‘The Big Money Show’ panel responds to Brian Moynihan’s claim that Americans continue to spend despite growing pessimism about the economy.
This is almost a quarter of all American households living paycheck to paycheck and the number has increased over the past year, although the growth rate has slowed, according to a new report.
The Bank of America Institute The report shows that so far in 2025, almost 24% of households would have a living income, an increase of 0.3 percentage points from 2024 – although the growth rate is almost three times lower than a year ago.
It defines living paycheck to paycheck as households spend more than 95% of their income on necessities such as housing, groceries, gas, utilities, internet subscriptions, public transportation and childcare. This leaves them with little or no money for savings or ‘nice-to-have’ purchases.
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Nearly one in four Americans live paycheck to paycheck, although the pace of growth has slowed, according to the Bank of America Institute. (iStock / iStock)
Inflation has grown faster than the after-tax wages of middle- and lower-income households since January 2025, the Bank of America Institute finds.
This trend has resulted in the share of lower-income households living paycheck to paycheck rising to 29% this year, up from 28.6% last year and 27.1% in 2023. Among middle- and upper-income households, there has been little to no increase in the ratio of living paycheck to paycheck.
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“For middle- and lower-income households, I think inflation is the main driver. This year in particular, we’ve seen the gap between wages and spending widen for lower-income households,” Wadford explains.
‘In October we saw a 1% wage increase, while the latest inflation data indicates that cost of living increase by 3%,” he added. “Put another way, if your bills increase by $300, but you only make $100 more, how are you supposed to keep up? And I think the short answer is that some families are really struggling with it.”
Wage growth for lower-income workers has slowed in recent years compared to high-income workers. (Yuki Iwamura/Bloomberg via Getty Images/Getty Images)
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About 19% of upper-income households live paycheck to paycheck, which Bank of America attributes to this lifestyle creeps causing bills to rise.
“If you’re talking about the households with a higher income who live paycheck to paycheck, lifestyle creep may be the main driver,” Wadford said. You bought a house, you bought a few cars and before you know it, all your money is going to bills.
Inflation continues to put pressure on US household budgets. (Justin Sullivan/Getty Images/Getty Images)
This was also evident from the report wage growth for people on lower incomes has eased compared to those for people on higher incomes since early 2025, after rising faster in 2021-2022 before cooling in 2023-2024.
“This K-shaped economy is largely dependent on wage growth,” Wadford explains. “As long as you continue to see this gap between wage growth at higher incomes and wage growth at lower incomes, you will continue to see this.”
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“The gap between wage growth at higher and lower incomes is the highest we have seen since 2016,” he added. “If we continue to see the labor market behaving differently for these two groups and the labor market in general cooling, I think that’s kind of the situation for the foreseeable future.”
