Data from Bank of America released earlier this week showed that nearly a quarter of U.S. households are living paycheck to paycheck in 2025, a 0.3% increase from 2024 but three times lower than in 2023.
The analysis defines living paycheck to paycheck as households where necessary spending exceeds 95% of income. The data shows lower-income households, particularly Millennials and Gen X, feel the most financial strain.
Inflation has consistently outpaced wage growth for middle- and lower-income households since the beginning of 2025. Inflation rose by 3.0% year-over-year in September, while after-tax wage growth for these households lagged, increasing by only 2% and 1% in October, respectively.
Higher-income households’ average wage growth is accelerating relative to that of lower-income families, according to Bank of America internal data.
Today, 29% of lower-income households are living paycheck to paycheck, up from 28.6% in 2024 and 27.1% in 2023 (Exhibit 3).
However, there has been little to no increase in the share of middle- or higher-income households living paycheck to paycheck. Why are we only seeing an increase in lower-income households? In our view, it’s likely due to slowing wage growth for this cohort.