Living on the Edge

Check out this staggering statistic: Nearly two-fifths of American households are living paycheck to paycheck.

A recent report conducted by the Consumer Federation of America and the Consumer Planner Board of Standards, Inc. found that 38% of households live paycheck to paycheck, up from 31% in 1997. The report also found that almost half of American households are behind on retirement savings.

Similarly, a recent Bankrate.com survey found that the financial security of Americans is deteriorating, and almost 40% of Americans feel less at ease about their savings than they did a year ago.

Living paycheck to paycheck is extremely risky. Any kind of financial blow, such as illness or job loss, would be devastating. About 46 million Americans are already living below the poverty line. But about 127.5 million people do not have enough money saved to weather a financial emergency and are just one mishap away from living in poverty as well.

However, it is important to note that financial planning is often the difference in whether or not a household will face financial distress. In the CFA/ CFP Board Survey, more than twice the percentage of respondents who identified themselves as planners, in comparison to those who did not have a financial plan, said they are living comfortably. This gap between planners and non- planners held true across income brackets.

This is why programs such as New Century IDA are so important. New Century IDA helps its clients transition from a pattern of consumption to one of savings. This is a behavior change that lasts a lifetime and helps people become more financially secure.

For more information read, “Living Paycheck to Paycheck is Reality for Two in Five Households: Report” by Khadeeja Safdar.