Break the paycheck-to-paycheck cycle

Living “paycheck to paycheck” describes the condition of having wages comprise most, all or not quite enough money to cover your current expenses.

You’ll often hear financial industry professionals, politicians, media analysts and others refer to such people as “the working poor,” attributing the state unemployment and income loss or inability to budget.

It’s actually a highly nuanced issue and affects people at varied income levels, according to a recent report from Pymnts.com and LendingClub.

"Living paycheck to paycheck sometimes carries connotations of barely scraping by and of poverty," notes the report. "The reality of a paycheck-to-paycheck lifestyle in the United States today is much more complex, and the current economic environment has made it even more complicated."

The immediate reality is that living paycheck to paycheck is the norm in the United States, and it has been for years. The Pymnts.com report surveyed 30,000 U.S. consumers and analyzed economic data and census records. Its data shows 125 million adults live paycheck to paycheck — 54 percent.

Further, 53 percent of respondents who earn between $50,000 and $100,000 said they live paycheck to paycheck.

The report hypotheses that higher income individuals living paycheck to paycheck “fall victims to lifestyle creep.” The term describes what happens when a bump in discretionary income increases a person’s perceived standard of living, which can make it difficult to balance spending and saving habits.

Perhaps the most alarming statistic in the report is that 70 percent of millennials — those born between 1980 and 1995 — say they live paycheck to paycheck. Of that number, 60 percent with annual income in excess of $100,000 say they live paycheck to paycheck, too.

These years tip off critical financial milestones for millennials. The oldest among them have entered their 40s. Some are making their first major purchases, even as they’ve been beset by economic downturns that began in 2008 and “may also be less advanced in their careers than their older counterparts,” according to the Pymnts.com report.

Meanwhile, 40 percent of baby boomers and seniors report living paycheck to paycheck. That’s not great, but it is the lowest numbers for any U.S. generational groups.

While we might be inclined to shrug off living paycheck to paycheck as none of our business, it does ripple through our families, communities and workplaces. The primary concern is that an unexpected expense — medical bills, a new furnace, vehicle breakdown — is a major financial catastrophe. It can trigger a series of events that impacts everything from family dynamics to work attendance.

In addition, individuals in this cycle who experience a financial crisis sometimes enter a downward spiral from which they can’t recover.

There is a lot of wisdom on breaking the cycle. It boils down to discipline and tough choices. The big missing piece that prevents people to heeding financial advice is a lack of understanding and empathy: It’s incredibly difficult to shed the money ideas, notions and habits we developed over a lifetime.

There are many resources tools for budgeting, creating personal savings incentives and forcing financial behavior changes. Likewise, there are deceptively harmful tools and practices to avoid if you hope to stop making bad financial choices. (For example, “early paycheck” services sound cool but simply deplete your account balance sooner.)

While saving more and spending less is a hard skill to develop, it doesn’t have to be complicated. With all the technology and access to information we have, changing financial behavior still relies on basics of close attention and careful decision-making.

Karris Golden is a Gazette editorial fellow. Comments: karris.golden@thegazette.com