the property taxes. Property taxes do not scale with the number of children that one has. Cheaper by the, etc.
From what I understand, housing in good school districts tends to be priced above-average.
And then there's Oklahoma, not a high-wage state, where public school is so godawful that everyone who can half afford it sends their children to private school. When you have more than one you have a bigger problem.
Home prices are higher, yes. But the higher prices are sticky, especially if local parents tend to get involved in their children's education. You can make up the cost when you sell the home after the kids are gone.
Or a different definition of living paycheck to paycheck (as others commented, if one is out of money at the end of the month but one's net worth increased, I don't think that'd meet the definition).
I'm playing the world's smallest violin over here.
Anybody making that much money and still living "paycheck to paycheck" is doing so by choice, or misunderstood the question and what it means to live paycheck to paycheck.
Or by just falling into it without really ever giving it a thought. That's not "by choice", exactly. (Though they do have the option of choosing not to do so, if they stopped to think about it...)
We'd need to define 'paycheck to paycheck' more precisely, but... I'm aware of multiple families in my area that used to have something left over in each check, that went in to beefing up some savings. Fuel, food and rent increases over the last 6-12 months have meant there's nothing leftover any more, and they'll need to start cutting back in some areas more aggressively. They were a bit 'close to the edge' anyway (imo), but with a couple kids, it's not hard to do.
Im in the top 1% in my country (yep, third world), and living paycheck to paycheck. Its embarrassing with some 20years experience, but, that's how ot is at the moment.
You're not insulting me. I am insulting myself by not taking action. 100k where i come from is huge money. I make a quarter of it, and it's still top 1%.
I don't know why this was downvoted. There's a pretty solid floor for the cost of housing in the US and WFH has only solidified it. It doesn't really matter what you're willing to put up with, you can't really get bellow it.
EDIT: For rent it's probably around $1.4k/month. Actually buying a house can fluctuate but if you're living paycheck to paycheck you're not saving up for a down payment.
EDIT2: I don't know what you think you're buying with 100k anywhere.
People probably look at results like these [1,2] and think that there are states/counties where 100k nearly buys you a full house, while others have 5~10 times those costs.
People living above their means is an epidemic. Mostly, it's people trying to look rich, whatever that means, and having poor self-control (high MPC) and poor money management skills. Their income sheet maybe positive, but like most stockbrokers, they don't have a balance sheet to back it up.
What I've seen from the valley people make this no surprise. Living in a place with an insane CoL so you can make an extra $20k/year. Working extra to not lose that meager amount of money because you're signed into a $3k/m studio apartment lease. Pissing away savings because you're burning out in style to deal with the extra stress.
im the top 1% in my country (third world...) by income. working for an Israeli company. When i read those 6 figure numbers for similar positions i have (can do better probably, hire me!!!!), my eyes get glossy (and tear up a bit). 6 months of your paycheck would solve all my problems and allow me to work on my dream projects.
Fairly well known company in the insurance and risk business. A cool 40,000 employees around the world. Result of a merger between the Willis and Tower Watson groups.
In 2022, 100k is not as much as it used to be. It is still a decent chunk of change, but it is not exactly life changing; especially if you live in high cost of living area ( NY comes to mind ).
Naturally, there are people who are broke regardless of how much they earn, but I personally think they are an anomaly.
I was in high school when "The Ladders" commercials came out in the US. It was a job board for high earners. I remember the tag line "100k jobs for 100k talent", this was in the early 2000's. It stuck with me because this was several multiples of the household income of anyone in my extended family, and I couldn't imagine ever making that much money or what those people's lives must be like.
Then ~5 years ago I crossed the 100k barrier myself, though it didn't feel that momentous or impactful. Earlier this year I looked up the rate of inflation since those commercials, turns out that 100k when they were airing would be more like 160k now...
Thank you for sharing this. This is exactly my point. The absolute number looks better and serves as an emotional barrier/achievement of sorts ( hell, I know I called my mom when it happened for me ), but in real terms ( as in, what that money can get you ), it is not as 'good' at getting goods as it once was.
One-Third of Americans Making $250k Live Paycheck-to-Paycheck - https://news.ycombinator.com/item?id=31581822 - June 2022 (305 comments)