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

A growing share of lower-income Americans are struggling to get by financially as their wages fail to keep up with inflation, according to a recent analysis. 

Roughly 29% of lower-income households are living paycheck to paycheck, up slightly from 2024 and from 27.1% in 2023, data from the Bank of America Institute shows. The financial firm defines that as spending more than 95% of household income on necessities such as housing, gasoline, groceries, utility bills and internet service. 

In 2025, nearly a quarter of all U.S. households lived paycheck to paycheck, Bank of America estimates. Several factors explain why many people are falling behind.

First, the nation’s inflation rate this year has edged up to an annual rate of 3% after dipping to 2.3% in April. The rise in consumer prices this year is well below their pandemic-era peak of 9.1% in 2022, but remains above the Federal Reserve’s target rate of 2%. 

“Inflation is picking back up again, and cost increases are picking back up again,” said Joe Wadford, an economist at the Bank of America Institute, which recently examined the financial pressures facing Americans by income. “That’s definitely going to put some renewed pressure on those households.”

Second, the cost of groceries and other essentials is continuing to rise as lower-wage workers see their paychecks and purchasing power stagnate. In October, wages for lower-income households were up only 1% from a year ago, according to Bank of America deposit data. 

“The gap between their wages and expenses has just continued to widen since the beginning of the year,” Wadford said. “When the cost of living is increasing 3% but your wages are only increasing 1%, you’re just going to really struggle to keep up.”

Lower-wage workers experienced strong wage growth during the pandemic and subsequent economic recovery, but that rise has slowed sharply since late 2022, according to Elise Gould, senior economist at the Economic Policy Institute. One factor weighing on wage growth — a decline in job openings and the rate at which workers are leaving their jobs.

“When people aren’t looking for other offers or quitting, that is going to cause wage growth to slow,” she said. 

While lower-income households are struggling to scrape by, middle- and higher-income households are on firmer financial footing, buoyed by stronger wage growth. This group has seen little to no increase in the share of households living paycheck to paycheck, the Bank of America Institute found. 

“These higher-income cohorts are more able to absorb the recent reacceleration in inflation due to their outsized wage growth,” Wadford wrote in the report.

That bifurcation is fueling what economists refer to as the “K-shaped economy,” a term experts use to describe the divergence in spending and financial health between wealthier Americans and people with more modest incomes. 

Gould also noted that many low-income Americans are unbanked and that Bank of America’s findings, which are drawn from an analysis of its depositor data, may not fully capture the impact of slowing wage growth on poor households.

“You’re missing some of the bottom end and how much pain [and] economic distress they may be feeling,” she said.