Tag Archives: financial trouble

59% Of Us Can’t Do Without One Weeks’ Pay

Last week, the 2nd annual survey by the National Payroll Association was released. Unfortunately, it’s bad news – and something we have been talking about a number of times in the last year.

According to the survey, 59% of people would be in financial difficulty if they missed one week of pay. Just think about that for a minute. One week of pay would cause a significant problem for almost two-thirds of workers. That figure is actually much higher for young people and single-parents.

Let’s be honest: If we can’t do without one week of income, we are really close to the edge, financially, and in trouble. With the national average income of around $45,000, take away 20% or so in taxes, and the average net pay a week is really about $700.

In other words, $700 stands between us and serious financial trouble. Just imagine what kind of stress that creates in our lives. It’s not a fun way to live. But we create our own mess, the mess doesn’t just happen to us. No, not consciously, but in the financial decisions we make, the debts we take on, and our priorities with money.

In the It’s Your Money book is a huge headline that says: It might take two minutes to spend it, but it’ll take years to pay off. It’s the debts and bills that are killing us, more so than our incomes, if we were to be honest with ourselves. In order to change things around, we can spend less, or earn more. Either one works, and both together change our financial situation that much faster.

If we wanted to, we can sell our car with the big payments by next week, and drive a $2,000 very used car until we’re debt free. Just not having that car payment is a huge amount of money that could go to paying off other bills. If we wanted to…

People don’t move until they’re fed up and mad with their financial situation. When we no longer want to live in the state we’re in, you’d be amazed how quickly we can turn things around. But until then, we keep confusing our needs with wants, and here we are: almost two thirds of us are on a financial cliff.

In relationships fights over money is one of the #1 issues with couples. It’s the biggest cause of divorces, and a huge contributor to male suicides. We hear this, we experience the fights, and we STILL keep doing what we’re doing? Does that make sense at all?

That’s not a life – that’s surviving, not thriving, and it’s not a fun way to go through life! At some point, all the stuff we’re still making payments on isn’t worth the financial pain we’re saddled with. But it isn’t that hard to turn around, if we focus, if we want to, and if we choose to be really disciplined for a year or two.

Step one: Do a written budget with your partner. Every dollar is planned, and nothing gets spent over and above the budget. It’ll really clearly show you where all your money is going. Right now, you think you know – but trust me, you don’t. Your goal is to cut your expenses by $150 a month – no matter what it takes.

Step two: Set up a separate savings account. The $150 savings, and whatever $20 or $30 you can find goes into this emergency account until you get one weeks’ pay in there. In three months, you’ll now be better off, financially, than two-thirds of the country, and your stress level will be seriously reduced.

Lifestyles of the Formerly Rich and Famous

Getting ahead financially really isn’t complex, or hard to do. We just need to do one thing: Spend less than we make. Yes, it really is that simple to say, but often that hard to do. We just get addicted to our “stuff,” and our lifestyle. Yet, any drop in income has us in denial and clinging to our former spending habits, instead of making some basic adjustments. But with less income, that lifestyle now has to be financed with debt. And like blowing up a balloon, there will always be an end to that shell game.

The rich and famous are even more likely to go through this denial phase. But denial only goes for a short period of time. And that time-frame is often shorter for the rich, since they choose (yes, it’s a choice) to have monthly expense which are a whole lot more than for the rest of us.

In the entertainment field, Zsa Za Gabor, Marvin Gaye, Mick Fleetwood and Don Johnson of Miami Vice fame have all been through a bankruptcy. As has Sopranos actress Lorraine Bracco, M.A.S.H. star Gary Burghoff, filmmaker Francis Ford Coppola, and singers Natalie Cole, Elton John, and Toni Braxton. The most famous bankruptcy likely still to come will be Michael Jackson. Somehow an estimated $500 to $800 million net worth in the 1980s is all spent, and then some. Jackson is holding on by his fingernails, with hedge fund financing and multiple mortgages on his Neverland ranch and his Beatles music catalogue.

But this common, often self-imposed problem, does not just apply to the rich. With bankruptcies up 16% year over last year, and the current recession, more and more people are reaching the danger level.

The National Post last week had a story of a drywaller whose income shrunk drastically last summer. Yet, for more than six months, he stayed in denial by using credit cards to maintain his lifestyle, and to make payment on his “baby,” as he called his Honda Acura. That may work for a while, but by January he had filed for bankruptcy.

Optimism is a great mindset, but when it comes to our debt and finances, staying realistic is always a much better frame of mind. And don’t kid yourself. Filing for bankruptcy is neither easy nor fun. Along with a death in the family or perhaps a divorce, bankruptcy will always rate amongst the top five traumatic experiences of a lifetime.