For financial stability, it doesn’t matter how much you earn, what matters is how much you keep and how hard that money works for you. Money cannot work for you if you spend it all each month. This describes the financial struggle of living paycheck-to-paycheck, meaning there is little or no savings.
Who is living paycheck-to-paycheck?
According to a study by Nielsen Global Consumer Insights:
- 50% of those earning under $50,000
- 33% of those earning between $50,000 and $100,000
- 25% of those earning over $150,000
- Overall, 22% of Americans have no spare cash
Those are very high numbers of people without any savings. While the paycheck-to-paycheck rate improves as income increases, it appears that far too many people are on financially thin ice.
How is it that a quarter of all people earning over $150,000 have little to no savings? Each increase in salary is consumed. This can be many things – cars, vacations, larger home, more toys, a second home, etc. So instead of becoming more financially stable as their income increases, these people become more financially precarious. They are raising their lifestyle spending and recurring expenses as fast as their income rises. When you have no savings, where does the money come from for required maintenance, repairs, and replacement of each and every item that you own? It either falls into disrepair, you borrow money and become poorer, or in the worst case, the bank takes them away from you.
Is your savings rate improving as your income increases, or instead, are you ratcheting up your lifestyle spending just as fast?