SAINT LOUIS–A new study examines in which U.S. cities Americans are most living paycheck to paycheck.
The study probes the behaviors of the nearly 38.1 million Americans who live in poverty and the 80% of workers in the U.S. who live paycheck to paycheck (10% of whom earn at least six figures).
The study, from Clever Real Estate notes that spending the majority of one's paycheck before the next payday induces a slew of problems, including stress and not being able to save for the future.
“You might assume that wages in more expensive areas cover cost of living expense differences, but that's not always the case,” said Clever in releasing the findings. “In fact, when we controlled for cost of living, per-capita annual income ranged from $31,853 to $95,209 in the most populous metropolitan areas in the U.S., suggesting that income's variation goes beyond cost of living adjustments.”
Clever noted it’s reasonable to expect residents in places like San Francisco, where the cost of living is 225% of the national average, to struggle paycheck to paycheck due to exorbitant living expenses.
75 Metro Areas Examined
Clever said its analysis looked at the 75 largest metros in the U.S. for trends. The company calculated the amount of money people had left at the end of each pay period using per capita bi-weekly (2x per month) income minus taxes and living expenses, which included housing, utilities, health, groceries, and non-recreational goods and services. Its per-dollar amounts refer to calculations on a per capita basis, assuming two paychecks per month, for a total of 26 paydays, unless otherwise noted.
“We found that the average American has less than $140 left over each paycheck, and even less in certain metros across the U.S., but where you live has a big impact on how much you can save,” the company said.
As the chart shows, six cities were identified where the average person is negative when it comes to disposable income after living expenses: McAllen, Texas; New Haven, Conn.; Riverside, Calif.; New York City, Orlando and San Antonio.
“Residents in the top 75 metros tend to save more than the national average, indicating saving is harder for people living in smaller cities,” Clever Real Estate said. “Where you live matters, and it has a direct impact on what you're able to save towards retirement and discretionary spending. This report also reveals what residents of high-cost areas are doing to survive when their expenses are so high.”
Key Insights
Among the key insights in the report:
- The average American spends nearly 60% of their income on living expenses; only 13 of the 75 most-populous metros spend less than 80%
- The typical American has less than $140 left over each paycheck (measured bi-weekly)
- People are more likely to live with roommates in places with higher rents to afford the high costs of living
- Living in an area where rents are high (e.g. San Francisco) doesn't necessarily mean residents are unable to save; many residents make lifestyle changes to save more than the average American
- A regression analysis revealed that people earn an additional $352 annually for each 1% hike in cost of living, meaning people earn more in places that cost more
- According to Zillow, 30% of adults lived with at least one roommate in 2017, up from only 22% in 2000
- About 14% of income is allocated toward housing and utilities (per person)
- 6% of metro residents live in poverty despite being employed
- The largest share of per capita spending goes toward housing and utilities ($403), followed by miscellaneous goods and services (including home, auto, health, and other insurance, $348), transportation ($224), healthcare (not including insurance, $160), and groceries ($137)
- Southern residents are more likely to live below 125% of the poverty level
Additional Findings
Other findings:
- Residents in Bridgeport, Conn; San Jose; Tulsa; Raleigh; Charlotte, and Nashville earn enough to save over $1,000 each month
- Residents in San Francisco; Bridgeport, Conn.; San Jose, New York City and Los Angeles spend the most on housing and utilities
- Housing and utilities are least costly in McAllen, Texas; El Paso; Greensboro, N.C.; Columbia, S.C., and Tulsa
- People are more likely to live with roommates where rent is high, with the largest shares of co-paying adults living in San Jose, Austin, San Diego, and San Francisco
- Those in the south are more likely to have delinquent debt: McAllen, Texas; Columbia, S.C.; Baton Rouge; El Paso; Memphis; Greenville, S.C.; Charleston, S.C.; Dallas and Tulsa have the highest rates of debt in collections
- Fewer than 20% of residents in Boston, Omaha, Seattle, Honolulu, San Francisco, and Minneapolis have delinquent debt
- Over one-quarter of people living in El Paso, Bakersfield, Fresno, and McAllen earn less than 125% of the poverty level compared to 11% in Washington, D.C., and San Jose
For the complete findings and additional detail, go here.