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Saving, Spending and Living Paycheck-to-Paycheck in America
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Saving, Spending and Living Paycheck-to-Paycheck in America

While the U.S. economy continues to improve and consumer sentiment remains above a baseline level for optimism, many consumers are still searching for fiscal relief. In fact, 40% of respondents in a recent Nielsen survey say they’re living paycheck-to-paycheck.

But in today’s world, what does it actually mean to live paycheck-to-paycheck? In its most basic sense, it means having just enough money from each paycheck to cover all necessary expenses. The catch, however, is that no two sets of expenses are the same. Historically, the phrase has more commonly been associated with lower income brackets. That’s perhaps less so today, as it may be used to refer to broader circumstances beyond daily costs, like basic housing. According to Nielsen’s first-quarter global Consumer Confidence Index report, housing represented the largest share of monthly spending for American consumers (24%), followed by expenditures on food and beverages (18%) and communication services (11%).

In looking at the results from the recent poll, we can see just how far-reaching the term “living pay-check-to-paycheck” is right now. Living paycheck-to-paycheck isn’t only a lower-income dynamic. It’s actually reflected across income levels nationwide. While more than half of the respondents (55%) who reported living paycheck-to-paycheck were among consumers earning $50,000 or less each year, 24% said they earn between $100,000 and $150,000.

But being strapped for cash today doesn’t exactly mean what it may have meant in years past. That’s because this poll revealed that households that claim to be living paycheck-to-paycheck are also saving money. In fact, 63% within the middle class (earning $50,000-$100,000 a year) and 45% earning $50,000 or less say they’re saving money for the future.

As only 40% of households say they’re living paycheck-to-paycheck, the recent poll reveals a sense of split consumer sentiment in American households. While nearly 50% of respondents expressed concern about their current financial situations, many are confident about their futures. In fact, 35% of all respondents said they’re optimistic about the economy in 2016, although $100,000-$150,000 earners were the most optimistic.

Overall, there is a fair amount of optimism throughout the U.S., and that optimism will likely grow over time—particularly as more households migrate into higher income brackets in the coming years. In fact, Nielsen PopFacts projects large spikes in the percentages of households earning $200,000 or more over the next five years.

So what does all of this mean? In an economy where nearly half of consumers are living paycheck-to-paycheck, are concerned about their financial situations and uncertain about the overall economy, spending within this group will likely be restrained and measured. However, it doesn’t mean consumer wallets are zipped shut. What it does mean is that marketers need to offer strong value propositions that deliver on every dollar they’re asking consumers to spend.

Methodology

The insights in this article were derived from an English-language survey conducted by Nielsen. The survey was conducted online for three weeks in June 2015 among 1,665 U.S. adults 18 and older.