Americans Living Paycheck-to-Paycheck

Southern Dad

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Original poster
May 23, 2010
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More than three quarters of Americans have no savings and are living paycheck-to-paycheck. They are one missed check away from disaster. What would it take to get Americans to start saving again? Higher wages aren't the answer, because they just spend more. This is evident because far more people are not saving than are making minimum wage. Whose responsibility is it to start saving?

75% of Americans are living paycheck-to-paycheck
 

Zombie Acorn

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Feb 2, 2009
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Toronto, Ontario
More than three quarters of Americans have no savings and are living paycheck-to-paycheck. They are one missed check away from disaster. What would it take to get Americans to start saving again? Higher wages aren't the answer, because they just spend more. This is evident because far more people are not saving than are making minimum wage. Whose responsibility is it to start saving?

75% of Americans are living paycheck-to-paycheck
The economy is propped up on the fact that Americans spend their whole paycheck and interest rates stay artificially low. As long as poor people are only getting 1-2% on their savings and we outsource all the production jobs to the third world you can expect this to continue.

Raise interest rates to 3-4% and watch the economy implode.
 

ugahairydawgs

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Jun 10, 2010
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That's just depressing. 46% of people had less than $800 in the bank?

How do you fix it? You have to change attitudes. We live in a world that is very driven by "stuff". We "have" to have the latest this or that. Most people refuse to be content with what they have, instead focusing on what they don't have. And when they find something they "need", they "need" it now....which explains our mounting credit card debt and proliferation of those rent-to-own stores.

Planning for an emergency is unpleasant....and boring. So we avoid it like the plague.
 

Huntn

macrumors demi-god
May 5, 2008
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More than three quarters of Americans have no savings and are living paycheck-to-paycheck. They are one missed check away from disaster. What would it take to get Americans to start saving again? Higher wages aren't the answer, because they just spend more. This is evident because far more people are not saving than are making minimum wage. Whose responsibility is it to start saving?

75% of Americans are living paycheck-to-paycheck
The Democrats understood that average people are lousy savers. A program like Social Security was and is the answer, but don't let politicians continuously rob it as our government has since it's inception, and base payback of the program on the actual performance of the fund to keep it solvent. Millions rely on their SS because they have no other significant savings. And if there is a reputable investment company who can do a better job managing the fund than the U.S. Government, with proper oversight, let them do it.

And PS your premise is wrong AND self serving, higher wages puts people in a better position where they can save. The only reason I could max out my 401k for 30 years was because I had the extra income to do it.
 
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balamw

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Aug 16, 2005
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A program like Social Security was and is the answer
Safe Harbor 401Ks are also a good solution to this. The company can opt to make deposits into their employee's 401Ks in the form of an employer match or "core contribution" to offset the balance between "highly compensated" employees and not in these plans.

Both of these put some onus on employers to help/encourage their employees to save.

B
 

0007776

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Higher wages would help as it would put more people into a position where they are able to save if they want to. But beyond that it would take a restructuring of the economy to one where it wasn't based on consumerism.
 

Michael Goff

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If people don't save, then wouldn't a slightly higher minimum wage mean even more money would go back into the economy?
 

ugahairydawgs

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Higher wages would help as it would put more people into a position where they are able to save if they want to. But beyond that it would take a restructuring of the economy to one where it wasn't based on consumerism.
Therein lies the problem. Most of them don't want to.
 

BenTrovato

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Jun 29, 2012
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People don't know why they should save, or how to improve the financial condition of their lives. It's always been this way, it's just more pronounced nowadays because we have a larger population. The current system requires poverty for some people to be rich.

Watch TV, grab a drink, surf on my phone, complain about the government... what more is there to life?
 

Bug-Creator

macrumors 6502a
May 30, 2011
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This is evident because far more people are not saving than are making minimum wage.
Depending on where you life, how large your family and how many work hours that family combines you can easily make x-times min-wage and still spend all on essentials....

Dunno bout the US, but round here we have a whole range of wages that are above the (not yet really existing) minimum wage but 100% sure will you put below the poverty line once you retire, pretty much nullifying all savings at that point.

So in order to make people save:
- make sure they have surplus money
- make sure saving is rewarding (interest rates)
- make sure those saving have a net effect on retirement
 

jnpy!$4g3cwk

macrumors 65816
Feb 11, 2010
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More than three quarters of Americans have no savings and are living paycheck-to-paycheck. They are one missed check away from disaster. What would it take to get Americans to start saving again? Higher wages aren't the answer, because they just spend more. This is evident because far more people are not saving than are making minimum wage. Whose responsibility is it to start saving?
You do realize that Mitt Romney's 47% or 43% or whatever are getting paid so little that their family budgets are already spoken for and then some? Have you asked them if they would have liked a pay raise some time in the last 35 years?

That's just depressing. 46% of people had less than $800 in the bank?
I'm not surprised at all. Same group of people, making only a little more than the same amount that they have been for the last 35 years.

How do you fix it? You have to change attitudes. We live in a world that is very driven by "stuff". We "have" to have the latest this or that. Most people refuse to be content with what they have, instead focusing on what they don't have. And when they find something they "need", they "need" it now....which explains our mounting credit card debt and proliferation of those rent-to-own stores.
How impulsive and short-sighted of our 46%-and-below income percentile people.

Safe Harbor 401Ks are also a good solution to this. The company can opt to make deposits into their employee's 401Ks in the form of an employer match or "core contribution" to offset the balance between "highly compensated" employees and not in these plans.

Both of these put some onus on employers to help/encourage their employees to save.

B
I agree with the Safe Harbor 401K, but, most people in that same 46% as above are not going to save much that way. It would certainly help the 47th-80th percentile, though.

Therein lies the problem. Most of them don't want to.
(!)

What a depressing conversation. Most {slaves, serfs, peasants} don't want to save, are too impulsive to save, and wouldn't know what to do with a middle-class income if they had one anyway, so, why bother to pay them more-- "they just spend more" anyway? I don't want to break the sarcasm button on my keyboard, so, I hope people can figure it out.

So, like most of you, I have seen (in-laws, friends, neighbors, whatever) in the 20-50% income percentile, over the years, who tried to live above their means and constantly struggled with it for years. Many of them were trying to live what they thought was the American Dream and they mistakenly thought it (still) applied to them, because, in the postwar years they grew up with, it did.

And now some of you are, frankly, looking down on them because they did not understand that after 1981, the rules had changed. Strange, because, in the TV ads, it still looks the same.
 

Southern Dad

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I agree that an attitude change is what it will take to get people savings. The problem is how do you make that happen? Increasing wages doesn't do it. If you can't save at $8 an hour, you won't save at $10. The truth is saving is easier at the lower wages because percentage wise, you have less to give up. When you are making $8 per hour X 40 hours per week, saving 10% would only be $32 per week.

The easiest way to save, is of course via payroll deduction. After a while you forget it is being taken out. I have so many deductions coming out of my payroll, I'm sure Human Resources and Accounting think that I'm nuts but I find that to be the easiest way to save for Disney vacations, new car, whatever.

When I review the payroll across the departments and properties, it shocks me at the number of people who do not take advantage of the 401k. These are people who make bad decisions. Our company matches dollar for dollar to 6% and you are vested immediately. That's free money. Yet, there are many people not using it. I've heard all the excuses, most common, is that they don't want their money in the stock market in case it goes down.
 

ugahairydawgs

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Jun 10, 2010
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What a depressing conversation. Most {slaves, serfs, peasants} don't want to save, are too impulsive to save, and wouldn't know what to do with a middle-class income if they had one anyway, so, why bother to pay them more-- "they just spend more" anyway? I don't want to break the sarcasm button on my keyboard, so, I hope people can figure it out.

So, like most of you, I have seen (in-laws, friends, neighbors, whatever) in the 20-50% income percentile, over the years, who tried to live above their means and constantly struggled with it for years. Many of them were trying to live what they thought was the American Dream and they mistakenly thought it (still) applied to them, because, in the postwar years they grew up with, it did.

And now some of you are, frankly, looking down on them because they did not understand that after 1981, the rules had changed. Strange, because, in the TV ads, it still looks the same.
From the article...

Even more disappointing; The savings rates have barely changed over the past three years, even though a larger percentage of consumers report an increase in job security, a higher net worth and an overall better financial situation.
Nobody is talking about people who are struggling to get by. We're talking about people who make plenty enough to save, yet they don't still. We're talking about people whose expenses rise when their paycheck increases.
 
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Huntn

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May 5, 2008
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The Misty Mountains
Safe Harbor 401Ks are also a good solution to this. The company can opt to make deposits into their employee's 401Ks in the form of an employer match or "core contribution" to offset the balance between "highly compensated" employees and not in these plans.

Both of these put some onus on employers to help/encourage their employees to save.

B
Would making a program like this mandatory rub you the wrong way? There are people who would always have a reason not to participate. Should it be their freedom to not have any retirement savings?

----------

I agree that an attitude change is what it will take to get people savings. The problem is how do you make that happen? Increasing wages doesn't do it. If you can't save at $8 an hour, you won't save at $10. The truth is saving is easier at the lower wages because percentage wise, you have less to give up. When you are making $8 per hour X 40 hours per week, saving 10% would only be $32 per week.

The easiest way to save, is of course via payroll deduction. After a while you forget it is being taken out. I have so many deductions coming out of my payroll, I'm sure Human Resources and Accounting think that I'm nuts but I find that to be the easiest way to save for Disney vacations, new car, whatever.

When I review the payroll across the departments and properties, it shocks me at the number of people who do not take advantage of the 401k. These are people who make bad decisions. Our company matches dollar for dollar to 6% and you are vested immediately. That's free money. Yet, there are many people not using it. I've heard all the excuses, most common, is that they don't want their money in the stock market in case it goes down.
I gave you the answer all ready, but something tells me you don't like it. The key word is "mandatory" ;)
 

vrDrew

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Jan 31, 2010
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Up until about 1980 the savings rate in the United States was much higher - around 9% for many years. The subsequent decline has been the subject of much discussion among economists and central bankers.

The reasons are numerous: Current interest rates on savings accounts that are near zero hardly act as an incentive to save. But perhaps more importantly, these days Americans have far more choices when it comes to raising emergency cash than they used to.

Simply put, its much easier to turn to a credit card (or other credit source, payday lender, etc.) to raise cash in an emergency.

Its not an ideal situation, and far from a sound financial strategy. But since one can chart and almost identical trajectory in decline of earnings over the same 1980-present period that savings declined - its hardly surprising.
 

D.T.

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Sep 15, 2011
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We're talking about people who make plenty enough to save, yet they don't still. We're talking about people whose expenses rise when their paycheck increases.
Yeah, [in the US] there’s so many opportunities for incremental lifestyle improvement, and so much exposure to motivators that increase the likelihood of making those improvements. You can buy a car that’s $20K, $25K, $35K, $50K, same with every product and service - or incrementally “improve” by purchasing more (1TV, 2TVs, 3TVs) - and you’ve got media constantly suggesting you do this, and social networks where it’s become a competition.

I've always set a lifestyle target, kind of lock it down, and only when there’s was a massive jump in income, over a long period of time, would I scale things up - always leaving me with a nice, comfortable buffer.

I’ve also always been careful about talking myself into what I can “afford”. For some people, affordability means simply covering the immediate cost concerns (like a payment), for me, afford factors in things like how it affects savings, long term costs, and where applicable things like maintenance.

We have a very nice lifestyle, but I bet you could take a sample of people, show them our financials, and they’d wonder why we don’t have/buy/own X, Y or Z.
 

Menel

macrumors 603
Aug 4, 2011
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The Democrats understood that average people are lousy savers. A program like Social Security was and is the answer, but don't let politicians continuously rob it as our government has since it's inception, and base payback of the program on the actual performance of the fund to keep it solvent. Millions rely on their SS because they have no other significant savings. And if there is a reputable investment company who can do a better job managing the fund than the U.S. Government, with proper oversight, let them do it.

And PS your premise is wrong AND self serving, higher wages puts people in a better position where they can save. The only reason I could max out my 401k for 30 years was because I had the extra income to do it.
You had the willpower and discipline to do it.

A majority of people, would put it toward buying a Benz instead of a Toyota. Or a 100k more expensive home. Or electronic gadgets.
 

Huntn

macrumors demi-god
May 5, 2008
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The Misty Mountains
Up until about 1980 the savings rate in the United States was much higher - around 9% for many years. The subsequent decline has been the subject of much discussion among economists and central bankers.

The reasons are numerous: Current interest rates on savings accounts that are near zero hardly act as an incentive to save. But perhaps more importantly, these days Americans have far more choices when it comes to raising emergency cash than they used to.

Simply put, its much easier to turn to a credit card (or other credit source, payday lender, etc.) to raise cash in an emergency.

Its not an ideal situation, and far from a sound financial strategy. But since one can chart and almost identical trajectory in decline of earnings over the same 1980-present period that savings declined - its hardly surprising.
Would you agree that the fall of the Middle Class, those with no disposable income in larger numbers results in less savings because they are living day to day and can't afford to save. However, I believe that some could save more if they were not obsessed with the latest consumer gadget. I think my son is one of them. :p
 

Southern Dad

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Original poster
May 23, 2010
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Shady Dale, Georgia
Would you agree that the fall of the Middle Class, those with no disposable income in larger numbers results in less savings because they are living day to day and can't afford to save. However, I believe that some could save more if they were not obsessed with the latest consumer gadget. I think my son is one of them. :p
It goes back to making EXCUSES. They are unable to save because, they don't want to save. They have a big screen television, they have cable. They have cars with payments. Savings is more important than all these things. It's called priorities. Until they get their priorities in order, they will continue to live paycheck-to-paycheck.

I did this at one time in my life. When I was a young, dumb lieutenant I ran out of money before running out of month, every pay period. Then I realized that only one person could change it. ME! At an absolute minimum every person should be saving 10%.

Payday lending is illegal in Georgia. One of the best moves our state ever made. Those check cashing places were robbing people blind. Now, it's just the pawnshops with the Title Pawns.
 

Huntn

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You had the willpower and discipline to do it.

A majority of people, would put it toward buying a Benz instead of a Toyota. Or a 100k more expensive home. Or electronic gadgets.
Sounds like an argument for a mandatory SS type of program which I have not yet started to collect. Some say you should take SS as soon as possible and not defer it. I'm leaning in that direction.
 
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Southern Dad

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Sounds like an argument for a mandatory SS type of program which I have not yet started to collect. Some say you should take SS as soon as possible and not defer it. I'm leaning I that direction.
The problem that I have with social security is that there have been threats to "means test" it. I'd hate to have paid in at max contribution all these years to be told, my money will go to someone less fortunate. Imagine a mandatory savings program where this becomes an issue. Also what about inheritance? You save in a mandatory account and die before collecting, where does that money go?
 

plinden

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Apr 8, 2004
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Hmm, here's an article from last year, with a chart estimating savings by income level - http://www.businessinsider.com/chart-savings-rate-by-income-level-2013-3#!ISjDH

It's a very clear that the bottom 40% don't earn enough to save, while for the top three quintiles the savings rate is very linear. This would indicate to me that there's a level (bottom two quintiles) where people have to spend on essentials and don't have the disposable income to save.

Another thing to consider is that you can't have large domestic economic growth and a high rate of personal savings. In mature western economies, domestic expenditure is the driver for economic growth. This means that governments have no incentive to encourage savings. In fact we're seeing some countries that have high savings rates now trying to encourage people to spend on stuff.

As for paycheck-to-paycheck - purely anecdotal, but although my wife and I are high earners, and our net worth is $750K (including house) we have the feeling we are living paycheck-to-paycheck because little of those savings are readily available, most being 401K, college fund and housing equity. So yes, we're saving but we'd be in trouble if I especially was jobless for more than a couple of months.
 

ugahairydawgs

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Jun 10, 2010
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As for paycheck-to-paycheck - purely anecdotal, but although my wife and I are high earners, and our net worth is $750K (including house) we have the feeling we are living paycheck-to-paycheck because little of those savings are readily available, most being 401K, college fund and housing equity. So yes, we're saving but we'd be in trouble if I especially was jobless for more than a couple of months.
In this kind of situation wouldn't it make more sense to cease making contributions to the 401k and college fund and pull back house payments to the minimum (if you still have a mortgage) in order to get a good emergency fund in place?
 

chown33

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Aug 9, 2009
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The problem that I have with social security is that there have been threats to "means test" it. I'd hate to have paid in at max contribution all these years to be told, my money will go to someone less fortunate. Imagine a mandatory savings program where this becomes an issue. Also what about inheritance? You save in a mandatory account and die before collecting, where does that money go?
Social Security Survivor Benefits:
http://www.ssa.gov/pgm/survivors.htm
 

Huntn

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May 5, 2008
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The problem that I have with social security is that there have been threats to "means test" it. I'd hate to have paid in at max contribution all these years to be told, my money will go to someone less fortunate. Imagine a mandatory savings program where this becomes an issue. Also what about inheritance? You save in a mandatory account and die before collecting, where does that money go?
Frankly I support the concept that the benefits you receive from SS should be proportional to what you paid into it. This was supposed to be a mandatory personal savings plan. Means testing reminds me of being paid a salary, but instead of paying you based on your skills, your salary is fed into a group employee fund and divided equally among all employees.

While I fantasize about the utopian socialist system of the future where we all live well, with perks and rewards based on our contributions, we as a species have a LONG way to go to achieve this and right now, I like people being paid for their skills with a livable wage provided at the low end of the spectrum. In other words, I don't support glorified slave labor. Where I have serious issues is the culture of greed at the top end, where upper management now think they are entitled to live like kings. This is a moral failing IMO.