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✅ Main takeaway:
Key takeaways
- As inflation rates outpace wage growth, families spend a greater share of their income on necessities.
- In particular, more families in the Northeast and Midwest are living paycheck to paycheck.
- However, this trend may not last forever, as consumers in the South and West face similar, if not higher, growth in inflation compared to other regions.
More families are living paycheck to paycheck as inflation continues to rise nationwide, but some areas are seeing higher cost increases than others.
Living paycheck to paycheck means 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 suffering the most, according to a recent report from the bank.
In September, inflation rose 3% over the year, the highest 12-month inflation rate since January, according to the Consumer Price Index. However, in October, wages rose just 2% for middle-income households, and 1% for low-income households, according to deposit data from Bank of America.
With the cost of living increasing faster than salaries, 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 growth slowed significantly last year.
Why is this important?
Affordability is a big issue for many Americans, as recent inflation rates, driven in part by tariffs, have pushed up costs and impacted household budgets. When fewer consumers can afford discretionary goods, it reduces overall spending, leading to more negative effects on the economy.
Where inflation hurts families the most
The proportion of households in the Northeast and Midwest living paycheck to paycheck rose from the third quarter of 2025 compared to the same time last year. Meanwhile, the share of households receiving a paycheck in the South and West has declined, according to Bank of America data.
The bank said this was likely a result of lower inflation in the south and west during 2024, which eased financial pressure on these households, allowing their incomes to rise further.
Inflation patterns can change
However, researchers at Bank of America expect that consumers in the South and West will soon face the same financial pressures.
Prices in the West rose 3.3% in September compared to the same period last year, according to data from the Bureau of Labor Statistics. In the same region, the year-on-year CPI in September 2024 rose by only 2.1%.
Inflation growth also increased modestly in the Midwest, but in the Northeast, which includes New York, Philadelphia and Boston, inflation was actually lower in 2025 than it was in 2024.
If the cost of living for consumers stabilizes, this could in turn affect the number of households living paycheck to paycheck.
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