Bank of America reports that even families making more than $150,000 annually struggle to make ends meet

It is not a surprise that prices for everything are increasing these days. (Tickets to the World Series are the most expensive ever.) However, according to a recent analysis by Bank of America, the situation is worse than many people realize, even for those considered wealthy.

Due to rising basic expenses and, in many cases, the cost of maintaining an expensive home, one out of every five households earning at least $150,000 a year is currently living paycheck to paycheck, as reported by the bank in an October note based on spending data and account information from U.S.-based customers. (Living paycheck to paycheck, as defined by BofA, means spending over 95% of income on necessities like food, electricity bills, childcare, and rent.)

Not surprisingly, households earning less than $50,000 annually make up the largest portion of the paycheck-to-paycheck group, accounting for 35% (up from 32% in 2019). As household incomes increase, the proportion in this group decreases.

Six-figure stress: ‘How could this be?’

Even those with six-figure incomes often find themselves struggling to make ends meet. (A MarketWatch survey earlier this year echoed BofA’s findings.) The main issue is the significant impact of lifestyle inflation in all its harmful forms, according to the authors of the Bank of America report.

“Households living paycheck to paycheck have either higher necessity spending, lower incomes, or a combination of both,” they write, adding that their data suggests that “households living paycheck to paycheck have over 90% higher necessity spending than households who do not live paycheck to paycheck.”

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Another reason is that when families reach a certain income level, their “necessity spending” ends up being relatively higher, often surpassing their income. Specifically, “higher-income households may have purchased larger, more expensive homes and consequently have higher mortgages,” BofA explains.

Large homes come with higher costs across the board: insurance, property taxes, utilities, upkeep, and maintenance.

Time doesn’t heal all

Even more concerning is the fact that the percentage of paycheck-to-paycheck households tends to increase with age. More baby boomers, who are mostly retired, live paycheck to paycheck compared to any other age group. Gen Xers, on the other hand, have the highest percentage of paycheck-to-paycheck households among those still primarily working.

The situation for Gen Xers, as highlighted by BofA, reflects their previous research findings showing that these individuals tend to have the highest proportion of necessity spending.

Overall, there has been a rise in the percentage of paycheck-to-paycheck households since 2019, according to BofA’s findings. One in four households falls into this category. This is despite the fact that inflation has somewhat cooled down; it is still high enough to cause lasting financial strain for working Americans.

Furthermore, whether or not workers are actually facing financial difficulties, a significant portion of them feel like they are. In BofA’s Market Landscape Insights Study, nearly half of the respondents agreed with the statement “I am living paycheck to paycheck,” a percentage that has been steadily increasing over the past two years.

This, according to BofA, “likely reflects the impact of higher consumer prices on people’s perceptions and experiences of their finances.”

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