The most recent figures show that 78% of Americans are living paycheck to paycheck. That figure should scare everyone.
How did most Americans get into this bind? There is only one answer that I can think of and that is debt! Too much debt and not enough equity.
Why do people think that they have to have everything now? What happened to saving for the things you want or need?
Let’s say you have just graduated from college and got your first job. So you moved out of Mom and Dad’s house and got an apartment. You need furniture. So you use a credit card to buy what you need. You figure you will just pay it off over time. What happened to getting the basic necessities of a bed, something to sit on, and a small table to eat at until you can afford to buy the suite of furniture? What happened to going to garage sales to look for these things or using relatives hand me downs? Why do you need to buy a suite of new furniture that you can’t afford to pay for? I know, you want everything that you have gotten used to while living at home and you want it now. You forget that your parents have been married for years and saved for things.
Lest I get told in comments that many young people’s parents were in debt up to their eyeballs and they had lousy role models, I know that. Because your parents were irresponsible is not an excuse for you doing the same thing. Learn about money so that you won’t become your parents. There is so much more information out there today than when I was a young adult. The internet is a valuable resource. Or you can go to the library and take out books to read to educate yourselves like I did. We didn’t have the internet way back when.
So many people are digging themselves into a hole that they either have no intention of getting out of or will be in debt for the rest of their lives making those payments to the bank every month. They don’t give the future a minute’s thought. It sends shivers down my spine.
They live their lives charging debt like there is no tomorrow. They are indentured servants to the credit card companies. They get in a bind and borrow money from their parents to get out of that bind. But you know what, the majority never do because they just charge those credit cards right back up. Then they owe both their parents and the credit card companies.
Next stop is the bank to consolidate those credit cards and the loan to their parents into one loan that they think will give them a lower payment to pay it all off. You will probably get a lower interest rate than the credit card interest rate. Do they cut up the credit cards? No!
So they use the credit cards again and again because they deserve things. Now they owe the consolidation loan and a credit card balance that is mounting. They are making minimum payments(again) on those credit cards. Now what to do?
Oh, you have a home. Well perhaps you have some equity in that home. Let’s go to the bank and consolidate the first consolidation loan and the all of the credit cards into a home equity loan. While we are at it, let’s take that loan for lots more years. That will lower your payments!
Do you see the vicious cycle here? Building debt is the worst thing you can do. Eventually you will lose everything! Unless you pay off that debt, you are in big trouble. You could end up in bankruptcy or worse yet lose your home. The bank has nothing to lose because they will just take your home, sell it, and pay off your debt with the equity.
So now you have been evicted from your home. No problem, we will just get an apartment. But where will you get the money for the deposits? Since you now may have ruined your credit rating or owe too much money, what landlord will rent to you?
This entire post is meant to get you thinking. It is not to scold you. Do you really want to be this person I talk about? Then do something about it. Will it be easy? Will it take a long time to pay off your debt? Yes, but you didn’t get into this mess overnight.
You have another choice though. You can continue getting deeper and deeper in debt, end up with nothing in your old age and live a very poor existence.
I want you to live a life of wealth so get a plan written down or make a chart to track all of your money on your computer. Then faithfully follow that plan to make your life better. Don’t stay in that 78%! This is one place where you do not want to follow the crowd!
11 replies on “Are You Living Paycheck to Paycheck?”
We were in that 78% thanks to the counsel of the in-laws on how to have a life. I got super scared 7y into our marriage (1987). And we started digging our way out. We went nowhere-no eating out, no vacations-we camped only. By 2010 we had zero debt, 2 homes, the vacations we wanted to take (we aren't extravagant and stay in the US).
Life is so relaxed on this side of debt. I wish it for everyone. Spend mindfully and live beneath your means.
That's terrific Elle! It is so freeing.
excellent article and so true. I have a family member right now doing the same thing and there is no convincing them to change their ways. Depressing people choose to live like this. The person makes over $58000 a yr and will be retiring with no saving. I have a hard time standing by but advice ignored. We have been there and are living retirement well. Watch what we spend and do not feel deprived. Thanks for article. Joyce
You are welcome. It is hard standing by but some people there is just no convincing. You are just wasteing your time.
Hi AD, this is Chris. Great article today! We also went through a stage where we lived paycheck to paycheck in a high cost of living area. It was no way to live, so stressful. We were so happy to move back to the Midwest, where we could get a handle on things. I so agree with you and the other commentors that having no debt is so freeing.
I also wanted to let you know that we found out over the weekend that our new grandchild will be another girl. We were so happy.
Congrats on " another girl on the way". You must be over the moon.
Hi AD, this is Chris again. I sent you an email.
When we married in 1966, we bought a bed, mattress, and dresser. I had a bookcase and sewing machine…all this for bedroom. In the kitchen we borrowed two folding chairs from the church and my mother bought us a $2 metal table called an ice cream table. It only seated two. In the living room we had my husband's trunk, so we sat on the floor and leaned on the trunk. We were so happy when we got a sofa cushion from my mother's sofa that my brother set on fire. It was easier to lean on the trunk with the sofa cushion. One year after our marriage, we bought a home even though we did not have a sofa. I was pregnant, so we got a baby bed and a rocker. We were tough.
It all pays off in the long run to be patient and save. Thanks for sharing your story.
Great post! After 22 years we are now almost debt free(no CC's)but medical,A/C and vehicles. Always the darn vehicles
Yeah on your almost debt free! I am cheering for you.