Living paycheck to paycheck - breaking the vicious cycle

I was struck by the attitudes of many people quoted in a recent article about the difficulties of living paycheck to paycheck.

National data on the paycheck-to-paycheck experience is flimsy, but a recent report from the Federal Reserve spotlights the prevalence of extra-tight budgets: Four in 10 adults say they couldn't produce $400 in an emergency without sliding into debt or selling something, according to the 2017 figures.

. . .

“It’s astronomical what people need just to make it month to month,” said Heidi Shierholz, a former chief economist at the Department of Labor who now studies how middle-class families spend their wages at the Economic Policy Institute, a Washington think tank that is funded by foundations and unions. “Given the high cost of transportation, housing, health care. … There is often no wriggle room.”

. . .

... workers across a variety of professions struggle to make ends meet.

Sol Smith, chair of liberal arts at a Southern California college, said he landed his job after earning three degrees. But with four daughters and mounting health-care costs, he said, saving just isn’t possible.

“I see no way out,” he wrote in an email to the Post. “I am 40, have built a strong career, have 17 years experience, and if something were to happen to me, my wife and kids would be homeless within a year when my life insurance ran out.”

Lani Harrison, 43, said she and her software engineer husband have trouble buying groceries after paying the $2,249 rent on their two-bedroom Los Angeles apartment. They're raising three young kids and rely on her husband's income, she said. Her work as a certified car seat installer earns her $40 per appointment, but the work isn't steady.

"Each month, we have to stretch his paycheck to make things work," she said. "We really don't have any savings. Many months we go under."

. . .

Dillon Holt, a housekeeping assistant at a Nashville hotel, said he's down to one piece of chicken in his freezer. His checking account often hovers around zero, and he is unable to put away any money for the future or an emergency.

"I make $12.50, work 40-50 hours a week," he said. "I still don't have a savings account."

Emily Webb, 38, said she works full time as an arts administrator in Columbus, Ohio, and waits tables on the side. Staying afloat each month, she said, is a precarious dance.

“It’s a scramble at the end of a paycheck to deposit my tips and make sure none of my automatic payments bounce,” said Webb, who has a master’s degree but cannot make her student loan payments.

She's grateful to work in her field, though, and loves her job.

There's more at the link.

Let's address a few of those comments.

• "with four daughters and mounting health-care costs, he said, saving just isn’t possible".  You know up front that kids are going to cost you.  According to the US government:
  

  ... a family will spend approximately $12,980 annually per child in a middle-income ($59,200-$107,400), two-child, married-couple family. Middle-income, married-couple parents of a child born in 2015 may expect to spend $233,610 ($284,570 if projected inflation costs are factored in*) for food, shelter, and other necessities to raise a child through age 17. This does not include the cost of a college education.
  
  Where does the money go? For a middle-income family, housing accounts for the largest share at 29% of total child-rearing costs. Food is second at 18%, and child care/education (for those with the expense) is third at 16%. Expenses vary depending on the age of the child.

  If you knew that up front (as any thinking person should have), and you nonetheless made the decision to raise four kids, you knew what you were letting yourself in for. Why complain?  What's more, health care is by no means the largest expense (unless your children are unfortunate enough to suffer serious illness or injury beyond the norm).  What's the rest of your household budget?
• "... the $2,249 rent on their two-bedroom Los Angeles apartment. They're raising three young kids..."  If you choose to live in a city that costs you that much in rent, and choose to raise three young children, and choose to rely on a single income for most of your living expenses, then why are you surprised that you have to live paycheck-to-paycheck?  Perhaps you should have thought about the costs before making those decisions?
• ""I make $12.50, work 40-50 hours a week".  That's your choice.  You're a single man, you sound young, and if you're a housekeeping assistant, you're probably reasonably fit and strong.  Why not move to where much higher-paying jobs can be found, in return for much harder work?  A couple of years in the oil patch in Texas or North Dakota (to name but one example) will allow you to sock away literally tens of thousands of dollars in savings, if you don't "waste your substance with riotous living".  With that, you can study for a better qualification, or start your own business, or . . . it's up to you.
• "... she works full time as an arts administrator in Columbus, Ohio, and waits tables on the side. Staying afloat each month, she said, is a precarious dance ... She's grateful to work in her field, though, and loves her job."  I'm glad you love your job . . . but again, that's your choice.  What does an arts administrator earn?  Clearly, not much.  Waiting tables?  That can earn a lot, or a little, depending on what sort of restaurant you work at, its clientele, and so on.  Could you find better-paying work in a field that you might not love so much?  There have been times when I've had to work in areas that didn't interest me at all:  but putting food on the table certainly did interest me, so I accepted the work without demur.  That's life.  It isn't always what we want.

There are also the myriad expenses we take for granted today that are actually not necessary at all.  Unless your job requires some of them, why not cut out a lot of those costs, and save money?  Examples:

• Do you really need the latest-generation smartphone?  Do you need a cellphone account with unlimited data?  If that's your only means of accessing the Internet, perhaps;  but for most of us, there are alternatives.  Miss D. and I make do with low-cost smartphones, several generations out of date.  They do all we need, and we've saved thousands by not keeping up with the latest and greatest technology.
• What about cable TV?  Do you really need TV at all?  If you have kids to distract sometimes, sure, that makes a difference;  but even there, a low-end package can save you hundreds of dollars over a year compared to the high-end offerings.  Miss D. and I do without a TV service at all, relying on our computers to screen anything we want to watch.  At our previous home, we had a TV, but used a digital aerial to pick up broadcast stations at no cost, rather than subscribe to cable.  We saved a bundle.
• Eating out . . . wow, what a money drain that is!  It's easy to run up a tab of several hundred dollars every month on eating out with friends, or fast food for lunch, or buying take-out meals for the family.  I have no problem with treating ourselves now and again, but all the time?  I know people who eat out five or six times every week, and buy take-out two or three more times, and regard that as normal.  Just add up the costs.  They'll blow your mind.  What's more important to us:  eating out often, or paying off our home?  Puts a different spin on the priorities, doesn't it?  We can cook, and we can entertain ourselves and our friends at home.  That's a lot cheaper.
• Travel.  Is your journey really necessary?  In 2018, the IRS allowed a deduction of 54½ cents per mile for business travel.  That squares well with the AAA's estimate of actual vehicle running costs.  If you drive an old banger that's paid off, sure, it'll cost you less;  but not many people do, so let's stay with the accepted figures.  If you know that every two miles you drive is going to cost you more than one dollar, it should make you think hard about cutting down the number of miles you drive.  Combine journeys, share trips and chores, don't use your vehicle unnecessarily.  How much will you save?  That's up to you, but if you drive just 200 miles less per month, that's over $100 you've saved.  Food for thought.
• Clothes.  Do you really have to shop at boutiques and name-brand stores?  I shop at Walmart, or online at Amazon or Aramark or places like that.  I've bought from Goodwill and other thrift stores on occasion - nice clothes, too, for all the "stigma" of being pre-owned.  I'm not a miser, but I try to use my dollars and cents wisely.  I reckon I save hundreds, if not thousands of dollars every year compared to what many of my peers are spending.
• Buy thrifty.  Look at your local Craigslist for goods for sale, check out flea markets and yard sales, use online auction sites . . . the options are almost endless.  I used to teach disabled and handicapped students to shoot, and helped them look for bargains in defensive handguns (since disability income is nothing to write home about).  I reckon they spent, on average, less than half what a new gun would have cost them, and still ended up with perfectly serviceable firearms that were very well suited to their needs.  All it took was careful shopping and being on the lookout for bargains.  Do the same for domestic appliances, sporting goods, and all sorts of things.  You'll be surprised how much you can save.

I read the horror stories of those living paycheck-to-paycheck, and I wonder . . . how many of them have ever bothered to take the time to re-evaluate their life choices, reassess their prospects, and make a firm decision to change?  If we don't break out of the trap, it's going to keep its grip on us.  It's up to us, and no-one else, to do something about it.  If we truly are trapped by previous poor decisions, or by things that have happened to us (and I accept there are such things, such as health crises, the death of a loved one, accidents, etc.), then we shouldn't be ashamed or embarrassed to turn to others - family, faith groups, or other support networks - to ask for help to break free;  but we should then use that help to actually break free, not merely continue as we have before.  Use Dave Ramsey or other financial "coaches" to learn to budget and manage your money, and then apply those lessons.

What say you, readers?  What have been your experiences and "lessons learned" in this area?  Please share them with us in Comments.

Peter