Most Americans live paycheck to paycheck: How to take control of your finances
Americans work hard for their money, but despite their best efforts, many are barely making ends meet.
A new survey from CareerBuilder reveals that 78% of Americans live paycheck to paycheck at least some of the time. This is up from 75% in 2016.
CareerBuilder compiled their data after surveying 3,462 full-time workers and 2,369 full-time employers.
One of the most startling revelations from the survey is that many Americans still struggle to make ends meet despite earning higher wages. About 9% of workers earning $100,000 or more a year said that they usually or always live paycheck-to-paycheck. The same can be said for 28% of people making $50,000 to $99,000.
So if wages aren’t the main culprit, then why are so many people struggling to pay their monthly expenses. One word: debt. According to CareerBuilder, 71% of all workers say they have some amount of debt — this is up from 68% last year. Of those respondents, 56% believe that they will never pay off their debt.
There were also some encouraging stats in the study. When it comes to saving, 10% of respondents said they put away $1,000 a month. The majority (56%), however, saves $100 or less per month.
Getting your financial house in order can be a long and methodical process, but there are some ways to avoid living paycheck to paycheck? Financial planner Morgen B. Rochard, CFA, CFP® says that the first step is to look at the non-monetary factors impacting your finances.
“Generally, people who live paycheck to paycheck have some underlying issues that calls for scrutiny,” she told Yahoo Finance.” The problem is that behavior change is very hard and people return to old habits if the root of the problem isn’t addressed.”
These behaviors can involve things like shopping to buy temporary happiness or spending money at a bar to relieve stress. Here are a few areas to analyze as you make your way to financial stability.
Assess your living situation
Living paycheck to paycheck could mean that you are living beyond your means. While you may enjoy your home and car, the expense of maintaining both could be setting you back financially. Is it possible to downsize your home and move into a cheaper apartment? Can you get rid of your car and take public transportation? Are there bills (WiFi, cable, cellphone) that you can lower? Instead of simply accepting the expenses, look for ways to cut back on the things that are costing you the most money.
Analyze how you are spending your time
Boredom can lead to overspending, so it’s important to look at what you are doing with your free time. “I suggest looking at how you spend your non-work time,” said Rochard. “Are you spending free time at a bar, the mall or another money-spending endeavor? If so, there are more productive things you can be doing.”
Rochard suggests using your down time to do something free, like take a walk with a friend or cook meals at home. You can also use this free time to invest in yourself. Look for free classes in your community and learn a new skill. Take on additional duties at work that will give you leverage for a future raise.
Identify bad habits
No one likes to admit his or her own faults, but taking an honest look in the mirror can help you to get your spending and debt under control. Living paycheck to paycheck creates a lot of stress, and it’s important to identify if your coping mechanisms are actually costing you money.“A few bottles of wine a week might not seem like a problem,” said Rochard. “But $50 a week in alcohol is $2,600 per year, and $13,000 over five years.”
After identifying the root of your financial problem, Kaya Ladejobi, CFP® offers these tips to take control of your spending and debt.
Automate savings
The best way to build an emergency fund is to make it a habit. Instead of relying on your memory, enroll in an automatic savings program at your bank. This way, the money will be regularly deducted from your paycheck without you having to lift a finger. “The automation will increase the odds of you actually sticking to your savings plan and growing your nest egg,” said Ladejobi.
Refinance your loans
Debt can be suffocating, but there are some ways to lessen the burden. If you feel like your monthly mortgage payments are too high, refinance the loan. This strategy means that the terms of your loan will change, often leading to a lower interest rate with an extended repayment plan. Ladejobi suggests refinancing if you want some relief while building an emergency fund.
Find a side hustle
As mentioned above, it’s great to fill your free time with activities that will improve your marketability and advance your career. It’s also beneficial to use your downtime to make some extra money. Between Uber, Lyft, and TaskRabbit, today’s sharing economy has made it easier than ever to make money on the side. Are you an artist? Sell your goods on Etsy. Looking to unload some used goods? Create an account on Ebay. In other words, don’t spend your idle time spending money — use it to make money.
Brittany is a reporter at Yahoo Finance.
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