According to several reputable sources, between 50% to 75% of Americans live from paycheck to paycheck. While the phrase is typically used to describe the lower working class, this phenomenon cuts across several income levels.
Living paycheck to paycheck means you are never able to put money away in savings. It’s also true that many people who live paycheck to paycheck have low-value skills and earn minimum wage. Still, there are many individuals with high-paying jobs who simply choose to live without any savings.
Living paycheck to paycheck means that your monthly income is barely enough to cover your basic expenses, such as rent, food, and other bills. As a result, you are continuously scrambling to make ends meet and don’t have any money left to save, invest, and get ahead financially.
The risk here is that even minor financial emergencies can bring you crashing deeper into debt.
What Does It Mean To Live Paycheck To Paycheck?
If your monthly income barely covers your monthly basic needs and find that you have little to spend on wants or are not able to put money away in savings, then you’re living from paycheck to paycheck. Simply put, if you can’t pay next month’s rent, buy food, and cover additional monthly bills without cashing that month’s paycheck, then you’re living from paycheck to paycheck.
You’re not alone! More than half the American population is living paycheck to paycheck. While you have a job this is all good, but when eventualities such as getting sick or laid off from work materialize, then the situation can become more drastic if you do not have a safety net in place.
This leaves you in a position where even the smallest of financial issues can leave you spending more than you’ve earned, which leads to taking on more debt. It may sound difficult to imagine saving extra cash to allow you to turn the tide, but anyone can do it, which means you can do it, too!
How To Not Live Paycheck To Paycheck
If you look at your spending retrospectively, you may be surprised at the opportunities to cut down and create some breathing room. To be able to do this, you need to know how to create a budget – even more important is to learn how to create a realistic budget which you are able to live within.
With considered budgeting, you can save before you start spending. Additionally, you will have been able to identify the least painful expenses to cut back on to free up some cash to put away as savings.
Keeping up with the Joneses is one of the major contributing factors that fuel living from paycheck to paycheck. Is it your social media feed that’s convincing you that you can’t move into a more affordable apartment or your co-worker’s sports car that makes you feel pressured to keep making hefty car payments? Whatever the case, this kind of thinking will not only keep you on the hamster wheel, but it will also bring anxiety and depression.
But, of course, for millions of Americans, to stop living from paycheck to paycheck is not as simple as creating a budget and cutting down on expenses. The impact of low wages, unprecedented health crises, the rising cost of living, and student loans, all contribute to disrupting any hopes of saving a financial cushion.
Still, you can change your personal situation, albeit, at a slower pace than you would ideally prefer.
How Far Are You From Living Paycheck To Paycheck?
If you find yourself with more financial wiggle room than most Americans, the best time to start putting money aside for a rainy day is now. Before you do that, you may want to gauge how close you are to living paycheck to paycheck. If you are spending your entire paycheck to cover both basic needs and avoidable luxuries, then you will find that you are already close.
You may, however, want to ask yourself how many months your savings can sustain your current lifestyle if you lost your job. Other considerations would be how quickly you are able to access your savings as well as the applicable penalty fees if you decided to access funds early.
Summing Up
Living paycheck to paycheck can be exhausting and feel like you are treading water or walking around in circles with no resolution in sight. As much as it may feel like you are trapped, there are many ways to rectify the situation.
Turning the tide may be slow and tricky at first, but if you are diligent you can slowly grow your savings, make investments, and build toward achieving your financial goals. Thankfully, with the Cashero High-Yield Wallet, you can earn an inflation-beating APY of up to 6%. Send and receive transfers to other Cashero Wallets instantly with little to no fees.
Also read: Can I Make a Direct Deposit To Someone Else’s Account, And What Are Other Options?
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