Nearly a quarter of U.S. households live paycheck to paycheck, report finds

A recent analysis has revealed that a growing number of lower-income Americans are facing financial struggles as their wages fail to keep up with inflation. According to data from the Bank of America Institute, approximately 29% of lower-income households are living paycheck to paycheck, a slight increase from previous years. This means that these households are spending more than 95% of their income on necessities such as housing, groceries, and utility bills.

In 2025, nearly a quarter of all U.S. households were living paycheck to paycheck, with several factors contributing to this trend. One major factor is the rise in the nation’s inflation rate, which has increased to 3% this year. While this is lower than the peak inflation rate during the pandemic, it still exceeds the Federal Reserve’s target rate of 2%, putting pressure on lower-income households.

Additionally, the cost of groceries and other essentials is continuing to rise, while wages for lower-income workers remain stagnant. In October, wages for lower-income households only increased by 1% from the previous year, further widening the gap between expenses and income. This trend has been exacerbated by a decline in job openings and workers leaving their jobs, leading to slower wage growth for lower-income workers.

On the other hand, middle- and higher-income households are faring better financially, with stronger wage growth and a lower percentage of households living paycheck to paycheck. This disparity has created a “K-shaped economy,” where wealthier Americans are experiencing better financial health compared to those with lower incomes.

It is important to note that the impact of slowing wage growth on poor households may not be fully captured in the data from Bank of America, as many low-income Americans are unbanked. This means that the true extent of economic distress among lower-income households may be greater than what is reported.

Overall, the analysis highlights the challenges faced by lower-income Americans in keeping up with rising costs and stagnant wages. As the economy continues to recover from the pandemic, addressing these disparities and finding ways to support those most vulnerable will be crucial for ensuring economic stability and prosperity for all.