In my recent wanderings on the world wide web, I came across an article on CBS MoneyWatch that said 38% of Americans are living paycheck to paycheck. This is up from 31% back in 1997. Other findings include:
- 66% say they don’t have enough to retire at 65
- 55% of respondents said it’s hard to know who to trust when seeking financial advice.
- 52% think investing is complicated.
- 55% are worried about losing their money in the stock market
Conversely, 52% of those that had a financial plan reported confidence in meeting their goals, versus 30% without a plan. It didn’t matter if they had a professional create a plan with them or not. The important thing was that they had a plan.
Living Paycheck to Paycheck: Action Steps
I’d like to address these one by one. First, with the recent collapse of the housing market and people living beyond their means, it makes sense why so many are living paycheck to paycheck. It’s hard to dig yourself out of a mountain of debt, but it can be done. It just takes time.
When paying off debt, focus on how much you have paid off rather than the large balance that lies ahead. Or, try to live in the moment, looking at what you are paying off now rather than what you still have to pay off. It’s helps to control that feeling of hopelessness we all feel when trying to get out of debt.
While trying to pay off your debts, focus on ways to cut back on other expenses. Find ways to make meals at home for less money. Decide to stay in on the weekends every other week. By learning to control your spending, you will have more money to use to pay off debt and will set the foundation for better money management once the debt is paid off.
When it comes to seeking financial advice, the process is a bit trickier. If you don’t have a lot of money to invest, or just starting off, I recommend reading about what you can control when investing and cannot control when investing. From there, move on to how to allocate your investments, and finally choose a low cost firm to help you with your money. I like Betterment.
If you have a more complex financial situation and want a financial planner, then reading this post on what to look for in an advisor is a must.
If you think investing is complicated, it is not. In fact, investing is boring. It only feels complicated because Wall Street is trying to sell you on new ways to make money in the market. Ignore the hype. Stick with passive investing for the long term. I would encourage you to read the above links on what you can and cannot control when investing as well.
Finally, you will lose money in the stock market. There is no guarantee you will make money. But if you stay invested over the long term, following a plan, you will come out ahead. Over the course of investing, you will lose money as the markets drop. But that is short term and that is life. Focus on your end goal and don’t get caught up in the short term day to day movement of the market. The last statistic is proof of this: 52% with a plan are confident of meeting their goals. So take some time to create your plan so you too have one less thing to worry about and can break free from living paycheck to paycheck.