1 in 4 US Households Struggle, Living Paycheck to Paycheck

The financial struggles of American households have become more pronounced as many find themselves living paycheck to paycheck. Recent analysis by the Bank of America Institute reveals that an alarming 24% of U.S. households are currently in this situation, highlighting widespread economic challenges.

Economic Overview of Households Living Paycheck to Paycheck

As of 2025, the economic landscape shows that a significant portion of families is struggling to cover their essential expenses. A closer examination of the Bank of America report indicates that:

• 24% of households are spending over 95% of their income on necessities.
• There are rising concerns regarding affordability, particularly for lower-income families.
• Wage growth is lagging behind inflation, which is further exacerbating financial struggles.

Wages and Inflation: A Diverging Path

The Bank of America research emphasizes that while after-tax wages for middle-income consumers increased by only 2% year-over-year, inflation rates stand at around 3%. For lower-income households, wage growth has stagnated at just 1% year-over-year, compared to 4% for high-income earners. This growing disparity has contributed to a crisis in affordability.

Demographics Affected

The report indicates that the majority suffering are those in lower-income brackets. Key findings include:

• The share of lower-income households living paycheck to paycheck rose from 27% in 2023 to 29% in 2025.
• Millennial workers, particularly in low-income jobs, report stagnant wages compared to their high-income counterparts.

Consumer Behavior and Economic Implications

As families grapple with financial pressures, their spending habits are expected to shift dramatically. Experts note that many might adopt a more cautious approach to spending, potentially weakening the overall economy. Gregory Daco, chief economist at EY–Parthenon, pointed out that this shift could have dire consequences for a consumer-driven economy.

Additionally, Goldman Sachs economists have flagged a potential rise in unemployment rates amid increasing layoffs. Current estimates suggest a 20% to 25% chance of a 0.5 percentage point increase in unemployment within the next six months.

Case Studies of Economic Struggles

Many Americans are facing severe financial distress. For example, Vanessa Jones from Iowa recently had to file for bankruptcy due to overwhelming medical bills and has had to take a second job to support her family.

This trend indicates that affordability crises are not just statistics. These are real human experiences reflecting the struggle for basic needs in an evolving economy. As the economic landscape changes, it is critical for policymakers to address these issues head-on.