You might be surprised by the percentage of low-income households living paycheck to paycheck

Many Americans know the cycle of earning a paycheck only to have it immediately consumed by rent, car payments, groceries, and other essentials, leaving almost nothing to save. This pattern has been amplified in a year marked by rising tariffs, which have directly increased prices at checkout.

Even though the Consumer Price Index (CPI) inflation rate has shown some easing, prices across the country continue to climb, according to the Bureau of Labor Statistics. The Bank of America Institute reports that nearly 25% of Americans now live paycheck to paycheck due to these pressures.

Over the past four years, more people have had to manage very tight budgets, and this includes some higher-income earners as well. However, in 2025, the most notable impact has been seen among low-income households. The report highlights that 29% of low-income Americans are now living paycheck to paycheck, a 2% rise from 2023.

The Bank of America Institute defines living paycheck to paycheck as spending over 95% of income on essential expenses such as housing, groceries, and fuel. Using this benchmark, nearly a third of low-income households fall into this category.

While wages for high-income households have continued to grow, the earnings of low-income families have remained largely stagnant. Income growth for high earners has consistently outpaced that of lower-income households across generations.

Determining who qualifies as low income can be complex, but a household earning below the federal poverty level is considered low income. For 2025, Healthcare.gov sets the federal poverty line at $15,650 for an individual and $32,150 for a family of four. Although Zillow reports that average national rent remains around $2,000, other essential expenses have increased, adding pressure on budgets.

The report identifies the main reason low-income households are struggling to save as inflation outpacing wage growth. Prices for everyday necessities such as beef, gasoline, and electricity have all risen over the past year, further straining finances.

Author: Olivia Parker