Do you know what day of the week it is? What day of the month? If you answered Monday to both of these questions, then you might be in trouble. According to a recent study, most Americans are living paycheck to paycheck on a month-to-month basis. This means that if they have to miss work unexpectedly or if their paycheck falls short one week, they’ll have no backup cash to get them through until their next paycheck arrives.
A Tale of Two Worlds
A recent survey conducted by Credit Sesame has revealed that roughly 58% of Americans live paycheck to paycheck. In other words, half of all American households would have a tough time covering their expenses if one person in their household were laid off. The survey also found that 47% of individuals do not have even $500 in savings. How can such an affluent nation find itself in such dire straits?
The causes of paycheck-to-paycheck living
When you’re living paycheck-to-paycheck, you’re unable to save or prepare for emergencies, so unexpected events can throw your financial life out of balance. You may also be struggling with larger issues like medical debt, student loans, and expensive housing.
What do people who live paycheck to paycheck worry about?
Living paycheck to paycheck is no joke. When money gets tight, you have bills that need to be paid. It is important to avoid missing bills and late fees, which can destroy your credit score. Always pay close attention when it comes time for payments, so you do not make any mistakes. Mistakes like these can take months to clean up and fix. Every month that goes by with bad credit means higher interest rates for you in future loans or even credit cards you wish to obtain.
How much money do people who live paycheck to paycheck have in savings?
Half of American workers don’t have any money saved in their bank accounts, according to data from CareerBuilder. Among workers who have less than $1,000 set aside for emergencies, 55% said they don’t have enough money in their savings account to cover unexpected expenses.
59% Have $0 Saved
The lack of emergency savings is one reason why so many people live paycheck to paycheck. Experts say you should have about $1,000 in an accessible place for unexpected emergencies—this might mean opening up a savings account or setting some money aside in your checking account. This way, if you ever lose your job or need to cover an unforeseen expense, you’ll have money available to do so.
How might this affect our economy?
Living paycheck to paycheck can be dangerous for our financial health. The majority of Americans don’t have enough savings set aside to cover even a minor emergency, let alone an extended period of unemployment or other hardship. Plus, nearly half of us say we’d have no way of meeting an unexpected expense of $400 without going into debt or selling something. This leaves us far more vulnerable than many realize—and far less protected in an emergency.
How can we make it better?
One big factor in paycheck-to-paycheck living is unexpected emergencies, and only 24% of workers have an adequate rainy day fund to cover them. One way to ensure you’re better prepared for emergency expenses is by saving automatically from your paycheck each month.