The Center for Financial Services Innovation study recently reported that nearly half of Americans say their expenses are equal to or greater than their income. For those ages 18 to 25, the percentage is over half, up to 54%.
In my practice, I see this time and time again with my clients after reviewing their income versus their expenses. The bulk of a client’s income is spent on housing. If your rent or mortgage payment is 50% of your income, there is no possible way to meet the barest of your monthly basics like utilities or groceries. To supplement, many clients turn to credit cards. The study done by CFSI states that of the 25% who say they have too much debt, 96% report being stressed. This sort of financial stress can affect your health and the relationships with your family. You probably know someone who is stressed out living from paycheck to paycheck. Maybe it’s you.
Is cutting back the answer? For many, if the rent or mortgage payment exceeds half the monthly income, there is no room to cut back. Another pitfall for many Americans is that their paycheck varies paycheck to paycheck. If there is no consistent amount to depend on, it’s impossible to budget or to prepare for life’s surprises like a flat tire or a car damaged by flooding in a parking lot much like Montgomery experienced this week. Again, many Americans turn to credit cards to pay for the unexpected. In turn, the amount of debt continues to increase with no ability to meet the minimum payment due next month.
Are you caught in the credit card trap? Let’s talk about it. Please call one of our Bond & Botes offices so an attorney can discuss your financial situation to see if we can take the stress and worry off your shoulders.