Researchers say 76 percent of Americans are living paycheck-to-paycheck. I'm ashamed to admit I am in the same predicament of having virtually no liquid savings even though our family's household annual income exceeds $100,000. Virtually all the income that comes to us each month makes a brief appearance and then quickly departs as we pay our bills online. Inevitably every month there is at least one dramatic phone call from "Grammy" who needs to pay her credit card bill and ran out of Social Security money.
According to a recent article by CNN Money, the saving rate hasn't changed in the past three years even though the financial situation is rosier for most Americans. A new survey released by Bankrate.com shows fewer than one in four people have enough money to cover at least six months of expenses. Moreover, half of those surveyed had less than a 3-month emergency savings fund. Twenty-seven percent had no savings. I know I've made several financial missteps that resulted in being paycheck dependent.
Pay other people's bills
One of the reasons we live paycheck-to-paycheck is because we pay not only our own bills, but the credit card bills that belonged to our college-age children and elderly parents. We also cover utility bills for family members. Although it may or may not be the "right" thing to give "parental handouts" on a moral level, it has been the wrong thing for our personal finances.
Stop automating savings
When my husband and I have money automatically taken out of our paychecks and saved into our retirement accounts, we barely miss the money. However, we temporarily stopped having money taken out of our paychecks when our children went to college. We also discontinued having money automatically moved from checking to savings. After having to move money from savings back to checking several times, we knew we couldn't afford to save.
Have more than one child
I think we would have money to save each month if it weren't for the fact that we have two children. Raising a child, according to a CNBC report, costs $235,000. And that's before college. Like most parents, we expect to support our children into their 20s. This fall, we have a $4,000 tuition bill to pay for our younger son. We are already financially beat up from our older son's college bills. I can't imagine the financial challenge of raising more than two children.
Trade speculative stocks
We haven't always lived paycheck-to-paycheck. When our children were younger, we were able to put money aside into our Roth IRA accounts. We wouldn't be living paycheck-to-paycheck today if I had kept the money in liquid savings or a conservative mutual fund. Instead, I decided to be "aggressive" with speculative stocks in our Roth IRA accounts. With some of the stocks down 80 to 90 percent, it may take a decade for our investments to recover. In the meantime, we are left with no liquid savings for emergencies.
To turn our financial situation around, we have a written plan of how we will save after paying the final tuition bill for the fall semester. We plan to go back to automating our savings since that worked in the past. I have sworn off speculative stocks since that equates to gambling. As far as supporting our elderly parents, we had to cut them off so we can stop living paycheck-to-paycheck and start living with less stress.
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