Survey: Many Americans Living Paycheck to Paycheck

Most national news stories right now are focusing on the seeming ineptness of our Congress and Presidential administration to agree on a plan to avoid the so-called “Fiscal Cliff.” While an agreement has now been reached, none of the information surrounding how this deal came to be is positive.

Americans are mostly annoyed and aggravated, some downright outraged, about this. And we absolutely should be – we elect these people to act on our behalf, not like squabbling children (sorry, that’s offensive to all children).

But maybe we also need to point a finger in the mirror. At least, one in every two Americans should do that, as apparently we’re not much better off at handling our own finances than the federal government is at handling its finances.

A December survey from online lender has discovered that almost half of Americans indicate that they are living paycheck to paycheck and 44% of Americans are just trying to stay current on their bills and avoid debt and bankruptcy.

Using 1,000 Americans in the poll, there were some demographics that stood out as the most likely to face this financial reality, including: 62% of Americans in their 30s; 54% among those Americans under age 60; 57% of families with children; 64% of families with five or more people in the household; and 53% in southern states, versus those in the northeastern U.S.

Also mirroring our political leaders, borrowing money seems to be the go-to answer in case of an emergency (car repairs, medical bill, high utility bill, etc.).

Twenty-three percent of these Americans would whip out a credit card; 16% would hit up their families and friends; 5% would head to the bank for a loan and 2% would use installment loans. Other possible solutions include using general savings or a separate rainy day fund, selling or pawning items or short-term cash advances.

But the poll’s press release also noted that a recent FDIC study found that nearly half of Americans can’t come up with $2,000 in 30 days if an emergency did arise and they used these options.

So what can be done to prevent this? The first advice I’ve seen from anyone who deals with money and finances is this: have an emergency fund. Start small; say $1,000 in a savings account (separate from the checking account). The ultimate goal is to have three to six months of living expenses in an emergency fund, which would cover a sudden loss of income and delay the added stress that would come with a job loss.

Slow and steady wins the race though; it’s not a quick thing to have six months of living expenses sitting in the bank. Create a budget and stick to it. Live within your means.

Now, would anyone like to share this with the federal government?

Financial Literacy: Too Many Lacking

It’s Financial Literacy Month. Hopefully it has arrived in time as far too many people are lacking in just that concept. Witness a new survey from the National Foundation for Credit Counseling and the Network Branded Prepaid Card Association.

Witness a few results from the survey:

  • More than half of U.S. adults admitted that they do not have a budget

  • One-third of survey respondents do not pay all of their bills on time

  • Thirty-nine percent of adults carry over credit card debt month to month

  • Twenty-five percent of those who do not currently have non-retirement savings indicated that, if they did begin to save, they would keep their savings at home in cash

“This year’s survey unveiled some disturbing trends, showing that a significant number of Americans are saving less, spending more and carrying credit card debt over from month to month, suggesting that the painful financial lessons of the past are quickly being forgotten,” said Susan C. Keating, president and CEO of the NFCC.

My reaction is a little more straightforward, 15 words in fact. "Really? Come on, people. Get in the game or you only have yourself to blame."

Just Listen to Jagger When It Comes to Finances

Remember the Game of Life board game? My favorite part was pretending to be the banker, which meant I counted and distributed the “play” money. That exercise helped illustrate a basic – but crucial – “life” lesson: When you run out of money, there’s no more to spend.

As an adult, you learn that’s only partially true – especially with credit cards, which pave a tempting path to overspending.

I’m not saying it’s easy, but here’s what I do as I longingly gaze at advertisements for Hawaiian vacations or elegant – but expensive – wardrobe styles: Begin silently singing what’s become my spending anthem – the Rolling Stones’ “You Can’t Always Get What You Want.”

I read an interesting Accumulating Money article describing a few reasons why people overspend. It notes that 43% of families shell out more than they earn each year. Here’s an excerpt: 

Keeping up with the Joneses – Psychology plays a big role in our spending habits. We want to feel as successful or more successful than those around us. We spend a lot of money to keep up that image. The reality is, the neighbors probably can’t afford that new boat either.

Plastic doesn’t feel like real money – It’s common to spend more when using credit cards than cash. The experience of handing over a card that you get back is just not the same as handing over some cold hard cash and seeing it disappear.

Immediate gratification – It’s all around us. We’re bombarded with the immediate gratification mentality. “Instant pain relief,” “fast food,” “on demand video” and the big financial one, “buy now, pay later.” We’re too used to getting what we want now even if we don’t know how we’ll pay later.

Can’t say no – Some people feel like a failure when they can’t meet the wants of others. Whether it’s new toys for the kids, new outfit for the spouse or a night out with the friends, some people just can’t say no, even when they can’t afford to say yes.