This week: Unpacking Our Paycheck-to-Paycheck Problem: The Three Reasons 61% of Americans Can’t Get Ahead

This week: Unpacking Our Paycheck-to-Paycheck Problem: The Three Reasons 61% of Americans Can’t Get Ahead

POV: You’re at a small, intimate party – there are 10 dashing people in the room. Everyone is smiling and dressed to the nines, and as you catch snippets of sidebar conversations, you hear about investment portfolios, promotions, vacations, second homes. Life is good!

You might be thinking: Am I the only one here still carrying student loan debt and worrying about whether I can afford to replace my air conditioning unit if it gives out this summer? Am I the only one here who is behind?

The reality is this: Of the 10 people in the room with you, six are living paycheck to paycheck. Even if those 10 people are making $250k+, 25% of them are still struggling to get by.

According to a recent Lending Club report, 61% of the United States is living paycheck to paycheck, a statistic that’s increased by 9% since 2021. And while it’s easy to assume that mostly represents the lower income population, 42% of individuals making $100k or more are living paycheck to paycheck, some unable to pay bills comfortably or cover a $400 emergency expense. 

The question is: Why?

I believe there are three main factors contributing to America’s paycheck-to-paycheck challenge:

Inflation. This one is obvious but worth mentioning, since it affects everything from gas to food to travel. Average inflation in the United States is currently 8.52%, compared with 5.37% last year and the generally established acceptable rate of 2% or below. This recent spike has pushed millions of new individuals, many of them otherwise considered mass affluent, into this worrisome trend of just barely getting by.

Keeping up with the Joneses. Considering the phrase originated in 1913, this isn’t a new phenomenon, but social media has perpetuated our desire to live – or at least appear to live – beyond our means through credit cards, “buy now pay later” purchases and ill-advised loans. Many of us get started on the wrong foot by setting our fixed expenses too high: Big rent payments, big private school payments, big car payments, etc. Even if we budget well for discretionary expenses, we are already behind the eight ball.  Avoiding these poor spending decisions requires making smart life decisions for the foundation of your spending plan, followed by making prudent spending decisions on a monthly basis.  This is easier said than done, and is the reason people need help from third party services that specialize in this. 

Lack of service. That leads us to our last point. One of the biggest problems is the limited service available to help individuals manage their cash flow effectively. While there are thousands of available advice platforms, professionals and services for asset management and retirement planning, the most acute unresolved need is for a solution that helps people manage their cash flow – and more importantly, their paycheck. There’s nothing that jeopardizes your financial health more than direct depositing your hard-earned-paycheck into the abyss we call our checking account, where it can be easily and immediately distributed to: expenses that weren’t budgeted for, ACH withdrawals from legitimate billers, impulse purchases, and more. It’s no wonder we have little to nothing left over at the end of each pay period. People need help organizing their money so that each dollar has a job, from day one.

Solving the paycheck-to-paycheck problem

We can’t do anything about inflation; unfortunately, for the moment, it’s here to stay. But we can stop comparing ourselves  to everyone else on social media, and focus on what’s best for our personal, current situations. It’s never too late to reset high fixed expenses that cause you to second guess the inconsequential cost of a latte.

Otherwise, everyone can benefit from a good financial coach that helps you understand your relationship with money and ultimately keeps you on track to take the right actions. The major missing gap that still exists today is implementing actions that make it easy to save, pay down debt and create digital budgets for your spending, directly from your paycheck.  We’ve heard that there is a dynamic fintech based in NYC working on something groundbreaking to solve this exact problem :)

It’s called Budge, and it’s coming soon. DM me to learn more!

Thanks for this — keep me posted!

Syed M.J. Jafri

Land Development/Municipal Engineer

1y

Great

Karamjeet Mangat CFP, MBA, CMC

Career Success Coach, Outside of the Box thinker, Retirement Planning Coach and Consultant

1y

Well said. Keep up the good work!

It’s such an important topic that causes Americans so much stress, Hussain Zaidi, CFP®, and it knows no boundaries—whether you’re earning $30,000 or $300,000, living paycheck to paycheck. Looking forward to seeing how Budge, Inc. can help thousands of Americans! 👏🏻

Keena Pettijohn

CEO& Founder -AgeTech/Wellness As Solution "WaaS"©/ Credit Union Evangelist & Bank Strategic Advisor/ Keynote Speaker/Integration & Technology Partnerships/Innovations Advisor/ Females& Finance Associate Partner

1y

This is a great share and I am thrilled Hussain Zaidi, CFP® that it was a focus for “ The Budge”. Having written on the pandemic of financial illiteracy with no vaccine” in sight and the fact that financial stress is the number one stresses for many American families, I welcome your perspective on this unfortunate phenomenon.

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