This post isn’t for all of you, but I’d be willing to bet that if it’s not for you, you know someone that it is for. If you’ve got your finances together but know someone who desperately needs to get theirs together, please consider sharing this post with them if you think it will help them.
Every once in awhile I feel a desperate urge to issue a wake-up call with those struggling with paycheck-to-paycheck living. Today is one of those days.
I’m going to be honest in this post. Really honest. Not because I’m mean that way, but because I really want you to stop living a life of financial hell. A life where you’re calm one minute because you can make the minimum payments on your debt and still have a small bit of breathing room, and off-your-rocker stressed the next minute because the da*n furnace just went out and you don’t have the cash to get it fixed. Oh goodie, more debt.
We’ve Been There, and Most Americans are STILL There
According to studies, this is the way that between 55% and 76% of Americans live. Some more interesting stats about Americans and they way they live their financial lives?
- More than half of Americans (63%) have no emergency savings
- 31% of of non-retired adults have ZERO retirement savings
- The average U.S. household with debt carries a credit card balance of over $15,000
- The average car loan taken out by citizens is nearly $28,000
Living with debt is okay; until it’s not okay. The 76% of Americans living paycheck-to-paycheck can tell you of the stress of carrying too much debt. The experts may say that “it’s all good as long as you can make the payments”, but Americans who are actually living with the debt know different. Carrying a heavy debt load wreaks major havoc on individuals, marriages and families.
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Having too much debt can put you at a bigger risk for a heart attack, a divorce or a mental breakdown. It’s tough living a life where your financial security is always hanging in the balance and you’re one paycheck away from falling into big financial trouble, like getting behind on your mortgage.
I know, because that’s the way we used to live too. It was hell on our marriage, on our family and on our physical and emotional health. But we put up with it because it was “what everybody did”.
There seems to be a common lie running through many American households about debt. That lie is that “everybody” has debt and “everybody” has car payments, credit card payments, personal loan payments, student loan payments, etc. so that people should just accept debt as a way of life and be okay with paycheck-to-paycheck living.
But friends, there is a better way. Read any number of the thousands of personal finance blogs out there and you’ll see that real people are paying off debt and building wealth. The problem, I think, between those bucking the system and those living with the system is that a.) the “living withs” don’t know where to start, or b.) they are overwhelmed by the amount of work it will take to clean up their financial mess.
We were there too. We’re still digging out of massive consumer debt after four years of work. But you know what? It’s been worth every ounce of effort and more. Soon we’ll be totally consumer debt free, and I’ll share our exact numbers with you, but suffice to say that our consumer debt load was really, really high. Much higher than most people, based on the stories we’ve read. And as we eliminate our debt, we increase our peace.
I want that increased peace and decreased debt for you too, my friend. It will take some seriously hard work, but you can have those things. So in the name of motivation, here are five financial truths that you can face up to today, if you choose, that will help you get on the road to a life of financial peace.
Stop Making Excuses for Your Money Mess – You Deserve Better
For years our money mess was never our fault. Our money mess happened, we told ourselves, because:
- We just didn’t make enough money
- There were life circumstances that “happened” to us
- We were doing “better” than others so our mess was justifiable
- It wasn’t fair that we had less “whatever” than other people
We used all sorts of excuses to why our money mess wasn’t our fault, but those excuses never helped us get our finances together. Instead, they served as a convenient excuse for us to keep on spending more than we made.
It’s time to face up to the fact that your money mess is your own fault. Yep, even though there were likely some happenings that caused financial havoc that were out of your control, the truth is that if you had been managing your money well from the beginning; avoiding debt and saving cash, that those happenings would’ve been a blip on the radar, or at least, much more easily weathered. But because there were decades spent spending it all and more, you didn’t have the “no debt” or the “plush savings” that would’ve been a major help in overcoming the financial disaster.
We can’t always prevent things like job layoffs, major house repairs, major medical bills and what not, but we can work to put ourselves in a situation where we have little to no debt and a 3-12 month emergency fund that will help cover those unexpecteds.
Why should you do this?
Because, my friend, you deserve financial security. You deserve better than to live every single day of your life worrying about money. You deserve the peace of mind that comes with having no debt and having a plush savings account. You deserve these things, so make a plan and go get them for yourself!
If You Do Not Get Your Financial Sh*t Together, You Will Not Be Okay
Chances are large that at some point in your life, you will face a job layoff or other financial emergency. People have quickly forgotten the hell that many went through when the economy tanked in 2007ish and stayed tanked for a good five years. SO many people lost their homes to foreclosure. Seriously, I want you to think about what would happen to you financially if there was an economic crash tomorrow.
What if you walked into work and *surprise*, you no longer have a job? Would you buck up and chill out, thanks to the fact that you’ve been working hard at crushing debt, now have less in debt payments and have a few thousand saved in an emergency fund?
Or would you go into extreme panic mode, wondering if you’re going to be able to keep your house?
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Stop telling yourself that it’s okay for you to be living with massive amounts of debt and zero savings. Make a plan today to get out of debt and to start preparing for the what ifs, so that when they come you’ll be in a better situation than you are today.
If You Don’t Start Saving for Retirement, You Have a High Chance of Ending Up Really, Really Poor When You’re Old
Consider these retirement statistics.
- 75% of Americans nearing retirement in 2010 had less than $30k in retirement savings
- 49% of middle class workers will be poor or near poor in retirement, living on a food budget of less than $5 a day
- 27% of Americans will have to keep working as long as possible
- 3 in 5 Americans say they will delay retirement because they need the money
We put off retirement savings for a long time because retirement seemed “so far away”. Like with debt, we told ourselves we would be “just fine” during retirement even though we had NO plan for how to get to “just fine.”
The truth of the matter is that time flies when you’re having fun (and even when you’re not) and that the YOLO lifestyle you’re living WILL come back to bite you in the tail if you’re not saving for retirement.
There are several ways to start ramping up retirement savings, even if you’re working on paying off debt and building an emergency fund at the same time. Here are some ideas.
1. Take Advantage of Your Employer’s 401(k) Program. The great thing about 401(k) programs is that the money is taken out pre-tax and you’ll hardly even notice the difference in your paycheck. Also, many companies offer a match program whereby they match employees’ 401(k) contributions. This is free retirement money, my friends; take advantage of it!
Even if you’re super strapped for cash, start contributing 1% to 2% into your employer’s 401(k) program. Every little bit really does add up. And remember; the closer you are to retirement, the less risky your investment choices should be.
2. Start Putting Something Into an IRA. Anything. Even if it’s just $25 a month. Just get saving, and remember to leave it there to grow and not take it out for YOLO purchases or because you need the money because you’re still living above your means.
3. Commit Whole-Heartedly to Crushing Your Debt. The less debt you have, the less money you’ll need to live on during retirement. While you’re saving in your 401(k) and your IRA, be sure to cut costs wherever you can and put the extra cash toward crushing your debt.
4. Start Contributing to an HSA. HSAs are a great part of a retirement plan as they help you make pre-tax contributions to cover medical expenses at a later date. With the ever-rising cost of Obamacare, saving for medical expenses is a must for everyone.
Luckily, we faced up to this truth and began making a plan for retirement. Even if we didn’t save another dime for retirement, we’ll have a minimum of a half million dollars when we retire, thanks to the fact that we faced up to this truth and made a plan. I pray that you will do the same.
Debt is NOT “Okay as Long as You Can Make the Payments”
For years we told ourselves that we were doing “just fine” in spite of our debt load. We could make our payments just fine and still end up with a (barely) positive number in the checking account at the end of the month, so that meant we were doing well.
But as the old saying goes, the enemy of “great” is “just fine”.
The more debt and debt payments you hold onto, the harder an unexpected event such as a job layoff or medical emergency is going to hit you. The less debt and debt payments you have, and the more savings you have, the easier it is going to be for you to weather a negative financial event. It’s that simple. You just can’t assume that everything will be just fine because you can make the payments and then be in total shock about how you’re going to survive when that negative event happens.
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Crush. Your. Debt. NOW. I’ve seen loved one after loved one’s finances spiral from “just fine because we can make the payments” to “Oh sh*t, we’re in BIG trouble” in a matter of weeks because of unexpected happenings. Don’t let that happen to you. Stop telling yourself the lie that you’re doing “just fine” and make a plan today to get out of debt and get your financial sh*t together.
Your Financial Mess Affects More Than Just You
The truth of the matter is that your financial matter doesn’t just affect you. It affects all those around you as well. Here’s how.
- If you don’t fix your finances now, you leave your kids with the burden of having to support you later on down the line
- If you don’t fix your finances you run a high risk of becoming a burden on your fellow taxpayers
- When you struggle financially, your loved ones worry about you
- When you do a shoddy job of managing your money, you run the risk of passing down your poor money habits down to your kids
My friends, I care about your money state. I don’t want you to have to live as we lived for so many years, stressing out about money all the time. Instead, I want you to experience the peace that comes with having and sticking to a plan that will allow you to eliminate your debt and start building wealth. Money shouldn’t be the main focus of your life, and when you’re managing your money well, it doesn’t have to be.
Are there any financial truths you have/had to face up to? How has facing the music changed your life?