A growing share of American households are living paycheck to paycheck in 2025, according to new data from the Bank of America Institute, underscoring the continued financial pressure facing families despite a cooling labor market and slowing inflation.

The analysis estimates that nearly 25% of U.S. households now spend more than 95% of their income on basic necessities such as housing, childcare, groceries, gas, credit card payments and car loans. That figure is up from 23.5% in 2024. While the number of struggling households continues to rise, economists note the pace of growth has slowed. The share increased by 0.3% this year, a smaller jump than the 0.9% increase recorded in 2024.

Economist Joe Wadford of the Bank of America Institute told USA TODAY that lower-income households — particularly millennials and Gen X — are driving the trend. Wage growth for these groups has tapered off even as key costs remain elevated, and the study found almost no increase in the number of middle- and high-income households living paycheck to paycheck. Among lower-income families alone, roughly 29% are now struggling to maintain financial stability, up from 28.6% last year and 27.1% the year before.

There are also sharp regional differences. The share of paycheck-to-paycheck households has grown in the Northeast and Midwest but has declined in the South and West, where inflation rates have been relatively lower. However, the report warns that inflation has begun accelerating again, raising the likelihood that financial pressure could intensify in the coming months.

Separate data suggests workers across income levels are burning through their paychecks quickly. A survey of 2,000 Americans by Talker Research for EarnIn found that consumers spend more than one-third of their paycheck within the first 12 hours of receiving it, with millennials spending about 40% in just a few hours. Nearly half of the average paycheck is gone within two days, mostly spent on essential items and bills.

The squeeze is not limited to low- and middle-income earners. A Harris Poll released this month shows that even high earners are feeling strained. Three-quarters of households making at least $100,000 a year say they are living paycheck to paycheck, and more than half believe they would need to double their income to feel financially secure. Many reported relying on credit cards when cash runs short and said they had cut back on medical care, sold personal items or skipped meals to stay within budget.

Economists attribute much of the pressure to cumulative inflation since the start of the pandemic. Consumer prices are now at least 24% higher than they were in early 2020, according to Bankrate. Bill Adams, chief economist at Comerica Bank, estimates that a worker would need to earn $170,000 today to match the purchasing power that a $100,000 salary provided in 2005. The impact varies widely by location: a LendingTree analysis found that in 25 of the nation’s 100 largest metropolitan areas, a family earning $100,000 would still fall short of covering basic monthly expenses.

The situation reflects what economists describe as an “income paradox.” Consumer confidence has fallen sharply, reaching its lowest point in three years, even as overall consumer spending continues to rise. Wealthier Americans are powering much of that increase, with the top 10% of earners now responsible for nearly half of all U.S. consumer spending. Economists warn that while high-income households are keeping spending afloat, the widening gap between income groups is leaving a growing share of Americans financially exposed.

For millions of families, the data points to the same conclusion: the paycheck does not buy what it used to, and financial stability remains elusive even for many who once believed they had achieved it.

(YWN World Headquarters – NYC)