The Holidays Could Place More Stress on People Living Paycheck-to-Paycheck
The holidays can be a stressful time in normal circumstances. Add in the pandemic and two years of lockdowns and economic struggle, and 2021 could be a particularly difficult year.
According to the recent Paycheck to Paycheck report, a collaboration between PYMNTS and LendingClub, the share of U.S. consumers living paycheck-to-paycheck increased from 52 percent earlier in the year to 57 percent in November.
And, as the economy opens and the holiday season approaches, Americans are feeling more optimistic. They’re likely to feel the urge to spend more on travel and gifts, adding even more stress for those living paycheck-to-paycheck.
[Surprisingly, the report shows that it’s not only people with low incomes who have this trouble – it can apply to those with six-figure incomes too. It all depends on how you manage your money.
“With good planning and money management it is possible to build a financial cushion and remove most of your financial stress, even if you don’t have a high-paying job,” says David Beckerman, Senior Vic President Investments for David Lerner Associates.
1. Pay yourself first. It’s difficult to save any money if you don’t make paying yourself a priority. Consider your savings account to be a monthly bill that must be paid regardless of the circumstances. It’s not the last bill. It’s the first. No exceptions.
2. Get a handle on your spending. Everyone should have a budget. There are countless resources covering the topic of setting and sticking to a budget. Use them.
• Make a list of all your purchases and review them at the end of each day. Every candy bar, magazine, and soft drink are included. Even if it only cost a cent, write it down.
• Avoid making big purchases without a waiting period. The urge to spend a lot of money will often pass after a couple of days.
• Create a decision-making process before purchasing anything you don’t need. This can be as simple as asking yourself a couple of questions: 1. Do I need this? 2. Is this helping or hurting my goal of breaking free from my paycheck-to-paycheck lifestyle? Then remind yourself how great you’ll feel when your financial situation is better.
• Eliminate unnecessary expenses. If it doesn’t help to keep you alive or employed, reconsider it.
3. Earn more. There’s a limit to how much you can cut your expenses, but there’s no limit on how much you can earn. Most financial gurus only focus on the expense side of the equation, but your options are ultimately limited. If you’ve been in your current position for at least two years, apply for something more lucrative.
• Find a way to earn some money on the side. With the popularity of the internet, there are ways to earn extra money without leaving home.
4. Tough it out. It’s not easy to get excited if you’re only saving $100 each month, but it’s a start. There’s a lot of inertia in your personal finances. It will take time to accumulate enough change to make a significant difference. It’s important to be pleased with your progress, no matter how small.
Living paycheck-to-paycheck is a precarious situation. Just a couple of weeks without a paycheck would spell disaster. Though it seems like a long journey to break free of this cycle, it’s worth the time and effort. Not worrying about your bills or what the future may hold is a worthy goal.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
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David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.