KEY TAKEAWAYS
- With inflation rates outpacing wage growth, households are spending a larger share of their income on necessities.
- In particular, more households in the Northeast and Midwest are living paycheck to paycheck.
- However, this trend may not last forever, as consumers in the South and West are facing similar, if not higher, inflation growth compared to other areas.
More families are living paycheck to paycheck as inflation continues to rise nationwide, but some regions are experiencing higher cost increases than others.
Living paycheck to paycheck means that a household spends more than 95% of its income on necessities, according to Bank of America. In the third quarter of 2025, nearly a quarter of American households were living paycheck to paycheck, with consumers in the Northeast and Midwest struggling the most, according to a recent report from the bank.
In September, inflation increased by 3% over the year, the highest 12-month inflation rate since January, according to the Consumer Price Index. Yet in October, wages had only increased by 2% for middle-income households, and by 1% for lower-income families, according to Bank of America deposit data.
With the cost of living increasing faster than paychecks, the number of Americans living paycheck to paycheck this year was 0.3 percentage points higher than last year. The growth rate was nearly three times that amount in 2024—meaning the growth has slowed significantly in the past year.
Why This Is Significant
Affordability is a significant problem for many Americans, as recent inflation rates, partly driven by tariffs, have driven costs higher and affected household budgets. When fewer consumers can afford discretionary items, it reduces overall spending, leading to further negative effects on the economy.
Where Inflation Is Hurting Households The Most
The percentage of households in the Northeast and Midwest living paycheck to paycheck increased from the third quarter of 2025 compared to the same time last year. Meanwhile, the share of households going paycheck to paycheck in the South and West decreased, according to Bank of America data.
This is likely a result of lower inflation in the South and West during 2024, which eased financial stress on these households, allowing their income to go further, the bank said.
Inflation Patterns Could Shift
However, researchers at Bank of America expect consumers in the South and West will soon face the same financial pressures.
Prices in the West increased by 3.3% in September compared to the same time last year, according to data from the Bureau of Labor Statistics. In the same area, year-over-year CPI in September 2024 had only grown by 2.1%.
The growth of inflation rates in the Midwest also increased modestly, but in the Northeast, which includes New York, Philadelphia, and Boston, the inflation rate was actually lower in 2025 than it was in 2024.
If the cost of living for consumers does level out, that could in turn affect the number of households living paycheck to paycheck.
RELATED EDUCATION
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