A recent survey conducted by CareerBuilder.com seems to indicate that 61% of American workers are living paycheck to paycheck, a figured that has increased each of the last three years. Granted that a survey done by CareerBuilder is not on par with studies done by a government institution such as the Bureau of Labor Statistics, but all the same, that is a staggering figure (at least I was staggered).
Even more crazy is the results showing that nearly a third of people making over $100,000 a year live paycheck to paycheck. I didn’t see anything that indicated that these values were adjusted for single vs dual income homes, or adults with dependents, or adjusted for cost of living, but still.
A troubling result of this trend indicated by CareerBuilder is the number of people either cutting back on 401(k) contributions, or even taking money out of their accounts. Obviously this is not the ideal situation, but we all know people who have done this. The tax implications are huge, plus the fact that you’re losing out on all future profits from the investments that you’re cashing out make it a potentially disastrous decision. It feels a little bit like robbing Peter to pay Paul. You can catch up, but it isn’t easy. Most likely those gains you would have had are gone and aren’t coming back. But sometimes you have no choice.
The advice given in the article is pretty boilerplate (keep a budget, boost your income, talk to your employer). However, that doesn’t mean that it’s worthless. Managing finances is an on-going task, and sometimes it’s useful to be reminded of what we need to do to stay on track.
I’ve been very blessed in my life to not have to live paycheck to paycheck. Since moving out on my own after college, there has been a few close calls however. I moved out here with just enough money to cover my security deposits and a couple bills. I wasn’t making much at my first job, but it wasn’t a big deal. Until the fuel pump on my car broke. All of a sudden I have one massive bill that needs to be paid off and I’m barely a month into my first job out of college. My finances were razor thin for a couple months as I worked to build my bank account back to a comfortable level. And although I did bounce one check (very embarrassing) it wasn’t long before I was able to get back on my feet and make everything ok (and I’m very fortunate to have people in my life that I could have turned to if I wasn’t able to turn things around).
I can’t make a comparison between that situation and those people who live paycheck to paycheck continuously. But for a brief moment, I did understand what it was like to look at a bank statement and see that there’s only $30 bucks in there and it needs to last until the next pay period. The stress was intense for me in just that short period of time; I can’t imagine doing it month after month, stressing over every bill, every paycheck; worried about where the next unexpected bill is going to come from.
So what can be done about it? There are the obvious answers everyone gives: cut down on your expenses, move to a cheaper area, find a better paying job, etc… But sometimes there isn’t anything that can be done to reverse a bad situation like that, especially with the unemployment rating flirting at around 10%. If you have the ability to, though, live frugal and use the savings to build wealth for the even “tougher” times that could come our way.
Readers: Have any of you experienced the paycheck to paycheck life? How did you cope with the stress? What was/is your plan for digging yourself out?
-Michael
Twitter: @michael_DINK
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