US Federal Reserve studies indicate that the percentage of US households with no excess income after
necessary expenses (as distinct from "ordinary expenses" as a term of art) is on the order of 10-15%. This definition roughly matches most people's intuition of what "living paycheck-to-paycheck" means. That isn't nothing but it implies 85-90% of Americans are not actually living paycheck-to-paycheck.
There is another 25-30% of households that spend all of their income on ordinary expenses beyond necessary expenses. This includes things like car payments on a new BMW or a mortgage on a big house; "ordinary" is determined by expense category, not expense necessity, so a lot of spending on luxury goods is classified as "ordinary". By implication, there is effectively no ceiling to ordinary expenses.
By contrast, the median US household has >$12,000/year in excess income after all ordinary expenses. Technically these households could have expanded their lifestyle to consume that income, but in many cases they are spending it on things that are not classified as "ordinary" and therefore not saving it. The categories of "non-ordinary" expenses (which have a sensible objective criteria) are almost entirely obvious lifestyle flex things, so not particularly controversial.
The implications of these statistics are pretty wild. The median household can easily accumulate a million dollars in inflation-adjusted net worth, not including their house, over a 40 year career. And they can do it without being particularly thrifty, since ordinary expenses covers a lot of luxury spending.
Americans have very high incomes, both in theory and practice, they just would rather spend it than save it.
There is another 25-30% of households that spend all of their income on ordinary expenses beyond necessary expenses. This includes things like car payments on a new BMW or a mortgage on a big house; "ordinary" is determined by expense category, not expense necessity, so a lot of spending on luxury goods is classified as "ordinary". By implication, there is effectively no ceiling to ordinary expenses.
By contrast, the median US household has >$12,000/year in excess income after all ordinary expenses. Technically these households could have expanded their lifestyle to consume that income, but in many cases they are spending it on things that are not classified as "ordinary" and therefore not saving it. The categories of "non-ordinary" expenses (which have a sensible objective criteria) are almost entirely obvious lifestyle flex things, so not particularly controversial.
The implications of these statistics are pretty wild. The median household can easily accumulate a million dollars in inflation-adjusted net worth, not including their house, over a 40 year career. And they can do it without being particularly thrifty, since ordinary expenses covers a lot of luxury spending.
Americans have very high incomes, both in theory and practice, they just would rather spend it than save it.