According to a 2006 survey released by the American Payroll Association, an estimated 65 percent of Americans live paycheck to paycheck. What's even more frightening than the idea that two-thirds of us are barely getting by is the fact that the findings were fairly universal across income levels. This means that the four-person family living off of $35,000 per year and the young, twenty-something single making $80,000 are functioning at equal levels of difficulty to just pay the bills.
Although what they're spending the money on obviously plays a role in how fiscally responsible each person is, it ultimately doesn't matter what they're buying - it's what they're not buying that's really important. The longer people go without creating an investment portfolio or retirement plan, the less likely they are to find room in their budget to make one five, ten, or even twenty years from now. In an age when Social Security is struggling and on its way out, this means trouble ahead not only for individuals, but for the economy as a whole.
First Steps
Any good budget starts with cutting back on the non-essentials. Overall, this is the least-heeded advice in the world of finance, because few of us want to stop drinking that morning latte. The good news is, you don't have to.
Instead of looking at ways to pinch pennies, look at ways to pinch dollars, tens of dollars, and hundreds of dollars. It's the larger monthly expenses - the mortgage, the car payment, and the cable bill - that make the biggest impact on the amount of extra cash that could be used for investments. When you create a budget for your lifestyle, factor in long-term investments first, and house payments and other essentials second. This way, you live your life around an income that takes the future into account.
Moving Forward
Saving money is only a drop in the bucket of necessary financial planning. While having a structured budget will go a long way in preparing you to move beyond the paycheck-to-paycheck lifestyle, you also have to implement financial plans that will not only give you a savings "cushion" for daily expenses, but also provide something for the future.
The best way to do this is to hire a financial advisor or investment firm that works with all types of fiscal opportunities. A broker is likely to only look at getting your money on the stock market; a financial advisor is more like a life coach, helping you to devise a plan for your unique fiscal situation, your goals for the future, and even your more immediate goals (such as setting aside a down payment for that first home).
Only by focusing on the "bigger picture," which includes finding a way to make you more financially responsible for the present as well as the future, can you begin to move away from the paycheck-to-paycheck trap and really start looking at how financial investments can benefit you.
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