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Meet the Paycheck-to-Paychecks  

A life where you can buy what you need but never what you want. Where after paying for housing, food, and clothing, you have very little left to pay for anything else. Where gas-price hikes make you ask: "What do I have to give up today to put enough in the tank to make it back and forth to work?" 

This is reality for more than half of all Americans. More than half! Some 54 percent say they're stretching it, living from one paycheck to the next. They're making ends meet, but they're struggling to do it. Any unexpected expenditure could tip the balance in the wrong direction. A large medical bill. A hole in the roof. And it's taking a toll. One-third say their financial situation is causing a lot of stress in their lives. 

Why are they here? What separates the paycheck-to-paychecks from the financially comfortable and the wealthy? Both personality and habits. But in this case, the habits are the driver. Sure, sometimes the catalyst is something out of your control, such as a health problem or job loss. But our research showed that overspending is the key reason that people slip from a position of financial security into a paycheck-to-paycheck existence. Consider how many people are on precarious ground because they bought houses they couldn't afford to live in or maintain. How many are on shaky territory because they bought one too many pricey cars, took yet another expensive vacation, or fashioned an image fueled by wearing the right clothes, eating in the right restaurants, or walking the right dog? 

It's a vicious cycle. Once you overspend, it's tough—if not impossible—to tap into the habits that move people into the range of the financially comfortable. Once you overspend, you cannot save habitually. Credit card debt is a savings killer, and only 22 percent of paycheck-to-paychecks can pay off their balances every month. 

But while overspending doesn't leave much to invest, it doesn't leave zero. More than one-third of these people participate regularly in their company's 401(k) or some other retirement plan. This automatic investing is clearly responsible for the somewhat surprising fact that paycheck-to-paychecks have investable assets, on average, of $83,000. If the number sounds higher than you'd expect, that's because it's skewed by what I like to call the "six-figure PTPs." These are the high earners— the managers, lawyers, entrepreneurs—who still can't seem to make ends meet. The folks who feel broke despite the fact that they're bringing in $100,000-plus a year. Fully half of paycheck-to-paychecks, however, have less than $25,000 to put to work to grow their futures. 

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