Living Under Your Means

The days of the Boomer Life are officially over. Our generations won’t be able to buy a house at 19 while raising a family of four on one income straight out of high school. That much is known. What is not known is how bad it will get.

Which is why it would be wise to begin living under your means as much as possible, starting now.

I was fascinated when I read a recent headline about the amount of Americans living paycheck to paycheck, and had to look into the story much deeper. There are a lot of journo articles on this topic, but the actual underlying study that they all link to can be found here.

I had initially assumed the study was some political ploy, but it seems genuine. They’ve been tracking this metric faithfully each month. Give it a look over. The results are astounding:

9.3 Million More U.S. Consumers Ended 2022 Living Paycheck to Paycheck Than in 2021

Today’s Paycheck-to-Paycheck Landscape

Sixty-four percent [64%] of U.S. consumers (166 million) were living paycheck to paycheck in December 2022, up 3 percentage points from 61% the year prior, with the most growth seen in higher income brackets. In fact, 9.3 million more consumers are now living paycheck to paycheck, and eight million, or 86%, of those consumers earn more than $100,000 annually.

In December 2022, 51% of consumers earning more than $100,000 annually said they lived paycheck to paycheck, up 9 percentage points from 42% in December 2021. In contrast, the shares of middle-income consumers (those earning between $50,000 and $100,000 annually) and low-income consumers (those earning less than $50,000 annually) have remained relatively constant over the same period — sitting at 66% and 78%, respectively, as of December 2022.

The data also finds that an increasing number of consumers earning more than $100,000 are living paycheck to paycheck with difficulty paying their monthly bills. In December 2022, 16% of these high-income paycheck-to-paycheck consumers struggled to pay their monthly bills, up from 11% in December 2021.

“The effects of inflation are eating into every American’s wallet and as the Fed’s efforts to curb inflation drive up the cost of debt, we are seeing near record numbers of Americans living paycheck to paycheck,” said Anuj Nayar, financial health officer at LendingClub. “While the number of Americans living paycheck to paycheck is close to the height we saw in the middle of the pandemic, the causes appear to be very different, as the economy is not sheltering in place like it was back in 2020.”

You read that right: 64% of American consumers, 166 million people, are currently living paycheck to paycheck.

Even more shocking: Given the American consumers earning more than $100,000, over half of them (51%) are also paycheck to paycheck(!).

I realize a dollar does not take you nearly as far as it used to, but it is mind-boggling that over half of the people earning this much—or more—are paycheck to paycheck.

$100k, after the massive taxes, payroll costs, and insurances that are mandated today is not a lot of money. Especially depending on where you live. But it’s not a small amount, either.

It likely goes to show that many Americans are desperately trying to keep up with the Joneses and living above their means.

The other piece of the study seems to collaborate that assumption:

• Meanwhile, middle-income consumers ($50-100k) sit at 66% paycheck to paycheck, and even low-income consumers (<$50k) are at 78%.

If many Americans in the middle and low income range are not paycheck to paycheck, far fewer in the >$100k should be.

Now is not the time for excess. Now is the time to live under your means, to brace for whatever is coming.

I have already had to do this to adjust my salary for inflation, but it is good to do even if you have the capabilities to spend more.

Stop buying so much. Repair instead of replace, if at all possible. Cut out unnecessary major and minor expenses. Save on energy (turn down heat, reduce water heater temp and amount of heated water usage, et cetera). So on and so forth down the line of your budget.

If you have extra money, it should go to savings, tangible goods that could be helpful in the future, self-sufficiency, improving health, or long-lasting useful goods.

Do what you can, even if it is a little. Don’t get stuck cutting out essentials later because you refused to cut out the extras now.

-By Kaisar