Study: Half of Americans Live Paycheck to Paycheck

Study: Half of Americans Live Paycheck to Paycheck

A new study from the Center for Financial Services Innovation finds that nearly half of US adults are living paycheck-to-paycheck, with expenses equal to (or even greater than) their income—including 54 percent of those aged 18-25—CNN Money‘s Anna Bahney reports:

Of the 25% who say they have too much debt, 96% report being stressed. This kind of financial stress has lasting health effects for those constantly working to cover the nut, says [Jennifer Tescher, president and CEO of CFSI]. “We can’t deal with their health problems if we can’t deal with their financial health.” …

Certainly we can all do the hard work of cutting back on our expenses, says Tescher. But she says the results of this study show something more structural than individual spending. “People are spending a shockingly large amount of income on housing. They have to pay for transportation to get to a job. These costs are going up while their wages stay the same.” Another major contributor, according to the study, is irregular income. Nearly 40% of those who spend as much or more than their paychecks have volatile income, which means it varies from day to day, week to week, month to month.

The issue of employees’ financial insecurity is highly salient for employers, who are increasingly aware of the negative impact financial stress has on well-being and productivity. This topic came up in the Minneapolis Evanta leadership summit in Minneapolis earlier this month, during a boardroom discussion on emotional resilience. Several companies were talking about introducing financial wellness benefits and receiving feedback from the vendors that so many of their employees were living hand to mouth that they didn’t need financial wellbeing benefits, they need debt consolidation guidance.

Finances often is one of the major causes of stress in the workplace, and it was interesting to see how organizations were grappling with the fact that they know this is a problem, but aren’t quite sure what their responsibility is in terms of providing support.

There was also a talk that referenced the volatility of the gig economy in terms of employee well-being, the idea being that the gig economy is unsustainable when there is no social safety net, so the people that are opting into this work are those that need the money and can’t afford for things to go wrong. These concerns were reflected in a recent report issued by the UK Parliament, which found that gig economy workers suffered from volatile incomes and were putting increasing strain on the welfare state. Reducing income instability is also a major rationale behind the recent spate of state and local laws limiting variable scheduling for hourly employees.

In this context, some employers are exploring new ways to support their employees’ financial health. In a New York Times feature this week, Tara Siegel Bernard highlighted some of the latest innovations in financial wellness programs, such as dedicated days off for taking care of personal finances, or seed money to help employees start emergency savings accounts:

SunTrust Banks [provides] these benefits as part of a financial wellness program, something that Bill Rogers, the bank’s chief executive, decided to introduce about two-and-a-half years ago after he came to a startling realization: Even his own workers — who he had assumed were more knowledgeable about money and in better financial shape than most people — were making poor financial choices, like borrowing against their 401(k) plans. And many of them were ill-prepared for a financial emergency. …

After introducing a financial wellness program to its 24,000 workers, SunTrust acquired the wellness company it initially hired for the job. And now, it plans to offer the program, which is based on eight main financial steps, or “pillars,” to employers across the country. … Roughly 30 other organizations already offer the SunTrust program, including Home Depot, Delta Air Lines and the company that makes Little Debbie’s snack cakes. Ten others plan to introduce it, the bank said.