The biggest recession that most of us have ever witnessed is now three years in the rearview mirror. Would you believe me if I told you that two out of every five individuals in the United States live paycheck to paycheck? Well, it’s true and that is actually an improvement from 2008-2009 when 46 percent of all Americans struggled to get from one payday to the next.
To me this number is disturbing because it means hundreds of thousands of families are a broken water heater or a job loss away from having a serious financial problem. One of the major causes behind this problem is that most people have never been taught the proper way to budget their finances and live within their means. They have failed to be able to set aside money into an emergency fund when times are good to take care of them when times are bad.
No person should ever live paycheck to paycheck. Making simple changes can help you live comfortably off whatever your families income happens to be.
Start Tracking Your Spending
For families that are living paycheck to paycheck the first thing that needs to be done is to track your spending habits. By tracking where all of your money is going, it will help you to better understand the changes that need to be made. I highly suggest Mint.com.
Reduce Your Credit Card Debt
Most families find themselves living paycheck to paycheck because such a large portion of their monthly income is going to pay off debt. If you find yourself in this situation the first step you need to do is is transfer all of your high interest credit card balances to a 0 percent balance transfer credit card. This will allow you to focus on paying down your principal balance until your are debt free.
Eliminate Extra Expenses
One of the biggest problems Americans have as consumers is that most of us fall for the up-sell. Just because the cable company tells you that you can get 3 months of HBO and Showtime at 50 percent off doesn’t mean you need to take advantage of it. To allow yourself to cut back on expenses, get rid of things you don’t really need. Instead of paying $100+ for your cable bill, sign up for Netflix ($7.99/month) or Hulu Plus ($7.99/month). Instead of paying for a gym membership find alternatives for working out.
Price Compare Insurance
One item that a lot of people don’t really consider when cutting their costs is insurance. Recently, I realized that I had not price compared our car insurance or health insurance for several years now. To my surprise, I am going to be able to save approximately $200 every six months on our car insurance and $300 per month on our health insurance. That is $500 that can be allocated elsewhere.
By focusing on a few simple steps it is possible for any family to stop living paycheck to paycheck and start living stress and debt free. All it takes is a little dedication.
Wait… 2 out of 5 = 40% no? Hmm I guess that’s an improvement of 6%
🙂 Ugh, your point on credit cards is really good. They are a money
drain if not sitting at 0% apr. My mom got out of her credit card debt by doing 0% balance transfers. I gotta give that to her.
I know I was shocked when I saw the 40% number.
Reducing credit card debt is a HUGE part of the plan. It’s unreal how carrying a balance messes up the monthly budget!