Workers on low salaries frequently find themselves in financial difficulties, even if they try their hardest to keep expenses down. The problem is that a family earning $35,000 a year might have little or no chance to save money in a savings account. As a result, it’s easy to understand why such a household may end up living from paycheck to paycheck.
New statistics indicate that a considerable number of individuals who are making a decent living also live from paycheck to paycheck. It’s surprising, yet it’s also somewhat conceivable.
Huge variations in living costs
According to a poll by Pymnts.com and LendingClub Corp, 36% of families earning at over $250,000 a year say they are living from paycheck to paycheck with zero savings cushion. This is especially true among millennials with earnings over $250,000, as over half of higher earners within that age group have very little money left over at the end of the month.
It appears to be an example of misplaced priorities at first glance, with higher-income people apparently giving up their pet causes. However, it’s not difficult to understand why a family earning $250,000 in income might have no money left over after paying for high living costs.
In some regions of the country, a first residence may cost more than $1 million. And in big cities, the average monthly rent for a two-bedroom home may be well over $3,000.
Of course, someone might retort, “Okay, then struggling families should just move to a different location.” The truth is that many people who earn higher salaries must live in high-cost areas of the country to earn those wages.
Sure, nowadays, more businesses are looking for people who work entirely from home. As a result, some individuals may have the option of earning more money by moving to a less-costly city.
However, it’s also accurate to state that in many situations, in order to make $250,000 or more a year, one must reside somewhere where rents or home prices are quite high. As a result of this, it’s easy to see how a larger wage might be quickly spent – especially for families who have childcare expenses for multiple children.
How to break the cycle
Even if you’re already earning a good salary, you may still be living from one pay check to the next. It’s possible that high-income earners are simply being thrifty with their money. Even so, it’s critical to try to set aside funds for a financial safety net.
That is, if you’re looking to increase your income. A side hustle could be a good idea in this situation since it’s easy to believe that those with less money should seek out additional work. It may be simpler for some families than lowering their expenditures.
Of course, reducing spending is frequently an option. It may take a specific sum of money to buy or rent a house in a certain location, but there may be minor expenditures to decrease, such as eating at restaurants or paying for cable. To be clear, those who do not have savings should reduce their expenses until their bank account balances are healthier.
Nobody is immune to losing a job or incurring an unanticipated expense. And, in that case, a family with a greater income may not be any better off than one with a lower income.