Jan 25, 2019 4 min read

As the government shutdown continues, we hear about many employees struggling to pay 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 paycheck to paycheck. If something unexpected happens your financial situation is in chaos.

A recent nationwide survey, Financial Capability in the United States, found that 41 percent “of respondents report spending less than their income, 36 percent spend about equal to their income and 19 percent spend more than their income.”

This survey was done by FINRA Investor Education Foundation, the self-regulatory body for stockbrokers.

If true, that means 55 percent of American families are living paycheck to paycheck or worse. Six of 10 individuals are saving nothing or worse! This is a scary statistic.

If an emergency came up and an individual needed $2,000, only 35 percent are certain they would have the money. In low-income families, this might not be surprising. The median U.S. household income, however, is $51,324.

Remember, baby boomers are the first generation in which many people are not covered by defined benefit pensions when they retire. This means 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 percent of Americans have positive perceptions of their own financial knowledge and math skills. Yet we have this condition where so many are living paycheck to paycheck. These choices lead to paying high amounts 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 paycheck to paycheck. Earn more or spend less. Maybe you take a second job, work some overtime or get 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 notebook 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 paid more than required in the past. It still wants 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 percent interest or more. If you miss a payment, penalty rates can jump up to 29.99 percent. On the bottom of your credit card statement, there is a line that estimates 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 another penny.

Also, be careful of the checks that sometimes come with your credit card statement. The interest might be between 20 to 23 percent. 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.

Gary Boatman is a Monessen-based certified financial planner and author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at rshrum@observer-reporter.com.