Your Financial Future
As the government shutdown continues, we are hearing about many employees struggling to pay their bills because they missed a paycheck. Unfortunately, federal workers are not the only ones in this situation. In fact the majority of the country is living pay check to pay check. If something unexpected happens your financial situation is in chaos.
In a nationwide survey, Financial Capability in the United States( a report done recently), it was found, “Just over two-fifths of respondents (41%) report spending less than their income, 36% spends about equal to their income and 19% spend more than their income.” This survey was done by FINRA Investor Education Foundation. They are the self-regulatory body for stock brokers.
This means that 55% of American families are living pay check to pay check or worse. Six in ten people you pass on the street are saving nothing or worse! This is a scary statistic. If an emergency came up and people needed $2,000, only 35% are certain they would have the money. In low income families, this might not be surprising; however the median US household income is $51,324.
Remember, baby boomers are the first generation where many people are not covered by defined benefit pensions when they retire. This means that they are responsible to save for their own retirement. Without sufficient emergency money, you have much more stress in your life and you just may have to work right up to death.
In surveys, 73% of Americans have positive perceptions of their own financial knowledge and math skills. Yet we have this condition where so many are living pay check to pay check. These choices lead to paying high amount of interest. So what can you do?
Deficit spending does not work long term for any family. If you spend more than you earn you have problems. There are only two parts to the equation about what you can do if you are living pay check to pay check. Earn more or spend less. Maybe you get a second job, work some over time or get into a better paying job. Maybe there are more potential workers in your home.
To spend less, you need to first determine where your current money is going .If you are not sure, carry a small note book and keep track of what you spend money on for a week or two. Look at your monthly bills. Do you have a home with too expensive of a mortgage. What are you paying for things like cell phones, cable television and other luxury goods? Can you drive your car a little longer before buying a new one? There are many things you could consider.
Some people pay ahead on their mortgage. If you are doing this, you must have a good emergency fund. If money gets tight and you have trouble paying, the bank does not care that you have paid more in the past then necessary. They still want a full payment every month. Work to pay off credit cards in full every month. Even if you have a decent rate you are probably paying 12% or more. If you miss a payment there are often penalty rates where they can jump up to 29.99%. On the bottom of your credit card statement it tells you how long it will take to pay off the balance if you only pay the minimum. It might be 18 years and that is only if you do not charge one more penny. Also be careful of the checks that sometimes come with your credit card statement. The interest might be between 20 and 23%. You do not avoid the interest if you pay them off in a month. Also they are the last things you get credit for as you make payments.
Getting your spending and savings under control might not be easy, but it is very important to your family. Your quality of life will be better and you will have far less stress. Don’t wait for tomorrow. Start your new plan today.