I know it sounds like a dumb-dumb question, but I am really serious here. I don't really know what is meant by the phrase "living paycheck to paycheck." I hear it used all over the place, in huge numbers. More than half of Americans live paycheck to paycheck, so I hear.

So what is the definition? Is it the situation where if you suddenly lost your job and there was no paycheck coming next week, you would be evicted from your house/apartment and you would have to declare bank ruptcy? Is it that you can't pay your bills and do your grocery shopping if that paycheck didn't come in?

Or, is it that you would have to dip into your savings if you suddenly lost your job?

I used to think I knew, but the more I hear stories of people actually LIVING "paycheck to paycheck" the more I realize that either the definition is vague and ambiguous, or I just am not undstanding it.

What brought this on was listening to the story of a woman on a personal finance show tonight who said she was living Paycheck to Paycheck, but also said she had $10k in savings. I have always been under the impression that I am not living paycheck to paycheck because if my paycheck stopped coming for maybe 2 or three pay periods, I would be able to get by. Am I mistaken? I do wait for my paycheck to come in to allocate savings, but generally I don't worry about WHEN to pay my bills because I know I have enough money in my account at any given time.

Thanks for any input!

This is how I understand it. I'd say 10K in savings=NOT living paycheck to paycheck. Or maybe the definition could be anyone who uses 100% of their paycheck for living expenses and doesn't save any.

All your examples are good. I look at it this way. Ask yourself a few questions: If my car's engine blew up tomorrow, would I be able to purchase a reasonable (a few thousand dollars or so) car with cash right away to replace it? If I had an unexpected emergency medical bill of $2,000, would I easily be able to pay it out of my emergency fund? If I lost my job and had no paycheck for 5 months, would my emergency fund cover my expenses for that amount of time? Am I able to adequately save each month for targeted savings items like cars, vacations, furniture, college tuition, etc., or am I just paying my monthly bills and maybe tossing $150 each month into a 401(k)? Am I financing anything besides my primary residence? Does my primary contigency plan involve a little card with the word "VISA" on it or perhaps dipping into my retirment account? Personally, I have broken through the ignorant thought processes that many people live with..for example, I know my car WILL break down, I know I WILL have an "unexpected" medical bill, I know my kids WILL possibly want to go to college, I know I WILL probably have a daughter who will want a nice wedding and I WILL want to help pay for it......so many people just act like money will magically "be there" when they need it, almost like people stumble through life half-asleep when it comes to finances. THE MONEY WON'T BE THERE WHEN YOU NEED IT UNLESS YOU SAVE IT UP!!! If you don't save for your next car, you WILL take out a loan on your next car, if you don't save for your daughter's wedding, you WILL either get a loan that you can't afford or you WILL feel guilty for not being able to help like you wanted to.

To me, living paycheck-to-paycheck, means exactly that. If the paycheck is gone, or if an unexpected bill arises, then a person living paycheck-to-paycheck would be screwed and would have to resort to credit to make it through the month. Since the day I established a 6 month emergency fund, my financial stress levels have become almost nil.

For a prime example of someone who fits the paycheck-to-paycheck, just listen for the guy or girl you work with that acts like their world is coming to an end just because of a $400 car repair. You could probably get a pretty good description of the paycheck-to-paycheck lifestyle from them. Sorry for the emotion and yelling, it's not directed at you.

Paycheck to paycheck has different meanings to different people. Technically, it's having liquid assets less than a pay period. I would include in this not increasing in net worth every month.

I know I am young, but I don't think I have ever lived paycheck to paycheck, and I hope I don't ever have to. I have enough money "in the bank" to cover myself for at least 4 months, if not six. I have been in the "professional" work force for about 3 and a half years only, and haven't had any HUGE expenses come up. But I have been able to buy a car with cash, pay off a small credit card balance (~$1200) incurred because of a move abroad and a loan my grandmother gave me, also from said move abroad.

I can't imagine the stress of depending completely on that next check... I don't think I would be able to handle it!! There are some people at work that make comments to me that blow me away. Such as having $200-300 heating bills in the winter, taking out loans to fix a semi-minor (~$3000) home repair due to weather damage, etc. One time I made a random comment about this check a woman gave me which was for about $30 (for something work related, don't remember what). I said "Oh, I thought it said $300." and she said, "You think I have that much money in my account??" as if I were insane. I felt like saying, "If you don't have $300 in your checking account, you're not doing too well..."

I guess this is all ho-hum to most people here, but for me its all just revelutionary! I am just getting to that age where all my high school friends are getting married, buying houses, settling down in general. I have friends that are making $15k more than me/year but still have outrageous car loans which they are upside-down on, buying houses and condos they can't afford (they could barely afford their apartment, now they want to add co-op fees, prop. tax, school tax and a huge mortgage??). So I am really starting to wonder, how did I not get sucked into this vortex of psychotic spending. Then I also wonder, maybe I did and I am just deluding myself.

But your questions made me feel a bit more at ease because I can afford those things that might come up, a medical bill or car repair, or even buying a new car if I needed to. For now, my emergency fund is not where I want it, but its getting there! Maybe I should start hammering my friends on their spend-crazy ways again. I used to do that more.

I have on occasion been in a situation I would describe as 'paycheck to paycheck'. This is where, when my paycheque arrived a day late, I had to pay my rent a day late. If it hadn't arrived, I wouldn't have been able to pay it. (Or rather, I would have borrowed money off my parents/boyfriend to pay it). It is stressful.

As said, it will be a little different for everyone, but the idea is that you can't afford to miss one paycheck. For the person on the show with $10k in savings, that may very well not be enough for her to cover expenses if she did not have a regular income check coming in as well.

Perspectives change as time goes by and lifestyles change too. As my assets have increased so has what I consider the 'panic' level. Many years ago I would be nervous to have less than $500 in the bank. Now if I didn't have enough to live on for at least a year if my regular income stopped I would feel some stress.

Paycheck to paycheck means almost all, or all, of your paycheck is spent before your next paycheck.

Pay-check to pay-check has about as many meanings as middle class.

It wouldn't matter if your friends made 150k more than you - they'd still be in debt up to their eyeballs.

I don't know what path any person needs to travel to become fiscally aware, but there needs to be more guides like JD leading them on the way.

As a society, I've come to understand that you and I are not the norm because we don't live paycheck to paycheck, we live within our means, and we are prepared for any number of fiscal emergencies. I know one other couple my age (outside of GRS) who is equally prepared, given the a loose grouping of ~20 couples (all smart, educated, 'successful' couples) we visit with regularly.

I try to encourage the rest of them to do the right thing any chance I get using positive reinforcement: offer them advice about how high to contribute to their retirement accounts, tell them how great it is that they opened a savings account with 20$, cheer them on when they pay more than the minimum on their credit cards.

Beyond that, they may grow resentful of you 'lowering their standard of living'. It is unfortunate.

i agree, pay check to pay check means different things to different people. if you are doing things correctly, you should be living pay check to pay check anyways, because your budget should have a zero out number for your paycheck. savings are expenses. i think if you can live a lifestyle that you want to live and have enough money to live that way for the remainder of your life and do not have to think about balancing a checkbook or budgeting, then you aren't living pay check to pay check. if you have to budget, regardless, then you are living pay check to pay check.

I have an "oh-snap" fund put aside in ING in case anything goes wrong, as I've already been put out of work due to a serious car accident, my lesson was learned. But I also believe I live paycheck to paycheck now.

By that I mean, anywhere from 80-95% of my paycheck (bi-weekly) covers the set of bills that I need to pay before my next paycheck comes. Realize that I have only a small student loan and no back-credit card debt, it gets paid in full every month I use it so my bills are truely cost of living, like mortgage, food, electric, etc. If I want to go on vacation, I need to save for it, while at the same time saving to pay my taxes since I didn't roll them into my mortgage's escrow. Some months are better than others, but there have been times when I couldn't go out to eat with friends because the money was tight. Yes I could dip into my savings but that money is there for a purpose.

I think my savings may be a bit higher than the average American but that I also live a very similar lifestyle to most. In Jan 2010 my local electric company will be 100% deregulated and the estimates for rate increases are in the 35-40% range. That scares me.

The term 'living from paycheck to paycheck' to me, means that you cannot buy anymore stuff (food, clothes, tv, whatever) until you receive your next paycheck. Most of the time, you have to wait until the next paycheck in order to pay your bills or buy anything. Thankfully I've only had to do this for a couple of months in the past.

paycheck to paycheck: if i run out of money before my next paycheck, guess i'm not eating until the next one comes. for me that means i'm motivated to spend carefully, i only get 1 paycheck a month.

i could stand to read a little less talk of how horrible paycheck-to-paycheck life is, personally. it's not always due to screwing up, and a little lifestyle adjustment can make a small income enough.

I spend my entire paycheck before I get it. Essentially, I pay off my credit card with one paycheck, and then with the next I invest/save it. Makes things nice and neat. And, with my next credit card statement, I should have enough rewards accumulated to get a free $250 check. Awesome.