I’ve long held the position that even though we live in one of the wealthiest, most financially blessed countries ever, as a society, we also live a life of serious financial stress. I often joke that it’s probably less stressful to live in the rainforests of South America, hunting and gathering, than to live in our modern, tech-savvy society, paycheck to paycheck. A lot of this stress stems from the fact that, as a society, we just don’t save money very well. According to a past Marketwatch article, almost 69% of Americans have less than $1000 saved. That is an astonishing amount of us that are basically one paycheck away from homelessness, or at least raiding our retirement funds in case of an emergency.
Why Americans Have a Hard Time Saving Money
There is a plethora of reasons behind our insufficient savings habits, such as a lack of discipline and making bad financial decisions. Maybe, it is simply that good jobs and hourly rates just don’t exist anymore for the lower and middle class (which I would argue as a legitimate factor). We can even rationalize that the value of the dollar doesn’t go as far as it used to, therefore, neither will our paychecks. Regardless of the validity of these arguments, our financial habits have a direct impact on our ability to save and our overall financial well-being, regardless of the inflation rate or our income level.
How to Alleviate Financial Stress
If you find yourself significantly stressed out over money, there are several adjustments that can be made to alleviate that pressure and simplify your life. But it does require discipline and sacrifice, and a willingness to live with less. For example:
- Flip the “whip” – Many of us cannot legitimately afford the car parked in our garage; it’s possible we can’t afford the house it’s parked in either. If your car payment exceeds 15% of your monthly net income, not gross (we live off the net), then it’s time to consider downsizing or getting rid of your vehicle. I have done this before myself, and although it’s unpleasant, it’s better than living in stress and worry. Maybe 15% doesn’t sound like much, but if your mortgage or rent is near the recommended limit of 28-30% per month, almost half of your net income is being consumed by rent and a vehicle. The change is worth it. Alternative transportation could be used for the short term if available, such as public transportation, occasional ride-sharing with Uber or Lyft, and even carpooling to work. Assuming your car is not upside-down in value and you are diligent in saving in other areas, it shouldn’t take too long to buy a used, older car outright, completely eliminating a car payment. (For related reading, see: Options for When You Can No Longer Afford Your Car.)
- No cable – In my opinion, cable service is one of the biggest wastes of money. In the average household of three to four TVs, cable and internet services can run $200 per month or more. I recommend having only internet and purchasing a streaming device with no recurring monthly cost. These “sticks” allow you to stream movies or purchase programs or apps. I have recently done this myself, and eliminating cable alone is saving me close to $1500 per year. (For related reading, see: Alternatives to Cable TV.)
- Gym membership – these can easily cost $600-800 per year, depending upon how swanky the establishment and package that was chosen. With YouTube and DVDs, it’s so easy to get a quality workout at home without having a ton of money worked out of your wallet. Eliminate the membership, not the exercise.
- Side hustle – I have always been a huge proponent of a side hustle, or part-time gig. During my transition of leaving corporate America to go independent, I also had a part-time job while I built my practice. Even if you have a stable job or career and feel you could save more, find a good side hustle. Do something you enjoy and make some extra cash while doing it.
If you are feeling the monetary strain, downsizing your car, getting rid of cable and the gym membership, and finding a side hustle can have a dramatic impact on your budget. It takes a bit of courage, but one can transition from living check-to-check to having a net surplus per month, depending upon your situation. If you are having debt and/or budgetary concerns and you want to make some positive changes but are not sure where to start, reach out to a qualified financial advisor. If you change nothing, then nothing changes!
(For more from this author, see: How to Cover Your Assets With Life Insurance.)