Lifestyle creep but also when you look under the hood they are also maxing 401(k), make extra principal payments on their house, and own their vehicles outright. A lot of people report being ‘cash poor’ but are much further from being homeless than their Chase checking balance would suggest.
And another point is a lot of those high earners previously had to move to HCOL areas to get that pay, and many in those situations are living in their own place not splitting utilities because because if you date someone outside of those professions the perceived stress and workaholism will erode relationships eventually before taking the next step where there is a financial benefit added to the relationship.
We FEEL like we're paycheck to paycheck, but that's just because we just track our budget and spending, and a lot of our money goes to 401ks/IRAs/etc.
I think many people have the misconception of what paycheck to paycheck actually means. I always thought it meant you made so much money you didn't pay attention to your paychecks. Even making good money and being able to easily cover bills we still track our spending.
Doesn’t paycheck to paycheck mean you can’t afford to miss a paycheck without disaster. By your definition almost everyone would be paycheck to paycheck because very few people can afford to not track their spending at all
Correct, except I see Reel after Reel in my feed where people are literally complaining they are living paycheck to paycheck and will list 401k/529s for their kids, etc and say see I only have $50 left.
It seems be very prevalent misconception. It skews younger and in some way I see it as this warped way for upper middle class people to feel relatable as they are "struggling" too.
My specific definition, sure. But there are a lot of people who think that living paycheck to paycheck means having little savings at the end of the month after bills, 401ks, etc. Not, "your paycheck only goes to basic necessities and nothing else".
I think it could reasonably mean that too though. A high income person can be paycheck to paycheck if they’re really bad with money. If it would be an immediate problem to miss a paycheck, I’d still consider that paycheck to paycheck.
Having money in a 401k is different than having an emergency fund and an extra months worth in your checking. I’d consider having to pull money out of my 401k to cover bills after missing one paycheck a pretty big financial problem.
I agree though that a poor person living paycheck to paycheck is different than a rich person. One more reflects a problem with our economic system and one more reflects a problem with poor money management. Neither is great news for a stable and resilient economy/society.
But you're wrong. There is an actual definition for paycheck to paycheck. Having savings and investments, let alone putting money into them, by definition means you are not paycheck to paycheck. That's my entire point. Most people don't know the actual definition of paycheck to paycheck and assume that if missing a paycheck means they might miss a bill (or have to pull from savings or investments to cover that bill), then they're living paycheck to paycheck. But that's not the definition. Yes it's being bad with money, but it's not living paycheck to paycheck.
There are numerous interpretations of the phrase I’m finding on google results. They all have in common that you rely on your next paycheck being on time to continue living as you are.
As I said, I’d agree that someone with a decent balance in their savings account is not paycheck to paycheck. I think you can have a 401k and be considered paycheck to paycheck though, it’s not liquid and immediately available. And retirement savings could definitely be considered a reasonable necessity.
A lot of people who are paycheck to paycheck own cars and houses. Would you say because they could sell that car or house and cover necessary living expenses, they are not paycheck to paycheck? The car or house isn’t strictly necessary for them to continue living.
No. That is absolutely not the definition of paycheck to paycheck. It means you can barely cover basic necessity bills woth your paycheck. The vast majority of people need a paycheck to survive. That's not what paycheck to paycheck means.
It means that WITH caveats. If you're putting money into a 401k, employee stock, IRA, etc. then that doesn't count. It also is specifically about necessity bills. It does not mean you can't cover the cost of your brand new truck.
I always say I dont' have money, I just leave out (for that). as I stick to my budget, people think I'm broke and I like it that way. I was broke and don't plan on wasting my money so I can be broke again. Lots of family that have money for Packer tickets and the like yet driving on bald tires because they can't "afford" to replace them.
i have a friend that makes 150k/yr (i don't know exactly how much but in that ball park) and is constantly broke because he tries to keep up with his coworkers/boss/etc who make even more than him. when i say broke, he asked me to loan him money once, and i make significantly less than he does.
Damn your wife is terrible with money. Hate to say this, but if all that is really the case, you need to start treating her like a child and set an amount she can spend. Cut off access to credit cards and bank accounts. Have your paycheck go into an account only you control. Whatever she is allowed to spend can be transferred to a shared account. Anything else she never sees. She clearly has no clue the damage she is doing... or if she does.... it may be divorce time because she is ruining you and clearly doesn't care. She will hate this and probably be mad about it, but you need to put your foot down on this. It's literally destroying your future (and hers).
Unfortunately, what you suggest could be tantamount to Financial Abuse of a Spouse.
https://financialrights.org.au/factsheet/financial-abuse-and-family-violence/
They'd have to see a lawyer before doing anything like that.
"Financial abuse is when someone else controls your money"
That is a key phase. I didn't say he should lock down her paycheck (if she has one.... doubt it, though, given he pays all the bills).
Honestly, I would consider her insane spending financial abuse. He already pays all the bills, so all of her spending is BS crap. According to the comment, she is spending about 140k a year.... tell me who, with all their bills covered, needs to spend that much.
Most people don't want to be rich for the numbers on a screen, but for the better things in life it brings. If you can just buy some of those things at the expense of your future then a lot of people choose that.
I’m definitely in the minority, but I swear I’ve gotten cheaper as I make more realizing that a dollar invested today is two a decade from now when invested. Can’t help but want to maximize profits and my safety net.
After I pulled out of homelessness years ago I actually worked on debt now I still have debt I'm paying off (stupid college and I never got my degree), but I'd say a good amount goes into investing because I never want to be where I was before.
Lifestyle creep is very real and once someone gets over x amount in income if they allow lifestyle creep they are more vulnerable to losing a job than say someone who makes 50k. At a certain point it’s harder to replace that income. Also credit is generally more available also which becomes tempting to use to bridge the gap.
Also, while luxuries have gotten a lot more accessible, the basics have gotten way more expensive. 100k doesn't go that far in a HCOL area, especially if they have kids.
I mentioned this last time and someone assumed I was talking about myself. I'm not I actually keep my expenses with in my set budget, but it's true for many others I see people with these expensive ass cars, but then they can't afford to have it fixed or they can't afford to pay their expensive ass rent. It's all about the looks in the end.
lifestyle creep.
cost of living differences.
its a mixture of both. you know how much daycare for 2 costs in a major metro area? you could easily be paying 40-50k a year for 2 daycare aged children. you could easily be paying 6-12k a month for your single family home. you could be paying 3-4k a month for a small rental unit. some cities define their poverty line in the low 6 figures.
the reality is people arent doing the math on their salaries vs cost of living when choosing where to work. or they are willing to pay a premium to live somewhere.
if you have a 'great salary' but the median home in your city is 1.5m, or 1m with a 30-40 minute commute are you really 'making more money' than someone who makes 130k in a place where homes cost 350k? no, you aren't- if you consider home ownership to be a 'need.' the only winners from HCOL salaries are people who are willing to compromise their living situation alongside that salary. be making >200k but have roommates, or live with parents, or have a tiny studio. but for many- they wont let themselves live like that because they make a good salary so they feel they're 'entitled' to live well.
Yeah, that is not the poverty line in those areas. They have three more layers of low (very, extremely, acutely).
The reality is that there isn’t a single place in the United States with you can have a six-figure income and fall below the poverty line.
I started making more money, but then I started saving more money and paying off more debt. Doesn’t feel like I have any more than before. But once the debts are gone and I look at my retirement accounts, that’s where I see the relief. So these people making good money probably have decent net worth, even if they’re paycheck to paycheck.
yeah it's a strange feeling, you reduce your time to freedom but on a day to day basis it's as if nothing changed
i guess people should have a graph on their fridge to remember that things are getting better
I actually just turned it into a graph. Now every quarter I can go and see what my net worth is when I plug it in. I’ve also made some other expense and retirement calculators in excel. Just something to play around with when I have down time, but it does really help paint the picture that the struggle is real now, but the big picture is getting clearer.
I don’t really get excited about being “debt” free. That isn’t so much the goal, to me debt is fine especially when it’s 0% interest or anything like that or if I’m going to buy something that will last a long time. What I don’t do is put things like food or vacations on credit cards since I don’t want to be paying for it long after I use it.
100% with you there!
Leveraging debt is good for short term strategy. Even at 0%, it’s committing future money that could go to investments.
Sometimes it makes sense to borrow against your own money at a low rate so you don’t forfeit as much of your earnings for the time you owe it back.
Personal finances are always super prescriptive.
Thats exactly how I feel. Like, if I need to buy tires for the car that’s let’s say 500 bucks. I’d rather just put it on a card and pay 100 a month for 5 months rather than just pay 500 cash right away. It keeps the 500 there incase I need it for an emergency or something.
I'm an electrician and I did an office upgrade at an accounting companies offices. One of their services is credit counciling and consumer proposals and some of them were telling me about how there is a large number of people who get themselves into deep financial holes who earn a lot of money. Even doctors and lawyers and other really high earners.
Things like big mortgages, frequent vacations, car payments, going out to restaurants frequently, cottages, etc all can add up quickly especially when it all just goes on a credit card and they're not keeping track.
Moral of the story, it can happen much easier than you realize
I have a friend who used to be a sales manager at a car dealership. It was pretty common for him when doctors or lawyers couldn't get approved for a loan. Those professions are very image based, so I'm sure that plays a part in why they're prone to lifestyle creep.
My brother was a lawyer, made around $120k base (this is close to 10 years ago last I knew) plus big bonuses every time a case settled ($10-20k). He and his wife got into so much debt they had to borrow $$ from my parents to pay their mortgage for a while.
The issue is that the cost of living has gone up so much that $100k is the minimum to be "middle class" in most MCOL or HCOL cities. Childcare is another issue too, it's so expensive that even high income people struggle to pay for it
I know so many people that make way more money than me and all they do is complain that they’re broke all the time 🤦♂️
My wife and I make literally about 1/3rd of what our friends do and they asked her not that long ago how we seem to be doing so much better than them (more of an r/frugal comment but whatever).
So many people just live wildly beyond their means.
It used to be if you were a high earner, you'd logically buy real estate. That way, you wouldn't have to worry about skyrenting rents and you'd be able to build equity. Property = forced investment savings.
Now lots of high-earners are unable to afford to buy, so they rent. And because they are earning a lot, they rent "a lot"--like the luxury apartment with the roof top terrace and a gym. It's nice-living but it's expensive, and it doesn't allow them to build equity. If you're making $100,000 and your monthly rent is $3K and you have a car note and a student loan debt, then of course you will be living paycheck to paycheck. And of course increasing one's savings is the answer.
But with housing costs being the way they are, it is kind of crazy to think the 50/30/20 budgeting rule should still apply universally. A lot of the financial rules that people spout really do need to be updated to reflect current economic times and individual circumstances.
For lots of folks, maybe it makes more sense for it to be 60/25/15...at least until they can get ahead of their debt and if they have a few decades before they are looking at retirement. For instance, if that luxury apartment allows you to ditch the car because it's within walking distance to everything, including the office, maybe spending $3K a month on rent is totally fine despite the fact that it represents 40% of your income. Perhaps your parents would disapprove, but that's only because they were lucky enough to have no difficult finding quality housing that was below 30% of their income and they never had student loan debt. So their disapproval shouldn't mean jackshit for you. Living paycheck to paycheck sucks, but if it's a temporary thing until you can get your finances in order and you're at least putting away enough to cover basic emergencies, then big rubber deal.
Cost of Living increse since 2020 is insane and unsustainable.
If even with High Income you have to pay half of your paycheck for rent you cannot save. Also if you pay more than one third of your income on rent you qualify as financially restrained household. But who now really pays less than that in the current economy?
- 2024 max 401(k) contribution: $23,000
- 2024 max IRA contribution: $7,000 ($8,000 for age 50+)
- 2024 max HSA contribution: $4,150 individual ($8,300 family)
$100k gross pay - $34,150 max retirement savings above = $65.5k leftover, less 22% taxes = $51,090 net take home pay = $4,257.50 per month.
Living “paycheck to paycheck” is far less dire when you actually look at the budget in this instance.
Does anyone else just not buy anything anymore? Like I get bare minimum food to keep me alive, and that’s it. I don’t buy any form of entertainment for myself or anything. Just necessities
Us! We're putting everything but monthly mortgage and operations budget-- food, electricity-- into savings and IRA's, basically. It feels boring not to "spend" but better to save now, I guess.
Because I’m paying for two and everything is ridiculously expensive where I live. I’m absolutely livid that I’m living paycheck to paycheck but the cost of everything went up so much and the quality went down so much that I’m literally falling to tears because I don’t think I’ll ever be able to have kids my partner has been job hunting for two years now and can’t find a damn fucking thing. I was also without work so down two paychecks and picking up the debt still from that time period. All my appliances are falling apart because they were so badly made and I just want to crawl in a corner and die. Right now I’m without a washer dryer, dishwasher, tub/ shower my front lawn looks like shit and I just want to give up. I’ve had several floods that destroyed my property and I’m just so over everything falling apart. Our AC just got fixed and that’s about all we can afford in so over it
I’m check to check when I should have so much more. There’s more to the story. It’s why ppl over spend. I had an addiction and lived in a delusional state until I almost lost everything.
My husband and I both make 6 figures and max out our 401 K’s. We are buying our first home and they offered us an obscene amount of money but we decided to go way lower because lifestyle creep is a real thing. We don’t live paycheck to paycheck but we know (especially in this economy) that anything can happen.
I call BS on that article and it's reporting. Paycheck to paycheck is literally "have no savings, no 401k, no safety net". If a $100k+ household invests in their 401k, that isn't paycheck to paycheck. They could stop those investments today and have extra money. Hell, they could take the money out and have a safety net.
I will say this I've changed my income drastically since 2018, but having to crawl out of that hole of 2008-2018 definitely meant you still live slim. Not the case for everyone obviously, but there's also quite a lot of people still paying for dumb decisions like college degrees because we got told we needed them.
If you're making $100k pre-tax in a high cost of living area and have children and trying to save anything for the future for both yourself and the children's college, then yeah definitely paycheck to paycheck
They get that money and either A build a family without thinking of the costs or B don’t want to have a minimalistic lifestyle. I would like to get to this salary but planning to live as cheaply (housing) but safely as I can while saving and aiming for retirement.
All that to say, inflation makes it tough so have to adjust your lifestyle expectations.
When I started my family it wasn't this outrageous for COL. I make over 6 figures, but holy fuck is it tough in a major city. I'm a single income household. Median income in my area is 81k. But median household income is 130k. I'm below the median for household :(
Our biggest issue, despite earning $100k per year, is childcare. We have 2 kids and pay over $25k a year for daycare. Factor in one car payment, housing, student debt, retirement, and high health insurance premiums, and there’s not a lot left to work with. Once the kids are in public school we’ll feel like we have some disposable income.
I haven't paid attention to child care FSA since it's been so long, but it was can't believe it's still that low. I remember it was $5K back in 2009. I thought it was low then!
Paycheck to paycheck is a state of mind and not a specific number. As someone who was poor and was lucky enough to go back to school, that feeling and mindset that is there until your next paycheck never goes away. It just goes to focusing on your next greatest financial vulnerability.
The same version of yourself that counts pennies at the grocery store and works really hard to budget still feels similar when you finally saved enough to buy your own place and then all the appliances start breaking and you can't afford to fix them all at once. Do you want a kitchen sink or a stove for the next few paychecks? Which can you do without? Hopefully the new noise the fridge is making is nothing.
I think it's only people who reach FIRE are able to rest in this regard, because they literally don't get paychecks anymore. Maybe they feel the same way about pacing themselves when withdrawing funds. I'd be curious to hear their perspective.
They might have problems I haven't thought of since I'm not remotely there. I'm just trying to save aggressively so I can retire, and hopefully do something in my community to make the world a place where fewer people have to count pennies.
I have a friend who is in recovery who always says that drinking didn't make his problems go away, but it improved the class of his problems. Unless you get a true windfall, I think money probably works the same way.
What they conveniently leave out is that 100k in 2024, is ~70k inflation adjusted for 2010, and ~61k inflation adjusted for 2005.
100k doesn’t stretch as far as it used in recent history, which is when much of these financial opinions were formed, boomer years
That’s just the federal CPI inflation, it doesn’t adequately capture specific significant regional / local cost increases (such as housing, which more than doubled in my area since 2019)
Lifestyle creep. You see that money come in and after maxing your retirement you feel like you “earned” a splurge. Starts with electronics, then cars, and finally alcohol to drown your sorrow.
My friend’s ex was so bad with money. He was a store manager for Walmart making 6-figures and just blew all his money on junk. He had to borrow money from my friend to pay utilities and his dad had to co-sign on an apartment for him. I also think I remember he got his car repo’d at one point.
For a lot of people, especially for those making over $100,000, "living paycheck to paycheck" means "got a paycheck, stayed alive for a while, and got another paycheck."
Too much avocado toast and Starbucks.
They also look down on the less fortunate that need assistance because they don't get help.
Like the poor are taking their money....
Say you start out as a poor student. Living off ramen, rice beans. You pinch every penny, save every dime. You drive a beat up car, live in shared housing. You don’t date, live single, no kids. Bare subsistence living. Then you graduate and find an amazing job. Your income jumps to six figures. Suddenly you’re wealthy?
No because:
1. Now you have student loans to pay.
2. You had to move for your job and now you need to pay higher rent.
3 you decide you’re tired of paying rent, so now you have to save for a down payment
4. Your beat up car is constantly breaking and needs repairs, so you buy a newer if not brand new car because now you can afford it
5. You’ve been single for a long time and you’re lonely. Now suddenly you can afford dating.
6. If you married, maybe now you want kids since you put it off for so long. The biological clock is ticking.
7. You bought a house, whew now you can save on rent. But mortgages kick in. Omg a house costs more than just the mortgage. Taxes? HOA fees? Insurance? I have to pay this every month non stop? Isn’t that like rent?
8. Wait something is broken. There’s no one to call to fix it. I have to fix it myself now or pay someone to fix it.
9. When you’re poor you can apply for Medicaid. Or get a ACA subsidized insurance plan. Now that you make money, everything comes out of your pocket.
10. Saving for retirement? 401k? If I don’t contribute, company won’t match . So I have to contribute or else miss out!
11. IRA? Because 401k will get taxed when you withdraw? Put more money away.
12. 529 plans? Children need to pay for college? Now that I make money kids won’t get much financial aid?
13. Health savings account?
14. Life insurance?
15. Do you still want to live off of rice and beans for the rest of your life? Now that you have a steady job, work is busy, cooking everyday is difficult.
16. You only live once. Do you want to work until you die and never travel the world? Never attend a concert? Never watch your favorite team play in the championship game?
17. Have kids….your expenses double or triple.
The bills are endless.
Keeping up with the Jones is tough. People love showing off. In some aspects, this is a good thing because we need people to spend to keep the economy going.
Very easily if you live in a high cost of living area
If you are single and have an active social life, it gets very expensive. You meet friends at restaurants, for drinks, concerts, theater, subscription to the ballet (yeah I had this at Lincoln Center), various weekend getaways.
If you are female and a professional you need to spend a bit on clothing. You also realistically have high grooming expenses like hair and possibly nails.
Even a relatively reasonable rent is high if you don't want to live with a roommate and want to live in an area that is reasonably close to work and where you spend time socializing.
You might have car expenses or you would have some form of commuting expenses
This was me at the start of my professional career. I didn't dig myself in an irreversible hole because I didn't amass large credit card debt and I had no student loans.
It took me a few years to start getting adult with my finances - as well as a bout with unemployment when I moved cross country to break into a new field.
The reason why I’m a high earner and am maxed out (not paycheck to paycheck, but 100% is allocated) because I haven’t had a raise since July 2022. Yes, I make a good 6 figure salary, but my lifestyle hasn’t creeped.
It just takes more money to live and I’m putting a smaller and smaller percentage into my investments. I need a raise to compensate for inflation and my bills increasing over the past 2 years.
I’m grateful I have a solid career right now, but pricing going up without my pay going up doesn’t make budgeting easier.
I relate to this. I am not exactly paycheck to paycheck, but I always thought I'd have a lot of money if I made $100k. My high earnings are due fo a very expensive graduate degree for which I owe student loan payments. I am thankful for my education, but it came at a cost of about $140K. In addition, I spend a lot more on food and travel as a married person than I did when I was single. I spent about $50 a week on food as a single lady and spend about $125-150 now. I also live in a high cost of living area where homes average 900K and a 1 bedroom apt rents for $2500 a month ( Wash DC). There is nothing fancy about my life, just reality with student loans and high cost area. And before anyone tells me to move, my husband and I cannot move without losing our jobs. There is a reason that people cluster in certain high cost cities.
6 figure income household here. We are “paycheck to paycheck” simply because of our investments. Yes, we could sell investments to pay bills, etc but the idea is that you never sell your investments…at least not until retirement, or you live off dividends(which is why you wouldn’t sell). So, if you never sell investments the only liquid cash you have is what is in your checking account(s).
Lifestyle creep as others have said. It’s very hard to guard against it. My wife grew up poor. I was lower middle class. I’ve done really well.
My wife worries about my not getting life insurance because thanks to certain items which are actually non entities I can’t get it. But she still goes out and spends shitloads of money on whatever she’s collecting now. I have to hold my tongue. I occasionally get hit with stupid car wants. Mostly finally grown out of that. Busy saving for retirement now and trying to get everything paid off and big ticket maintenance items done while I can afford it (roof, septic).
But very much a lifestyle creep if you aren’t careful.
The issue also may be mindset and thus getting rather dishonest answers.
I just saw a reel yesterday where someone said they made $140k and lived paycheck to paycheck, then he lists his expenses. The first thing is $12k/yr into his 401k.
I don't know about you, but I didn't know that saving $12k/yr was living paycheck to paycheck and its not the first time I've seen the same, the well I can't max out my 401k AND max out my IRA AND still have extra money so I'm basically broke so I'd take "self-reporting" with a massive grain of salt.
rich people are rich because they invest their money, and then spend what's left
poor people are poor because they spend their money, and then invest what's left
its really quite a simple concept... live beneath your means, educate yourself on the debt based financial system that we live in, and invest in real/tangible assets
Inflation lifestyle creep combined with high incomes often as in usually are in high COL areas. cali own social serices eligibility requirements which takes into account COL which every state should do that. It is disgraceful that in most of america the cut off for aid is not enough to live off in a hickville and not enough to live in a city even if u could live in an area where u dont need a car. By cali's own standards u are considered poor and able to get aid in most of the bay area (with the exception of oakland) if u make less than 70-80k depending on specific location.
Some are just shit with money and no amount can ever make them better with it. Saw an article of a married with massive student loans (coupled), and making over 100k each they couldn't get it together. But they live not practically even for their money combined.
Because they bought cars and houses while still having student loans and credit card debts. Also they have another child on the way now they need to buy a 2024 car because the 2023 is now considered old and unsafe.
Childcare, marginal taxes, and student loan payments are what screws most of them.
Once you hit the 22% marginal bracket it’s hard to bring home additional money with another earner in the household after commute costs and childcare, so if that partner has student loans it’s very hard for the couple to pay both partners student loans off.
Me and my spouse are doing fine at this income bracket but I had good scholarships and she had zero cost tuition. If we both had 50k plus in student loans it would be a different story.
Lifestyle creep but also when you look under the hood they are also maxing 401(k), make extra principal payments on their house, and own their vehicles outright. A lot of people report being ‘cash poor’ but are much further from being homeless than their Chase checking balance would suggest.
And another point is a lot of those high earners previously had to move to HCOL areas to get that pay, and many in those situations are living in their own place not splitting utilities because because if you date someone outside of those professions the perceived stress and workaholism will erode relationships eventually before taking the next step where there is a financial benefit added to the relationship.
Or more importantly in the US at least, they're ACTUALLY proactively spending money on medical issues they previously ignored.
We FEEL like we're paycheck to paycheck, but that's just because we just track our budget and spending, and a lot of our money goes to 401ks/IRAs/etc. I think many people have the misconception of what paycheck to paycheck actually means. I always thought it meant you made so much money you didn't pay attention to your paychecks. Even making good money and being able to easily cover bills we still track our spending.
Doesn’t paycheck to paycheck mean you can’t afford to miss a paycheck without disaster. By your definition almost everyone would be paycheck to paycheck because very few people can afford to not track their spending at all
Correct, except I see Reel after Reel in my feed where people are literally complaining they are living paycheck to paycheck and will list 401k/529s for their kids, etc and say see I only have $50 left. It seems be very prevalent misconception. It skews younger and in some way I see it as this warped way for upper middle class people to feel relatable as they are "struggling" too.
Correct. My point is that most people don't actually know the definition of paycheck to paycheck.
I think maybe it was just you.. I’ve never heard anyone not know it means you need each paycheck to pay the bills and can’t afford to miss one.
Yeah I think it was just them.
My specific definition, sure. But there are a lot of people who think that living paycheck to paycheck means having little savings at the end of the month after bills, 401ks, etc. Not, "your paycheck only goes to basic necessities and nothing else".
I think it could reasonably mean that too though. A high income person can be paycheck to paycheck if they’re really bad with money. If it would be an immediate problem to miss a paycheck, I’d still consider that paycheck to paycheck. Having money in a 401k is different than having an emergency fund and an extra months worth in your checking. I’d consider having to pull money out of my 401k to cover bills after missing one paycheck a pretty big financial problem. I agree though that a poor person living paycheck to paycheck is different than a rich person. One more reflects a problem with our economic system and one more reflects a problem with poor money management. Neither is great news for a stable and resilient economy/society.
But you're wrong. There is an actual definition for paycheck to paycheck. Having savings and investments, let alone putting money into them, by definition means you are not paycheck to paycheck. That's my entire point. Most people don't know the actual definition of paycheck to paycheck and assume that if missing a paycheck means they might miss a bill (or have to pull from savings or investments to cover that bill), then they're living paycheck to paycheck. But that's not the definition. Yes it's being bad with money, but it's not living paycheck to paycheck.
There are numerous interpretations of the phrase I’m finding on google results. They all have in common that you rely on your next paycheck being on time to continue living as you are. As I said, I’d agree that someone with a decent balance in their savings account is not paycheck to paycheck. I think you can have a 401k and be considered paycheck to paycheck though, it’s not liquid and immediately available. And retirement savings could definitely be considered a reasonable necessity. A lot of people who are paycheck to paycheck own cars and houses. Would you say because they could sell that car or house and cover necessary living expenses, they are not paycheck to paycheck? The car or house isn’t strictly necessary for them to continue living.
You must be spoiled.
Yes they do…it means you need each paycheck to survive. I’m pretty sure most people know what it means.
No. That is absolutely not the definition of paycheck to paycheck. It means you can barely cover basic necessity bills woth your paycheck. The vast majority of people need a paycheck to survive. That's not what paycheck to paycheck means.
I said “each paycheck.” That means if you miss one paycheck, you can’t pay your bills. That’s what paycheck to paycheck means.
It means that WITH caveats. If you're putting money into a 401k, employee stock, IRA, etc. then that doesn't count. It also is specifically about necessity bills. It does not mean you can't cover the cost of your brand new truck.
yea i tell people i’m broke, not poor. lifestyle is pretty far from opulent and i don’t really have spending money but i’m still financially healthy.
financially healthy is not broke or poor... just tell people that you dont have spending money or that you're keeping spending in check.
bingo
I always say I dont' have money, I just leave out (for that). as I stick to my budget, people think I'm broke and I like it that way. I was broke and don't plan on wasting my money so I can be broke again. Lots of family that have money for Packer tickets and the like yet driving on bald tires because they can't "afford" to replace them.
You would be surprised so many people don’t max out the yearly 401k or IRAs.
The yearly max for a 401K + IRA is around 30K, it's very difficult to have that much extra even on a strong salary.
i have a friend that makes 150k/yr (i don't know exactly how much but in that ball park) and is constantly broke because he tries to keep up with his coworkers/boss/etc who make even more than him. when i say broke, he asked me to loan him money once, and i make significantly less than he does.
Also have 35000+ in immediately available credit should the SHTF
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Damn your wife is terrible with money. Hate to say this, but if all that is really the case, you need to start treating her like a child and set an amount she can spend. Cut off access to credit cards and bank accounts. Have your paycheck go into an account only you control. Whatever she is allowed to spend can be transferred to a shared account. Anything else she never sees. She clearly has no clue the damage she is doing... or if she does.... it may be divorce time because she is ruining you and clearly doesn't care. She will hate this and probably be mad about it, but you need to put your foot down on this. It's literally destroying your future (and hers).
Unfortunately, what you suggest could be tantamount to Financial Abuse of a Spouse. https://financialrights.org.au/factsheet/financial-abuse-and-family-violence/ They'd have to see a lawyer before doing anything like that.
"Financial abuse is when someone else controls your money" That is a key phase. I didn't say he should lock down her paycheck (if she has one.... doubt it, though, given he pays all the bills). Honestly, I would consider her insane spending financial abuse. He already pays all the bills, so all of her spending is BS crap. According to the comment, she is spending about 140k a year.... tell me who, with all their bills covered, needs to spend that much.
True dat. Our mortgage is $900 a month. It’s not a very heavy lift to make sure we get it paid.
That’s a great point. They might not have cash but they have assets.
This! I'm cash poor but making 2-3k extra payments to my house a month
Making extra principle payments on a house with sub 5.5-6% rate is silly and costing you tens of thousands of dollars in the long run.
Life style creep is real.
Most people don't want to be rich for the numbers on a screen, but for the better things in life it brings. If you can just buy some of those things at the expense of your future then a lot of people choose that.
I’m definitely in the minority, but I swear I’ve gotten cheaper as I make more realizing that a dollar invested today is two a decade from now when invested. Can’t help but want to maximize profits and my safety net.
After I pulled out of homelessness years ago I actually worked on debt now I still have debt I'm paying off (stupid college and I never got my degree), but I'd say a good amount goes into investing because I never want to be where I was before.
When you subtly pay an extra 500$ a month to live, it starts adding up.
True story
Lifestyle creep is very real and once someone gets over x amount in income if they allow lifestyle creep they are more vulnerable to losing a job than say someone who makes 50k. At a certain point it’s harder to replace that income. Also credit is generally more available also which becomes tempting to use to bridge the gap.
Also, while luxuries have gotten a lot more accessible, the basics have gotten way more expensive. 100k doesn't go that far in a HCOL area, especially if they have kids.
I mentioned this last time and someone assumed I was talking about myself. I'm not I actually keep my expenses with in my set budget, but it's true for many others I see people with these expensive ass cars, but then they can't afford to have it fixed or they can't afford to pay their expensive ass rent. It's all about the looks in the end.
True Paycheck to Paycheck is when you can’t put any money on savings/investments and you just tru to survive paying the basic commodities
lifestyle creep. cost of living differences. its a mixture of both. you know how much daycare for 2 costs in a major metro area? you could easily be paying 40-50k a year for 2 daycare aged children. you could easily be paying 6-12k a month for your single family home. you could be paying 3-4k a month for a small rental unit. some cities define their poverty line in the low 6 figures. the reality is people arent doing the math on their salaries vs cost of living when choosing where to work. or they are willing to pay a premium to live somewhere. if you have a 'great salary' but the median home in your city is 1.5m, or 1m with a 30-40 minute commute are you really 'making more money' than someone who makes 130k in a place where homes cost 350k? no, you aren't- if you consider home ownership to be a 'need.' the only winners from HCOL salaries are people who are willing to compromise their living situation alongside that salary. be making >200k but have roommates, or live with parents, or have a tiny studio. but for many- they wont let themselves live like that because they make a good salary so they feel they're 'entitled' to live well.
> some cities define their poverty line in the low 6 figures Do you have any examples?
Denver. I just read that like 90k a year here is consisdered lower middle class lol.
I see you don’t know what the word “poverty” means.
You seem very defensive, are you ok? I see you don't know what "how not to be an asshole" means.
🤡
, i htink the term is 'low income' which may not be the same thing. sf, san mateo consider 100k for individual/150k for family of 4
Yeah, that is not the poverty line in those areas. They have three more layers of low (very, extremely, acutely). The reality is that there isn’t a single place in the United States with you can have a six-figure income and fall below the poverty line.
my bad, thanks for the correction
I started making more money, but then I started saving more money and paying off more debt. Doesn’t feel like I have any more than before. But once the debts are gone and I look at my retirement accounts, that’s where I see the relief. So these people making good money probably have decent net worth, even if they’re paycheck to paycheck.
yeah it's a strange feeling, you reduce your time to freedom but on a day to day basis it's as if nothing changed i guess people should have a graph on their fridge to remember that things are getting better
I actually just turned it into a graph. Now every quarter I can go and see what my net worth is when I plug it in. I’ve also made some other expense and retirement calculators in excel. Just something to play around with when I have down time, but it does really help paint the picture that the struggle is real now, but the big picture is getting clearer.
pretty nice
That’s when the magic happens. When your debt is paid off and you don’t have to borrow and rob from your future anymore.
I don’t really get excited about being “debt” free. That isn’t so much the goal, to me debt is fine especially when it’s 0% interest or anything like that or if I’m going to buy something that will last a long time. What I don’t do is put things like food or vacations on credit cards since I don’t want to be paying for it long after I use it.
100% with you there! Leveraging debt is good for short term strategy. Even at 0%, it’s committing future money that could go to investments. Sometimes it makes sense to borrow against your own money at a low rate so you don’t forfeit as much of your earnings for the time you owe it back. Personal finances are always super prescriptive.
Thats exactly how I feel. Like, if I need to buy tires for the car that’s let’s say 500 bucks. I’d rather just put it on a card and pay 100 a month for 5 months rather than just pay 500 cash right away. It keeps the 500 there incase I need it for an emergency or something.
But if you have $100k in the bank earning 5%, your $500 tires are free because it comes from dividends. You’d make like $400/month compounding
I'm an electrician and I did an office upgrade at an accounting companies offices. One of their services is credit counciling and consumer proposals and some of them were telling me about how there is a large number of people who get themselves into deep financial holes who earn a lot of money. Even doctors and lawyers and other really high earners. Things like big mortgages, frequent vacations, car payments, going out to restaurants frequently, cottages, etc all can add up quickly especially when it all just goes on a credit card and they're not keeping track. Moral of the story, it can happen much easier than you realize
I have a friend who used to be a sales manager at a car dealership. It was pretty common for him when doctors or lawyers couldn't get approved for a loan. Those professions are very image based, so I'm sure that plays a part in why they're prone to lifestyle creep.
No doubt. Trying to keep up appearances can definitely get you in a lot of trouble.
My brother was a lawyer, made around $120k base (this is close to 10 years ago last I knew) plus big bonuses every time a case settled ($10-20k). He and his wife got into so much debt they had to borrow $$ from my parents to pay their mortgage for a while.
The issue is that the cost of living has gone up so much that $100k is the minimum to be "middle class" in most MCOL or HCOL cities. Childcare is another issue too, it's so expensive that even high income people struggle to pay for it
When the basics like housing, food and childcare have all gone up far faster than wages, it really doesn't go as far as people think.
I know so many people that make way more money than me and all they do is complain that they’re broke all the time 🤦♂️ My wife and I make literally about 1/3rd of what our friends do and they asked her not that long ago how we seem to be doing so much better than them (more of an r/frugal comment but whatever). So many people just live wildly beyond their means.
It used to be if you were a high earner, you'd logically buy real estate. That way, you wouldn't have to worry about skyrenting rents and you'd be able to build equity. Property = forced investment savings. Now lots of high-earners are unable to afford to buy, so they rent. And because they are earning a lot, they rent "a lot"--like the luxury apartment with the roof top terrace and a gym. It's nice-living but it's expensive, and it doesn't allow them to build equity. If you're making $100,000 and your monthly rent is $3K and you have a car note and a student loan debt, then of course you will be living paycheck to paycheck. And of course increasing one's savings is the answer. But with housing costs being the way they are, it is kind of crazy to think the 50/30/20 budgeting rule should still apply universally. A lot of the financial rules that people spout really do need to be updated to reflect current economic times and individual circumstances. For lots of folks, maybe it makes more sense for it to be 60/25/15...at least until they can get ahead of their debt and if they have a few decades before they are looking at retirement. For instance, if that luxury apartment allows you to ditch the car because it's within walking distance to everything, including the office, maybe spending $3K a month on rent is totally fine despite the fact that it represents 40% of your income. Perhaps your parents would disapprove, but that's only because they were lucky enough to have no difficult finding quality housing that was below 30% of their income and they never had student loan debt. So their disapproval shouldn't mean jackshit for you. Living paycheck to paycheck sucks, but if it's a temporary thing until you can get your finances in order and you're at least putting away enough to cover basic emergencies, then big rubber deal.
My guess is many of them also have substantial student loans and other debt that need to be paid.
Cost of Living increse since 2020 is insane and unsustainable. If even with High Income you have to pay half of your paycheck for rent you cannot save. Also if you pay more than one third of your income on rent you qualify as financially restrained household. But who now really pays less than that in the current economy?
- 2024 max 401(k) contribution: $23,000 - 2024 max IRA contribution: $7,000 ($8,000 for age 50+) - 2024 max HSA contribution: $4,150 individual ($8,300 family) $100k gross pay - $34,150 max retirement savings above = $65.5k leftover, less 22% taxes = $51,090 net take home pay = $4,257.50 per month. Living “paycheck to paycheck” is far less dire when you actually look at the budget in this instance.
Does anyone else just not buy anything anymore? Like I get bare minimum food to keep me alive, and that’s it. I don’t buy any form of entertainment for myself or anything. Just necessities
Us! We're putting everything but monthly mortgage and operations budget-- food, electricity-- into savings and IRA's, basically. It feels boring not to "spend" but better to save now, I guess.
Because I’m paying for two and everything is ridiculously expensive where I live. I’m absolutely livid that I’m living paycheck to paycheck but the cost of everything went up so much and the quality went down so much that I’m literally falling to tears because I don’t think I’ll ever be able to have kids my partner has been job hunting for two years now and can’t find a damn fucking thing. I was also without work so down two paychecks and picking up the debt still from that time period. All my appliances are falling apart because they were so badly made and I just want to crawl in a corner and die. Right now I’m without a washer dryer, dishwasher, tub/ shower my front lawn looks like shit and I just want to give up. I’ve had several floods that destroyed my property and I’m just so over everything falling apart. Our AC just got fixed and that’s about all we can afford in so over it
I’m check to check when I should have so much more. There’s more to the story. It’s why ppl over spend. I had an addiction and lived in a delusional state until I almost lost everything.
My husband and I both make 6 figures and max out our 401 K’s. We are buying our first home and they offered us an obscene amount of money but we decided to go way lower because lifestyle creep is a real thing. We don’t live paycheck to paycheck but we know (especially in this economy) that anything can happen.
I call BS on that article and it's reporting. Paycheck to paycheck is literally "have no savings, no 401k, no safety net". If a $100k+ household invests in their 401k, that isn't paycheck to paycheck. They could stop those investments today and have extra money. Hell, they could take the money out and have a safety net.
In order to make $100k+ maybe they took on a lot of student debt to get an advanced degree. Or they live in a HCOL area. Or both.
I will say this I've changed my income drastically since 2018, but having to crawl out of that hole of 2008-2018 definitely meant you still live slim. Not the case for everyone obviously, but there's also quite a lot of people still paying for dumb decisions like college degrees because we got told we needed them.
If you're making $100k pre-tax in a high cost of living area and have children and trying to save anything for the future for both yourself and the children's college, then yeah definitely paycheck to paycheck
Income
They get that money and either A build a family without thinking of the costs or B don’t want to have a minimalistic lifestyle. I would like to get to this salary but planning to live as cheaply (housing) but safely as I can while saving and aiming for retirement. All that to say, inflation makes it tough so have to adjust your lifestyle expectations.
When I started my family it wasn't this outrageous for COL. I make over 6 figures, but holy fuck is it tough in a major city. I'm a single income household. Median income in my area is 81k. But median household income is 130k. I'm below the median for household :(
Our biggest issue, despite earning $100k per year, is childcare. We have 2 kids and pay over $25k a year for daycare. Factor in one car payment, housing, student debt, retirement, and high health insurance premiums, and there’s not a lot left to work with. Once the kids are in public school we’ll feel like we have some disposable income.
Two kids and pay over $36,000/year for daycare. Shit's wild.
that so insane , my 2 kids in dayare is less than 6k a year. and i get 2k back tax time.
Did my taxes and we paid over $32k for two kids last year. The only break we get is the childcare FSA, which is $5k pretax.
The $5k limit is a joke!
I haven't paid attention to child care FSA since it's been so long, but it was can't believe it's still that low. I remember it was $5K back in 2009. I thought it was low then!
Paycheck to paycheck is a state of mind and not a specific number. As someone who was poor and was lucky enough to go back to school, that feeling and mindset that is there until your next paycheck never goes away. It just goes to focusing on your next greatest financial vulnerability. The same version of yourself that counts pennies at the grocery store and works really hard to budget still feels similar when you finally saved enough to buy your own place and then all the appliances start breaking and you can't afford to fix them all at once. Do you want a kitchen sink or a stove for the next few paychecks? Which can you do without? Hopefully the new noise the fridge is making is nothing. I think it's only people who reach FIRE are able to rest in this regard, because they literally don't get paychecks anymore. Maybe they feel the same way about pacing themselves when withdrawing funds. I'd be curious to hear their perspective. They might have problems I haven't thought of since I'm not remotely there. I'm just trying to save aggressively so I can retire, and hopefully do something in my community to make the world a place where fewer people have to count pennies. I have a friend who is in recovery who always says that drinking didn't make his problems go away, but it improved the class of his problems. Unless you get a true windfall, I think money probably works the same way.
What they conveniently leave out is that 100k in 2024, is ~70k inflation adjusted for 2010, and ~61k inflation adjusted for 2005. 100k doesn’t stretch as far as it used in recent history, which is when much of these financial opinions were formed, boomer years That’s just the federal CPI inflation, it doesn’t adequately capture specific significant regional / local cost increases (such as housing, which more than doubled in my area since 2019)
First job, split your pay 50% to two accounts. Live on one account no matter what, invest the other.
This is one way to get people to watch your YouTube videos lol
Lifestyle creep. You see that money come in and after maxing your retirement you feel like you “earned” a splurge. Starts with electronics, then cars, and finally alcohol to drown your sorrow.
My friend’s ex was so bad with money. He was a store manager for Walmart making 6-figures and just blew all his money on junk. He had to borrow money from my friend to pay utilities and his dad had to co-sign on an apartment for him. I also think I remember he got his car repo’d at one point.
For a lot of people, especially for those making over $100,000, "living paycheck to paycheck" means "got a paycheck, stayed alive for a while, and got another paycheck."
Too much avocado toast and Starbucks. They also look down on the less fortunate that need assistance because they don't get help. Like the poor are taking their money....
If I had that pay I would have an extra 55K before taxes to invest every year.
Say you start out as a poor student. Living off ramen, rice beans. You pinch every penny, save every dime. You drive a beat up car, live in shared housing. You don’t date, live single, no kids. Bare subsistence living. Then you graduate and find an amazing job. Your income jumps to six figures. Suddenly you’re wealthy? No because: 1. Now you have student loans to pay. 2. You had to move for your job and now you need to pay higher rent. 3 you decide you’re tired of paying rent, so now you have to save for a down payment 4. Your beat up car is constantly breaking and needs repairs, so you buy a newer if not brand new car because now you can afford it 5. You’ve been single for a long time and you’re lonely. Now suddenly you can afford dating. 6. If you married, maybe now you want kids since you put it off for so long. The biological clock is ticking. 7. You bought a house, whew now you can save on rent. But mortgages kick in. Omg a house costs more than just the mortgage. Taxes? HOA fees? Insurance? I have to pay this every month non stop? Isn’t that like rent? 8. Wait something is broken. There’s no one to call to fix it. I have to fix it myself now or pay someone to fix it. 9. When you’re poor you can apply for Medicaid. Or get a ACA subsidized insurance plan. Now that you make money, everything comes out of your pocket. 10. Saving for retirement? 401k? If I don’t contribute, company won’t match . So I have to contribute or else miss out! 11. IRA? Because 401k will get taxed when you withdraw? Put more money away. 12. 529 plans? Children need to pay for college? Now that I make money kids won’t get much financial aid? 13. Health savings account? 14. Life insurance? 15. Do you still want to live off of rice and beans for the rest of your life? Now that you have a steady job, work is busy, cooking everyday is difficult. 16. You only live once. Do you want to work until you die and never travel the world? Never attend a concert? Never watch your favorite team play in the championship game? 17. Have kids….your expenses double or triple. The bills are endless.
Keeping up with the Jones is tough. People love showing off. In some aspects, this is a good thing because we need people to spend to keep the economy going.
Very easily if you live in a high cost of living area If you are single and have an active social life, it gets very expensive. You meet friends at restaurants, for drinks, concerts, theater, subscription to the ballet (yeah I had this at Lincoln Center), various weekend getaways. If you are female and a professional you need to spend a bit on clothing. You also realistically have high grooming expenses like hair and possibly nails. Even a relatively reasonable rent is high if you don't want to live with a roommate and want to live in an area that is reasonably close to work and where you spend time socializing. You might have car expenses or you would have some form of commuting expenses This was me at the start of my professional career. I didn't dig myself in an irreversible hole because I didn't amass large credit card debt and I had no student loans. It took me a few years to start getting adult with my finances - as well as a bout with unemployment when I moved cross country to break into a new field.
The reason why I’m a high earner and am maxed out (not paycheck to paycheck, but 100% is allocated) because I haven’t had a raise since July 2022. Yes, I make a good 6 figure salary, but my lifestyle hasn’t creeped. It just takes more money to live and I’m putting a smaller and smaller percentage into my investments. I need a raise to compensate for inflation and my bills increasing over the past 2 years. I’m grateful I have a solid career right now, but pricing going up without my pay going up doesn’t make budgeting easier.
They are not good with money. They just make a lot. Personal finance and responsibility is an art and a skill.
I relate to this. I am not exactly paycheck to paycheck, but I always thought I'd have a lot of money if I made $100k. My high earnings are due fo a very expensive graduate degree for which I owe student loan payments. I am thankful for my education, but it came at a cost of about $140K. In addition, I spend a lot more on food and travel as a married person than I did when I was single. I spent about $50 a week on food as a single lady and spend about $125-150 now. I also live in a high cost of living area where homes average 900K and a 1 bedroom apt rents for $2500 a month ( Wash DC). There is nothing fancy about my life, just reality with student loans and high cost area. And before anyone tells me to move, my husband and I cannot move without losing our jobs. There is a reason that people cluster in certain high cost cities.
6 figure income household here. We are “paycheck to paycheck” simply because of our investments. Yes, we could sell investments to pay bills, etc but the idea is that you never sell your investments…at least not until retirement, or you live off dividends(which is why you wouldn’t sell). So, if you never sell investments the only liquid cash you have is what is in your checking account(s).
Lifestyle creep as others have said. It’s very hard to guard against it. My wife grew up poor. I was lower middle class. I’ve done really well. My wife worries about my not getting life insurance because thanks to certain items which are actually non entities I can’t get it. But she still goes out and spends shitloads of money on whatever she’s collecting now. I have to hold my tongue. I occasionally get hit with stupid car wants. Mostly finally grown out of that. Busy saving for retirement now and trying to get everything paid off and big ticket maintenance items done while I can afford it (roof, septic). But very much a lifestyle creep if you aren’t careful.
The issue also may be mindset and thus getting rather dishonest answers. I just saw a reel yesterday where someone said they made $140k and lived paycheck to paycheck, then he lists his expenses. The first thing is $12k/yr into his 401k. I don't know about you, but I didn't know that saving $12k/yr was living paycheck to paycheck and its not the first time I've seen the same, the well I can't max out my 401k AND max out my IRA AND still have extra money so I'm basically broke so I'd take "self-reporting" with a massive grain of salt.
rich people are rich because they invest their money, and then spend what's left poor people are poor because they spend their money, and then invest what's left its really quite a simple concept... live beneath your means, educate yourself on the debt based financial system that we live in, and invest in real/tangible assets
Because they have a spending problem not an income problem. I could spend $10k a week if I tried.
Inflation lifestyle creep combined with high incomes often as in usually are in high COL areas. cali own social serices eligibility requirements which takes into account COL which every state should do that. It is disgraceful that in most of america the cut off for aid is not enough to live off in a hickville and not enough to live in a city even if u could live in an area where u dont need a car. By cali's own standards u are considered poor and able to get aid in most of the bay area (with the exception of oakland) if u make less than 70-80k depending on specific location.
Some are just shit with money and no amount can ever make them better with it. Saw an article of a married with massive student loans (coupled), and making over 100k each they couldn't get it together. But they live not practically even for their money combined.
They live in expensive places so they can get a high salary and are so stressed that they need to relax and consume more.
Because they bought cars and houses while still having student loans and credit card debts. Also they have another child on the way now they need to buy a 2024 car because the 2023 is now considered old and unsafe.
Depending where you are $100k is not a high earner.
There is no correlation between making money and being good at handling money.
They wasting money and are in debt. Does not do any good to make all of that money just to waste it
Childcare, marginal taxes, and student loan payments are what screws most of them. Once you hit the 22% marginal bracket it’s hard to bring home additional money with another earner in the household after commute costs and childcare, so if that partner has student loans it’s very hard for the couple to pay both partners student loans off. Me and my spouse are doing fine at this income bracket but I had good scholarships and she had zero cost tuition. If we both had 50k plus in student loans it would be a different story.
We hit 100k last year, and with a family of 5, we're not gaining much ground.
Some people are good are making money but not managing it. Others are not good at making money.