Financial Therapy: living paycheck-to-paycheck

The sad situation described in this article is that a nationwide online study of 25,000 American adults found that while “just over two-fifths of respondents (41%) report spending less than their income, 36% spend about EQUAL to their income, and 19% spend MORE than their income.”

Only 35% are “certain they could come up with the full $2,000” if an unexpected need for $2,000 came up within the next month. Similarly, 40% claimed to have set aside 3 months or more in an emergency fund.

What happens when you consistently live paycheck-to-paycheck?

  • You go into serious debt if income stops coming in, and then you pay high interest on that debt
  • You are always stressed out about financial risk and hardship
  • You aren’t able to build sufficient emergency savings
  • You will never save anything for retirement and will be working until death
  • You will never achieve financial independence
  • You will not be able to save up for an occasional vacation, home improvement, education, etc.
  • You really can’t work towards ANY future goals that are reliant on saved assets

Financial Therapy: middle-class living from paycheck to paycheck

47% of Americans would not be able to come up with $400 in case of an emergency. Admitting to financial insecurity may be more embarrassing than sexual impotence. “To struggle financially is a source of shame, a daily humiliation—even a form of social suicide. Silence is the only protection.” 65% of Americans ages 25 to 65 are financially illiterate (lacking understanding of fundamental financial principles, such as compound interest, risk diversification, and the effects of inflation), and this illiteracy correlates highly with financial distress.