Save, spend, thrive. Sounds good. Sounds smart. Sounds like a concept we can all agree with. So why are so many of us struggling? We spend years our lives being taught all the things we should know to live as productive,
successful citizens in our world. However, we are given little to no practical instruction on how to manage our financial lives. We are told to get educated, get employed, and figure it out along the way. Magically everything will work out somehow.
Statistics tell us that 21% of divorces can be attributed to financial stress. Minimum wage is set at $7.25/hr in the US with some state minimum wages set as high as $15.00/hr. Average incomes across educational levels vary by age, but for our purposes we will use the figure $41,000.00/yr for an individual between the ages of 25 and 34. The average income noted here puts this worker in the bottom 60% of wage earners in the US today. In a recent article from USA Today, the following facts were asserted:
About 76 million U.S. households make up the bottom 60% of income earners, with take-home pay of $65,000 or less. Of that group, about a third were “stressed” in 2016, UBS says, near the highest level since the mid-1990’s. UBS defines ‘stressed’ Americans as those whose financial obligations — such as mortgages, rent, auto loans and leases, and credit card bills — exceed 30% of their income and who don’t have enough cash and other assets to pay their bills for six months in the event of a layoff or other shock. Such people are far more likely to eventually fall behind on loans and rein in spending.
Even more troubling: About 25 million low-income households that earn $23,000 or less face growing burdens, with nearly half of that bottom 20% of income earners stressed in 2016, up from 45% in 2013, UBS figures show.
The comedian George Carlin once said “It’s called the American dream because you have to be asleep to believe in it”.
For 60% of workers today his statement might sadly be true. So, now that we have identified the problem, what do we do about it? How do we end the paycheck to paycheck cycle which leaves us feeling like a hamster running in an exercise wheel? Here are some basic ideas to start with.
- Make a budget
Know how your money is being spent. Write down your routine expenses and financial needs. Write down notes indicating any
money spent. (even the change for the vending machine at work)
- Learn the difference between needs and wants
Needs are BASIC food, clothing, shelter, and safety. 30% of income is usually earmarked for shelter expenses. Approximately
14% of income is earmarked for food expense. Clothing expense comes to about 10% of income and transportation around
12%. We are then left with 10% for charitable giving. 20% should be set aside for savings. We have now accounted for
80% of our budget. The remaining 20% is left over for discretionary spending or “wants”.
- Use cash whenever possible. Use credit sparingly. Financing a home makes sense. Financing your food, clothing and gas
does not. Use a debit card checking account instead of a traditional checking account. Avoid credit card use except for
- Learn how to spend less using skills like gardening, making your own household cleaners and detergents, and cooking
homemade meals. Brown bag your lunch for work. Use herbs and essential oils to maintain good health. Refurbish second
hand items when you can. Learn to do basic repairs and maintenance yourself.
Save, Spend, Thrive will provide tips and tricks to live a better life with the income you have and will provide information to help
meet financial goals for your future. Visit us often for help achieving a better financial life and the freedom that life allows.