The majority of American workers admit to living paycheck to paycheck. Many of those not living paycheck to paycheck are only a few paychecks ahead of trouble, which can mean major problems if they lose their job and can’t find another one fast. Financial insecurity is reaching epidemic proportions, despite the fact that unemployment is low and GDP is healthy.
So what’s the problem?
There is no simple answer. Even expert economists can’t agree on the exact reasons; however, all financial experts agree that there are certain drivers of the paycheck-to-paycheck epidemic that consumers need to be aware of. There are several ways to combat this problem in order to make your financial future more secure.
Financial experts agree that a household is in a dangerous position when bills are due and payday is still several days or weeks away. If this happens to you as a one-time occurrence, using savings or finding a cash advance can end the problem. However, if this pattern continues, savings will be gone or you’ll end up in worse financial shape than before. In that case, there is a chronic problem that needs fixing. Here is how to get money to cover bills.
Reduce high living expenses
This comes as no surprise to those living in urban areas. Cities like Portland, Seattle, San Francisco, and others are seeing intense rent increases, sometimes as high as 40 percent in a year. No matter how hard you work, keeping up with that level of rent inflation isn’t realistic unless you win the lottery.
For those of us without lottery winnings, this means it costs too much to live in the city. If you are a renter in an urban area, reducing rent is usually the number one best way to get out of the paycheck-to-paycheck trap. High rent usually means living beyond your means. If too high a percentage of your earnings goes to rent, you won’t have enough left over for other things, and that often results in debt. Hint: 30 percent of income should be the maximum spent on rent; 20 percent is decent; 10 percent is great.
To cut rent, consider a roommate. Also, is living with family an option? Consider how much money you could put in the bank without that giant rent payment. Though a long commute isn’t ideal, it’s better than living beyond your means. Consider moving to a less expensive town or neighborhood. Remember, renting a small space is better than being rent poor.
Once you get housing costs under control, consider your transportation. Remember, if you own a car, you are obligated to the payment, insurance, gas, repairs, and maintenance. Get the most practical vehicle. If you are an urbanite subjected to high rent and can do without a car, consider using public transportation and renting a car for occasional out-of-town trips.
By taking a close look at your budget, you can probably find some ways to trim expenses. Besides cutting out unnecessary restaurant and convenience foods, you can probably save money on utilities by turning down the thermostat, especially while away. Savings are also important. Make sure that the money you save goes into the bank.
When you need to cover a big, unexpected expense and don’t have the cash, consider your borrowing options carefully. Credit cards are convenient, but they often have high interest rates and fees. When you need a loan for money to cover bills, shop for online installment loans. These loans offer competitive interest rates and comfortable payment terms of up to four years. By keeping the payments low, you can stay on budget and pay extra when you have the funds. For small, short-term loans, online cash advances provide competitive interest rates and fast funding.
Households are living paycheck to paycheck when bills are due and they have to wait until payday to afford them. When living paycheck to paycheck, households are too vulnerable when financial shocks happen.. Cutting expenses and practicing responsible borrowing are two of the surest ways to escape the paycheck-to-paycheck trap.