If you are counting the days until the next payday comes around, you’re not alone.
And we're not talking Jane and Joe Six Pack here.
Some 21 percent of those with salaries of $100,000 or more say they are living paycheck
to paycheck, according to a recent survey conducted by CareerBuilder.com.
While experts are quick to acknowledge that high gasoline prices, the slumping housing
market and a generally weak economy are weighing on consumers' finances, they also
agree that the general difficulty in making ends meet is also the result of persistently bad
spending and saving habits that are now catching up with the spendthrift Americ.
The amount of money Americans save has been declining for decades. Most recently,
the personal savings rate was 1.2 percent of after-tax income,
according to the Bureau of Economic Analysis.
A couple years ago, the rate was actually negative, meaning consumers were dipping
into savings to cover expenses. One-in-ten workers making more than $100,000 say
they put no money in a savings account each month, according to the CareerBuilder survey.
(Calculate your savings rate vs. the national average.)
While recessions and inflation are inevitable, your personal balance sheet need not
be perpetually red. "The one thing you can control for a more secure long-term financial
future is your savings and spending rate,” said Alyce Zollman, a financial consultant at
Charles Schwab.
Here are some tips to break out of the paycheck-to-paycheck syndrome.
Follow the Money
To cut down on unnecessary expenses, Zollman recommends tracking every
dollar you spend for a month. (Spending calculator.) Use an online bank or
create a spreadsheet to keep tabs and decide what expenditures you can
do without. For example, eliminating one night of dining out a month can free
up $50 to $100 that can be saved or invested. (Budget calculator.)
Save More Automatically
In addition to contributing to a 401(k) or a similar retirement account,
Ronald T. Wilcox, a business administration professor at the Darden School
of Business and author of "Whatever Happened to Thrift?", suggests opening
an account that automatically withdraws funds from your paycheck and into
a high-interest savings account. What's more, since the best opportunity to
save more money is when you get a raise, he recommends diverting any pay
increase directly into a savings or retirement account.
Downsize
Stop trying to impress the neighbors. Their fancy cars and large homes may
look great on the surface, said Wilcox, but there's a good chance there's a
lot of financing behind them. Right now, consumers should be looking to lower
their standard of living, he says, and begin living below that of their peers.
If you’re looking to buy a home, Terry Fergus, president of FSM Capital
Management recommends holding off on the purchase and rent instead.
Even in this market, he says, renting is cheaper than owning a home.
By waiting longer, you can save more money for a down payment and push
it up to 25-35 percent of the purchase price.
Avoid Credit Cards
It’s a no-brainer, but it needs to be mentioned. Focus on lowering debt and
stop adding to what you have. “Live off of what you have,” said Fergus. Don't
run up balances on credit cards by paying the minimum; pay in full each month,
avoiding costly interest and finance charges.
A number of loan calculators can help you track the costs.
One silver lining of living paycheck to paycheck might be learning to never fall into
that rut again by continuing to save money.
"Once the economy does improve, and someday it will," says Goldstein,
"this will wake people up and make them realize we need to be saving more money."
