Comment by notJim | Hacker News Reader

Comment by notJim | Hacker News Reader

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The living paycheck to paycheck stat is meaningless. It generates headlines, because bad news wins, but if you dig in, even the surveys that ask about this reveal that a large percentage of people living paycheck to paycheck are very financially secure, both objectively, and according to their own assessment. I don't have time right now, but I'd encourage anyone reading this to go find the actual source for this stat and read their full report. Last time I looked, it was freely available.

Many of those people living paycheck to paycheck have a budget where they're saving or investing a significant amount of their money, and accordingly, money feels tight. This is the financially sound way to avoid lifestyle creep, but it doesn't mean you're in a precarious position. Or alternatively, they're paying for really expensive, but optional things like private schooling and expensive cars or vacations.

Obviously some people are struggling, but this paycheck-to-paycheck stat is not an accurate way to quantify that. It's best IMO to look at objective metrics like the poverty rate, or people's objective financial picture (available via surveys.)

> Many of those people living paycheck to paycheck have a budget where they're saving or investing a significant amount of their money

I don't think that's the common understanding of what "living paycheck to paycheck" means.

The most common one is saying that someone is paycheck to paycheck but they're also funding their 401(k) up to company match, etc.

It's usually just the inverse of saying most people don't have ready cash savings laying around; because there's no need to when you have credit every which way all the time.

Much better to look at the debt load on people and how that changes over time. Someone who makes $5k a month and spends $3k on debt service and lives off $2k is going to feel much different from someone who makes the same $5k, lives on $2k, and spends $3k on candles or whatever (since they can stop buying candles anytime but you can't easily stop paying down debt).

When I hear "living paycheck to paycheck" I think it means your recurring expenses (rent, utilities, food, etc.) consume all your income every month and you have nothing left to save. No savings. No investments. No 401K. If you don't get your next paycheck you can't pay the rent.

That's what it's supposed to mean, but because so many people don't report it that way the resulting data is meaningless.

What you think and what each individual reply to the survey indended are bound to be wildly different.

Sure. But it would be strange to assume _most_ think of it any other way.

I think your definition is completely reasonable, but it's not how people answer the question (again, based on reading the report, which has a lot more detail.)

What planet are you on? Paycheck to paycheck means there's (nearly) nothing left at the end of every month.

Clearly you're not in that situation, and likely have never been anywhere near it with that privileged view of the world.

Many people in the States are living on the edge; i.e. paycheck to paycheck, not, "oh, well, I'll just dip into my equities if the need arises".

> It's usually just the inverse of saying most people don't have ready cash savings laying around; because there's no need to when you have credit every which way all the time

This is quite a precarious situation to me. People should not need nor be encouraged to rely on debt to live life, especially month to month.

The default mode should be working people make enough to, if budgeted moderately well, can pay for everything plus save money away post tax[0]

Anything less and you’re only growing systemic issues over time

[0]: including tax exempt savings like 401Ks is ill-reflective of people’s ability to save money aside for emergencies and unexpected costs

That's exactly the point he's making. That exact slight of hand underpins all those "huge percent of population living paycheck to paycheck" headlines.

I love seeing this in those periodic ragebait articles about how a family earning 400k+ is "paycheck to paycheck" after maxing out their retirement accounts, paying for private schools and vacations, mortgage on a $2m house, car notes on two newer luxury cars, etc. etc.

"After long term saving and paying for my indulgent lifestyle, I just don't have anything left at the end of the month!"

> periodic ragebait articles

Somewhat offtopic, but I call these articles "parading the idiot". Where a newspaper or other media outlet runs an article interviewing a person where the subject is clearly out of step with everyone else in their assumptions.

See also articles where a property investor complains about how hard they are doing financially because they have to sell one of their eighteen investment properties.

I find it pretty egregious that someone who is saving/investing a chunk of every paycheck could be considered to be "living paycheck-to-paycheck." I feel like the most obvious definition most of us would assume is that nearly 100% of your paycheck gets spent on goods and services, and/or bills and debts, before your next paycheck.

The Federal Reserve has pretty detailed studies on this that take a nuanced view of spending behavior. Households with no excess income after necessary expenses are in the 10-15% range. The methodology is designed to exclude the diverse scenarios under which having no apparent excess income is an artifact of lifestyle rather than an economic reality.

>living paycheck to paycheck have a budget where they're saving or investing a significant amount of their money

How can you be "paycheck to paycheck" if you have a massive savings pile? Are you dumping it all into 25 year treasuries?

This is literally me. I live paycheck to paycheck but also have a six figure sum of money I can tap into if needed.

How I got here is living way below my means in my twenties, saving up tons of money, and nowadays living at my means while still maxing retirement. I also have almost all that saved money invested, which just grows the pot as it sits. I also have zero debt besides a 3% mortgage.

So basically I spend all of every paycheck, after retirement has been deducted, but if I lost my job I could maintain my current life with zero income for a few years before running dry.

That is not living paycheck to paycheck by any reasonable definition. If you could stop contributing to savings/retirement/investments and suddenly have a ton of additional disposable income, then it's not that.

I know several people who spend 100% of their income, saving none of it. Not because they have poor saving habits but because they've already saved more than they'll likely ever need for a comfortable retirement.

At which point, it actually kind of makes sense to blow your entire income on lifestyle.

That’s still not paycheck to paycheck. If you’re spending income on non necessities you could cut back and be just fine.

An aside, if you’re spending 100% of your income on just lifestyle stuff… you don’t to work at all if your retirement covers it.

>That is not living paycheck to paycheck by any reasonable definition

Well then now we know that the media will happily use unreasonable definitions to bolster stats for click bait stories and headlines.

People assume paycheck to paycheck means "Spending each paycheck entirely on absolute necessities to live" but the survey definition is "Do you save any money from your take home pay every pay period".

This is how you get people at every income level reporting they live paycheck to paycheck.

I think you really underestimate how much people spend on stuff that is a non-necessity. People at every income level fall prey to the “if I’ve got extra money in my account, guess that means I can spend it”. There are, 100%, people living paycheck to paycheck that make 200k because they’ve made some terrible life choices and have outrageous debt to service, essentially.

If you can tap into a six figure sum of money then you're not living paycheck to paycheck.

That's not living paycheck to paycheck. The implication of living paycheck to paycheck is that you're a few missed paychecks away from homelessness.

where is this implication from? to me living paycheck to paycheck means you are living THE LIFE to the fullest. no “savings” or any BS like that. you make $50k a month, spend it all - wait for next paycheck. paycheck to paycheck

In the context of economics and poverty, paycheck to paycheck is defined as having no ability to save because necessary spending is consuming the entire paycheck.

Necessary spending is food, utilities, clothes, rent. But not eating out, fancy housing is a nice neighborhood, designer clothes, etc.

> Many of those people living paycheck to paycheck have a budget where they're saving or investing a significant amount of their money, and accordingly, money feels tight.

I don’t understand. Isn’t everybody living paycheck-to-paycheck then?

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