Key takeaways

  • Household budgets are being pressured by increases in daily living expenses.
  • The current inflation rate of 3.7% diminishes the spending power of workers.
  • Assessing your income, limiting expenses, living beneath your means and automating savings are some steps you can take.

Christina Moss and her husband had a combined yearly income of $125,000. They make 50 percent more money than the 2022 median household income in the United States–which was $74,580.

The reality of their day-to-day finances, however, places them in a much different light. The couple, who shared the details surrounding their finances in 2019, had to cancel a service call for their home’s furnace because they couldn’t afford the $200 fee. Christina said her family is lucky that her husband is handy and could fix the furnace himself, but she still expressed shame when discussing how financially strapped the couple is on a daily basis.

“It’s embarrassing to make this much money and still be financially broke,” Christina, a 42-year-old accounting manager in St. Louis, Missouri said. “After a while, you get used to it and just chalk it up.”

A higher income does not guarantee financial security

On paper, the Moss family’s income is strong and stable. However, their story illustrates the challenges of making ends meet even with a strong and steady income. It’s a challenge that is especially prevalent at a time when inflation is skyrocketing across America, and the cost of everything from gas to groceries to housing and healthcare has been climbing.

Household budgets are being squeezed as daily living expenses continue climbing and nearly all (93 percent) of consumers say they’ve noticed higher prices on the items that they buy, according to a Bankrate poll conducted in March 2022. What’s more, of the adults who say they’ve experienced price increases over the past year, nearly three quarters (74 percent) reported that the increases negatively impacted their financial situations.

Another Bankrate survey found that only about 4 in 10 Americans have enough savings on hand to cover an emergency expense of $1,000.

“Just 44 percent of Americans could cover an unplanned expense of $1,000 from savings, a troubling statistic at any time but particularly with monthly expenses marching higher due to inflation at a 40-year high,” said Greg McBride, CFA, chief financial analyst at Bankrate. “Being undersaved for emergencies or lacking savings altogether is not limited to certain income brackets and is a reality for Americans from varied walks of life.”

Financial challenges for American families

So how can earning even as much as $100,000 keep families from staying financially afloat?

There are so many factors at play — it’s almost impossible to pinpoint just one reason why so many Americans are teetering on the edge of being one surprise expense away from a major financial emergency.

Poverty calculations

One hitch in the system is that our perspective of “good money,” or what draws the lines between the middle class — rich and poor — hasn’t changed in over 50 years.

The official Federal poverty measure is a calculation used to determine who is poor in America. However, the measure was created in 1963 and is based on 1955 data. Economic analysts pointed out years ago that this measure of poverty is wildly outdated and needs improvement to better serve the public. The calculation is based solely on income and takes into consideration the cost of a minimum food diet in 1963–not 2022.

Cost of living

Meanwhile, the cost of living has been skyrocketing and the purchasing power of workers has been significantly diminished by record inflation. The current inflation rate is 3.7 percent. While that’s a decrease from 6.5 percent one year earlier, it’s still well above the 2 percent rate the Federal Reserve aims for.

The cost of food alone increased 8.8 percent between March 2021 and March 2022. That figure is the largest 12-month increase since the end of May 1981.

While employers have increased wages in recent years to attract employees after waves of resignations amid the COVID-19 pandemic, those increases have not been distributed evenly–and some sectors fared far better than others.

“Americans and their personal finances have been through a lot over the past few years,” said Mark Hamrick, senior economic analyst and Washington bureau chief at Bankrate. “There’s been the pandemic, an economic recovery and then inflation began to soar, seeming to catch nearly everyone by surprise. Because wage growth has not been sufficient to keep pace with rising prices, many households have been scrambling to adjust, whether tapping funds from savings, cutting back or utilizing credit card debt.”

Healthcare costs

Healthcare costs are another substantial challenge for Americans when trying to make ends meet. The U.S. Bureau of Labor Statistics reports that in 2022 (the latest year with statistics), an average of 8 percent of the U.S. household budget went toward healthcare, which was up substantially from 5.9 percent in 2004.

Student debt

Another major expense impacting household budgets is student loan debt, which has reached $1.76 trillion. Though federal student loan payments were temporarily on hold amid the pandemic, student debt will continue to be a significant financial challenge for many Americans once payments resume.


Childcare costs in America are also a significant issue that can hardly be overlooked. The costs associated with child care are among the highest expenses in a family’s monthly budget. In fact, in many parts of the country childcare costs are often more expensive than housing, college tuition, transportation or food.

Bad financial habits

All of these factors combine to paint a blurry picture of a struggling working class. At the same time, Hamrick says, some of the challenges may be self-inflicted.

“During good times and not-so-good times, one constant is the need for individuals and households to have a budget, attempt to live beneath their means and to continue to prioritize savings for both the short and long terms,” said Hamrick.

How debt adds up

When the Moss family adds up their monthly costs, there just isn’t enough cash to cover everything. Their situation is a fairly typical financial scenario: They have student loan debt, credit card debt, a mortgage, kids to care for and monthly bills to pay.

Before Christina and her husband met, they were both single parents. Her husband, who makes less than her, was “struggling” to survive, as Christina puts it. After they married, she started helping him manage his debt.

Combined, Christina and her husband say they have $200,000 in student loan debt and about $15,000 in credit card debt. Being saddled with debt is a common experience in America —  another recent Bankrate survey found that 3 in 10 Americans have more credit card debt than emergency savings.

Their mortgage, which eats up 15 percent of the family’s monthly income, is upside down. They say that they cannot afford the $30,000 it would cost them to sell the home.

The couple reported spending 33 percent of their monthly income on education-related expenses for their four children. Their oldest daughter only received partial tuition scholarships for college because their “income is considered too high to get the entire tuition covered,” according to Christina. She and her husband cover the remaining $6,000 of their daughter’s tuition and provide her with a stipend for living expenses.

Their other three daughters attend private school, something Christina says is unavoidable.

“I wish this wasn’t the case, but with the failing school system in St. Louis, this was our only option,” she said. The scholarships each of the three daughters receive doesn’t cover all of their tuition, leaving the family to foot the rest of the bill.

On top of that, there are the regular living expenses — groceries, utilities, car payments and vehicle maintenance — that often take the backseat. Christina, who hasn’t paid her vehicle loan since December, recently negotiated a new payment arrangement with her bank.

“The irony is that the car has been down for about three months, but we don’t have the money to fix it,” she said. “So, I’m basically paying for a vehicle I can’t drive.”

Bit by bit, the Moss family is trying to pay off their debt. But Christina knows financial security won’t happen overnight.

“We are slowly working our way up,” Christina says.

4 ways to manage your finances when facing insecurity

Preparing for a financial emergency is one thing. But managing your finances while you’re already facing insecurity is another.

Those seeking to break the paycheck-to-paycheck cycle have options, regardless of their income range.

1. Assess your current employment

Hamrick says consumers should take a hard look at their current employment and determine if it’s making ends meet. If it isn’t, he suggests taking a new approach.

“Assess whether you need to look for another job (or additional work such as a part-time gig), move to a more robust job market or seek additional training,” Hamrick said. “Most of us aren’t trust fund babies or wealthy because of inheritance. We’re reliant on our work, or a wage earner, for meeting our regular expenses and possibly raise our standard of living.”

2. Live beneath your means

The Federal Reserve has been steadily raising interest rates to help fight inflation. But that means the cost of debt, including credit card balances, is going up and getting more expensive.

“With interest rates on the rise, there’s increased urgency to manage debt effectively,” said Hamrick.

Instead of charging expenses you can’t immediately cover to a credit card, adjust your budget accordingly.

3. Determine what you’re willing to sacrifice

If you’re already feeling strained for cash, consider small changes that can have a large impact on your budget; this can include packing a lunch or skipping a daily coffee run.

On a larger scale, Hamrick recommends considering a used auto purchase over buying new. Consumers can also think about cutting down on college costs by encouraging their children to attend a community college for the first two years before diving into a four-year university, he says.

4. Automate your savings

Having as little as $250 in savings can help consumers be better prepared for a financial emergency, like missing a bill or being evicted.

Overall, ending a paycheck-to-paycheck cycle requires constant communication, planning and strategizing. And while initial conversations about struggling may be intimidating, Hamrick says they are of big value in the long run.

“For couples and families, having constructive conversations about money, while sometimes challenging, can be very useful,” Hamrick says. “And it shouldn’t be a one-time-only event. What are the goals and what do we have to work with?”

Bottom line

The cost of living in this country has been increasing steadily for years. Food prices, housing, gas, the cost of college tuition, health care and child care are all eating away an ever greater share of the household budget. Even Americans who have a strong, stable income find themselves struggling to make ends meet

With record inflation sweeping much of the nation, household budget challenges are becoming even more significant. Some of the steps to help manage finances amid such insecurity include living beneath your means, identifying areas to sacrifice and automating your savings to better prepare for emergencies.