78% of Americans live paycheck to paycheck

[Blake Hampton]

Seen this on Forbes and found it sort of absurd. Is it really true that almost 8 out of every 10 Americans are struggling this bad? The personal savings rate is currently 3.2%. Assuming $64,240 being the median household income after-tax, that's only $2,056 a year in savings. It seems to me that people are living really tight right now.

 

Some links:

Forbes

CNBC

Personal Savings Rate

[Malmqky]

Lots of people finance everything and spend too much on cars.

Then think about college kids, etc.

 

Makes sense to me

[Eng12345]

Yes - I am an engineer and my wife is a pharmacist both from the same town of ~35k in middle America. 

 

I work a lot of overtime and so does she, and we are very much ahead of the curve of our friends but by no means wealthy. We can sock away an extra 2-5k a month depending on overtime and thats after my massive mortgage payment. However, by all friends and family accounts they think of us as "rich". I think not - we just work incredibly hard and have worked hard for the past 10 years. One or two bad events or decisions could wipe us all out. 

 

My dad was a truck driver - he lives on social security now. My mom has a minimal state pension and social security to look forward to in retirement. Her retirement job is the most money she has ever made - $18/hr. I made that in 2016 working as an intern. 

 

The hard truth is when you get down to it most of America doesn't have two nickels or two brain cells to rub together. We are incredibly blessed not only financially to be able to have these discussions on this forum but also from an intellect perspective. One of the greatest things my mom did for me growing up was fostering a love for reading and learning - taking me to the library every weekend and making me entertain myself there. Looking back I know why she did that - she couldn't afford to do much else. 

 

Most peoples homes are their biggest assets not their retirement funding. They have no hope. I hope to never lose my hope. 

[Castanza]

39 minutes ago, Eng12345 said:

Yes - I am an engineer and my wife is a pharmacist both from the same town of ~35k in middle America. 

 

I work a lot of overtime and so does she, and we are very much ahead of the curve of our friends but by no means wealthy. We can sock away an extra 2-5k a month depending on overtime and thats after my massive mortgage payment. However, by all friends and family accounts they think of us as "rich". I think not - we just work incredibly hard and have worked hard for the past 10 years. One or two bad events or decisions could wipe us all out. 

 

My dad was a truck driver - he lives on social security now. My mom has a minimal state pension and social security to look forward to in retirement. Her retirement job is the most money she has ever made - $18/hr. I made that in 2016 working as an intern. 

 

The hard truth is when you get down to it most of America doesn't have two nickels or two brain cells to rub together. We are incredibly blessed not only financially to be able to have these discussions on this forum but also from an intellect perspective. One of the greatest things my mom did for me growing up was fostering a love for reading and learning - taking me to the library every weekend and making me entertain myself there. Looking back I know why she did that - she couldn't afford to do much else. 

 

Most peoples homes are their biggest assets not their retirement funding. They have no hope. I hope to never lose my hope. 

 

Rich is somewhat relative to your peers income and areas cost of living. 2-5k a month in savings is not a negligible amount and at an average market return would could net you upwards of ~13m at 65 if we assume you're around 30. 

 

Personally I think people spend too much, buy too much house, drive too nice of vehicles and in general finance too much. I see a lot of 250k houses with 125k worth of vehicles parked in the driveways. 

 

[Intelligent_Investor]

I've seen way too many people who think that financing is not debt. These people have negative net worth but think they are fine because cash flow is positive.

[ValueArb]

CNBC said 65%.

 

Extraordinary claims require extraordinary evidence, and a SurveyMonkey online survey doesn't cut it. 

 

This is a press release masquerading as science.

[Dinar]

So, I think that this is sadly very true.  Two examples from this week:

 

a) A doctor and his wife, $400K+ annual income in NYC, two kids, late 40s, kids aged 12 and 7.   Zero savings, except for $300K in 401(k).  Own their apartment, worth probably $800K (there is a mortgage on it), which was bought nine years ago, with the downpayment provided by parents.  Spend money like drunken sailors - take out several times a week, camps for kids at $25K total for the summer, three vacations per year including a $20K cruise in 2023.

 

b) A doorman (who just got fired) and his wife, a cook for NYC DOE.  The guy also worked a second job.  Combined income of about $100K after-tax, two kids both grown and out fo the house.  Couple's age is 50.  Zero savings.  Why?  Stupid decisions - no bank account so 3-5% paid on every check cashed, smoking a pack a day ($7K per annum on cigarettes per person) and things of that nature.

Edited May 16 by Dinar

[Paarslaars]

We live paycheck to paycheck and are very happy with this.  Though I'm not american... 

I work 80% and my wife 60%, we got a massive mortgage so that we did not have to put up a lot of money up front and instead invest it.

So we don't really save any money from our paycheck, we spend most of it leading a normal comfortable life and whatever is left we use for renovations.

 

That said, our portfolio's combine to roughly 6 years of net annual salaries. 

The gains we realise on this (which are untaxed in my country) outweigh whatever we could save by working more because the tax rate on labor is so high (55% in the highest bracket, where I am).

Edited May 16 by Paarslaars

[Dinar]

7 minutes ago, Paarslaars said:

We live paycheck to paycheck and are very happy with this.  Though I'm not american... 

I work 80% and my wife 60%, we got a massive mortgage so that we did not have to put up a lot of money up front and instead invest it.

So we don't really save any money from our paycheck, we spend most of it leading a normal comfortable life and whatever is left we use for renovations.

 

That said, our portfolio's combine to roughly 6 years of net annual salaries. 

The gains we realise on this (which are untaxed in my country) outweigh whatever we could save by working more because the tax rate on labor is so high (55% in the highest bracket, where I am).

Belgian?

[adesigar]

2 minutes ago, Dinar said:

Belgian?

 

More likely Denmark/France/Austria

[mattee2264]

Seems pretty plausible. 

 

Of course it is not as bad as it sounds because if you are paying down a mortgage and contributing to a company pension plan you will still be able to eventually retire in relative comfort. And that will be the position of a lot of middle class and some upwardly mobile working class households. 

[Paarslaars]

40 minutes ago, Dinar said:

Belgian?

 

Yes

 

I also forgot to mention, the company retirement plan I have is very good (no personal contributions, all by the company).

I believe it's roughly 10 years of salary if you work there 40 years.

Combined with our pensions (2k/month), the wife and I won't actually need any savings by the time we retire... it will all be plenty.

[Sweet]

The metric might be true when you add in all the luxuries of many households.  Some households are of course struggling but I’m not referring to them.

 

I used to hang with a bunch of guys in who earned broadly the same as I did and who managed to spend their entire pay each month on girls, drugs and drink.  I was saving about 70% of mine.

 

Today those same guys are still living paycheck to paycheck with little to no savings all as a result of their own choices then and now.

 

Paycheck to paychecj in 2024 is not the same as it was in 1984. 

 

If this is supposed to be some metric of how terrible the economy is doing, or if the rich - poor divide, they can suck a dick. 

[Parsad]

Those numbers are comparable to Canada...about 50% are living paycheck to paycheck and an unexpected expense of $200 would put them in difficulty.  

 

Because employment numbers are doing so well, pandemic funds that supplemented savings, consumers are surviving by a thread.

 

You get a recession or downturn, you are going to start seeing problems.  Already, bankruptcies and insolvencies are way up...I don't think the restaurant sector has ever had it so tough...maybe the Great Depression?!

 

The confluence of high input costs, higher salaries, higher costs for fuel/electrical, landlords not making concessions on lease rates...margins are getting squeezed.  They estimate close to 50% of restaurants are not currently profitable in Canada!

 

I'm seeing so many restaurants in great commercial areas selling or folding.  At some point, I would imagine landlords are going to start having to make concessions on leases, but because of losses or rent delays during the pandemic, they are reluctant to reduce rates too much.  Makes it very difficult for restauranteurs to keep margins above water!

 

Cheers!

[longlake95]

3 hours ago, Paarslaars said:

We live paycheck to paycheck and are very happy with this.  Though I'm not american... 

I work 80% and my wife 60%, we got a massive mortgage so that we did not have to put up a lot of money up front and instead invest it.

So we don't really save any money from our paycheck, we spend most of it leading a normal comfortable life and whatever is left we use for renovations.

 

That said, our portfolio's combine to roughly 6 years of net annual salaries. 

The gains we realise on this (which are untaxed in my country) outweigh whatever we could save by working more because the tax rate on labor is so high (55% in the highest bracket, where I am).

Sounds like Belgium.

[Eldad]

My buddy is a CPA that has a firm that only has dentists as clients. I would say average makes 400k. 
 

When my state shut down dentist offices during Covid at the very beginning, over half his clients started calling him and saying they had zero cash and had to fire their entire staff immediately. Shortly after PPP loans were announced. But the point is over half his clients had 0 margin. If they couldn’t work they were bankrupt in a week. 

[gfp]

10 minutes ago, Eldad said:

My buddy is a CPA that has a firm that only has dentists as clients. I would say average makes 400k. 
 

When my state shut down dentist offices during Covid at the very beginning, over half his clients started calling him and saying they had zero cash and had to fire their entire staff immediately. Shortly after PPP loans were announced. But the point is over half his clients had 0 margin. If they couldn’t work they were bankrupt in a week. 

 

There are so many people like that.  I've known several that made huge but variable incomes and could never come up with the cash to pay taxes in April.  They would go to the boss or owner of the company asking for a loan to pay their f'ing taxes.  Embarrassing.

[aws]

35 minutes ago, Eldad said:

My buddy is a CPA that has a firm that only has dentists as clients. I would say average makes 400k. 
 

When my state shut down dentist offices during Covid at the very beginning, over half his clients started calling him and saying they had zero cash and had to fire their entire staff immediately. Shortly after PPP loans were announced. But the point is over half his clients had 0 margin. If they couldn’t work they were bankrupt in a week. 

 

I also used to be a CPA and was doing a tax return for a dentist in his early thirties. The guy made what would be the equivalent of 800k today, but had too little withholdings and owed about 25k to the IRS, basically one paycheck worth of debt. He freaked out when he heard this and asked us to set him up with a payment plan for the IRS. I filled out the paperwork to have him settle it at 1k per month, but he called back saying he couldn't afford that and we had to drop it to $500 a month.

[Gamecock-YT]

Not surprising between the way personal finance isn't taught and people's affinity to want to keep up with the Joneses. 

Edited May 17 by Gamecock-YT

[schin]

4 hours ago, Sweet said:

I used to hang with a bunch of guys in who earned broadly the same as I did and who managed to spend their entire pay each month on girls, drugs and drink.  I was saving about 70% of mine.

 

Today those same guys are still living paycheck to paycheck with little to no savings all as a result of their own choices then and now.

 

@Sweet - But, are they still spending on girls, drugs, and drink.. If so.... They are living their dream!

[DooDiligence]

1 hour ago, schin said:

 

@Sweet - But, are they still spending on girls, drugs, and drink.. If so.... They are living their dream!

 

George Best enters the conversation.

[schin]

1 hour ago, DooDiligence said:

 

George Best enters the conversation.

@DooDiligence - LOL. It's all about when you hit your peak. For some, it's living their best life in high school.... you don't want to be the richest person in the cemetery.

 

George Best was epic.

[Sweet]

5 hours ago, schin said:

 

@Sweet - But, are they still spending on girls, drugs, and drink.. If so.... They are living their dream!

 

Not as much now, the girls have been replaced by the babies!

[Paarslaars]

Well daughters are a hell of a lot more expensive than women. 

[mattee2264]

Post-pandemic I can definitely understand the issue.

 

Official government statistics claim that the price level has risen about 20-30% since the pandemic. But in the real world it is probably more like 50% especially for items such as groceries, entertainment, restaurants, travel etc. and salaries haven't even kept up with official inflation rates. 

 

You are seeing the cost of some items such as groceries come down. But a lot of companies have been able to get away with jacking up prices using the pandemic supply chain disruptions as an excuse and when these disruptions eased and their costs came down didn't pass on the lower costs to consumers. And got away with it because consumers had excess savings from the pandemic, unemployment is low, in many cases mortgage payments are low as people refinanced during the pandemic, and consumers have credit cards that allow them to live beyond their means at least in the short term. You also have some criminal buy now pay later schemes (phantom debt) to trap consumers. 

 

Wouldn't be the worst thing in the world if we did have a recession, a lot of credit card defaults, and companies were forced to lower prices (and margins are still close to record highs) so they can easily afford to do so. 

 

Edited May 17 by mattee2264