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No Joke: An Estimated 122 Million Americans are Living Paycheck-to-Paycheck

By Sean Williams - Updated Jul 6, 2017 at 7:31AM

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If your piggy bank is running on empty, you're not alone.

It's no secret that Americans aren't very good when it comes to saving money. According to recently updated data from the St. Louis Federal Reserve, the personal saving rate as of May 2017 was 5.5%, an eight-month high. Before you break out the champagne, a 5.5% personal saving rate is still well below the recommended 10% to 15% of income that most financial advisors recommend people save for retirement, and it's less than half the 11.9% that the American public was socking away exactly 50 years ago.

America has a saving problem

This lack of savings can lead to a multitude of problems. For example, not having enough money in your nest egg could mean having to lean very heavily on Social Security income during retirement, or not being able to retire at all. Relying on Social Security as a major component of your income isn't recommended considering that the 2016 Trustees report predicts a cut in benefits of up to 21% may be needed by the year 2034 in order to sustain payouts for the next 75 years.

A young woman staring at a piggy bank in her hand.

Image source: Getty Images.

Not having sufficient cash on hand to cover emergencies can also led consumers to rack up unwanted credit card debt. The Federal Reserve recently noted that aggregate credit card debt exceeds $1 trillion, joining both student loans and auto loans in surpassing the $1 trillion mark. With the Federal Reserve tightening monetary policy and interest rates rising as a result, servicing this debt is about to get a lot more challenging for the consumer.

Essentially half of all adult Americans are living paycheck-to-paycheck

But these issues aren't as scary as the data GoBankingRates released in its latest study on the after-effects of the Great Recession. GoBankingRates asked six pressing yes-or-no questions that pertain to recession preparedness to more than 1,000 Americans, and each and every answer was worrisome. Here's a sample of the results:

  • 64% of those surveyed did not have multiple sources of income.
  • 61% did not have enough saved to cover six months of living expenses.
  • 78% aren't ready to search for a new job with an updated resume.
  • 68% said their investment strategy doesn't account for a recession.

But here's the crème de la crème of statistics: 49% of Americans are living paycheck-to-paycheck. Considering that the Census Bureau estimated a U.S. population of 323.1 million last summer, 77.2% of whom are adults 18 and older, this suggests that up to 122 million Americans are currently living paycheck-to-paycheck. That's a horrifying statistic.

A man pulling out his pant pockets and exposing a lack of money.

Image source: Getty Images.

What's more, it's not as if this data suggested a particular age-group was at-fault -- they were all equally bad. The "top" performers were those aged 25 to 44, where only 46% were living paycheck-to-paycheck, while 53% of pre-retirees aged 55 to 64 were at the other end of the spectrum. If there is a silver lining for you pre-retiree baby boomers, you were the most likely to have had an investment strategy that accounts for a recession at 38%, though this figure is still very much subpar.

It's time we all went back to "Budgeting 101"

Essentially, these poor results boil down to Americans not having a proper savings plan in place. A Gallup poll conducted in 2013 found that just a paltry 32% of households kept a detailed monthly budget. This leaves 68% of households guessing about their cash flow and how to best optimize their ability to sock away money for an emergency and/or retirement. Formulating and sticking to a budget would probably alleviate much of America's saving woes and at least give individuals and families some cash to fall back on in case of an emergency or a recession.

Perhaps the best news I can offer is that access to budgeting software is easier than ever, and much of it is free. If you know how much you want to save each month or year, online and mobile budgeting programs may even be able to formulate a plan for you. All that's required is for you to honestly enter in your income and expense data and devote anywhere from 15 to 30 minutes a month to reviewing your finances and progress. That's really not much time for a whole lot of peace of mind.

A budget on a table next to a calculator.

Image source: Getty Images.

But formulating a budget is only half of the challenge. Sticking to your plan is just as tough. Here are a couple of tips that could come in handy and allow you to stick to your game plan.

  • Consider using cash instead of credit to make purchases. Though credit transactions will allow you a neat and tidy way of keeping track of what you've purchased, credit also isn't tangible. Having to remove cash from your wallet to buy a good or service, and experiencing the loss in value from doing so, will make you think twice about discretionary purchases.
  • Do your best to get everyone involved. If you live with other people, ensure that they, too, stick to a budget. If you live alone, consider meeting up with other people once or twice monthly who share your budgeting goals so you can discuss your progress.
  • Maintain discipline by utilizing automatic withdrawals. Having a set amount of cash taken out of your checking account and deposited into a saving or investment account weekly, bi-weekly, or monthly should help keep you honest about your savings goals.
  • Consider separate accounts when analyzing your spending habits. If you have a tendency to splurge or impulse buy, separating your budgeted funds for each category (i.e., food, entertainment, and so on) could be smart on your part. Leaving your money in one central checking account can be a bad move for those with little control over their spending habits.
  • Finally, be "SMART" with your budget. This acronym stands for specific, measurable, attainable, relevant, and timely goal-setting. This way you can lay the groundwork that'll allow you to properly track your progress and make adjustments in your saving and spending habits if need be.

If we started saving the recommended percentage of our income, 10%-15%, I'd be willing to bet that tens of millions of Americans probably wouldn't be living paycheck-to-paycheck in as little as a year from now.

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