The results of an interesting survey recently conducted by CareerBuilder.com indicate nearly half of American workers are living paycheck to paycheck. Combine this with the news in recent years that we actually had a negative savings rate for the first time since the Great Depression era, and it is easy to see why so many Americans are struggling with their financial lives.
Defining Paycheck to Paycheck
I don’t know that an official definition of “living paycheck to paycheck” exists, but since I’ve been there myself I can sum it up by the example of checking your balance the day before payday and breathing a sigh of relief that you are not overdrawn, even though the $1.81 left in your checking account doesn’t leave much breathing room. Your credit cards are nearly maxed out, you have nothing in an emergency fund, and your wallet is empty. Kind of reminds me of my own soggy hotdog story.
The Numbers
The survey revealed some interesting statistics:
- 47% of workers live paycheck to paycheck to make ends meet
- 21% of those earning over $100,000 also live paycheck to paycheck
- 25% of all workers reported they save nothing each month
- 33% do not participate in any retirement programs (employer-sponsored or otherwise)
The numbers are telling. One in four workers save $0 each month, either because they don’t have any additional money, or because they choose to spend it. While there are a few in the former category, I imagine a large percentage of those who save nothing could find something to save if they simply cut back on their lifestyle. These folks probably pay for cable, have cell phones, go out to movies, drink beer or cigarettes, indulge in meals out, etc. If only one or two items were cut from their monthly budget they could probably free up $50-$100 dollars to begin a savings program.
Start Saving, Something
I personally know several people who save nothing because the amount they have to save is perceived to be so small that it couldn’t possibly make a difference. Not true. Even $20 a month adds up over time. In just a few months you will have built a $100 cushion in your emergency fund. Here are a couple ideas on how to start a savings program:
- Find one or two monthly expenses you can live without and eliminate them.
- Open a high-yield savings account.
- Set up an automatic transfer each month in the amount you saved by reducing monthly expenses.
- Find some creative ways to earn extra money (complete surveys, start a blog, work part time, etc.).
- Add to your savings any additional part-time earnings you generate.
- As you receive raises or bonuses at work, hold your lifestyle steady and increase the amount you save each month.
The point is to start saving something–any amount you can scrape together. You don’t have to be saving half of your income for your savings plan to be worthwhile. As your savings accumulate you will slowly become less dependent on a paycheck to pay your next bill. Eventually, you may even have a month’s worth of expenses saved. It’s been said that having money in the bank is the softest pillow of all, and I couldn’t agree more. No more staying awake at night worrying about the power being cut off. No more feelings of desperation when your kids are sick, but you can’t afford to get a prescription filled. And best of all, no more soggy hotdogs for lunch!