A large percentage of consumers may prioritize their finances in 2013, and try to overcome the burden of credit card debt and loans. In addition, many say they will focus on savings in an effort to break their dependence on bi-weekly paychecks to make ends meet.
A new survey conducted by NetCredit, an online lender, noted that 48 percent of respondents say they live paycheck-to-paycheck, making it difficult to plan ahead or free up income for savings. Another 44 percent said they are trying to stay current on bills and mortgages and to avoid excessive debt or bankruptcy. Living paycheck-to-paycheck became significantly more common following the recession when many households went from a two-income family to a single income. Other companies were forced to cut workers’ hours. Other factors such as home issues, illness, student loans and other sources of debt have also been contributing factors to this issue.
“Living paycheck to paycheck puts many Americans dangerously close to their own personal fiscal cliff should they be hit with an emergency expense,” says Stephanie Klein, head of consumer lending at NetCredit. “An unexpected medical bill, car repair or higher than usual utility bill can easily push them beyond their ability to pay bills on time.”
Consumers list options they would turn toward if faced with a crisis
Many survey participants – 61 percent – said they would turn to a savings account if they encountered a financial crisis. However, 23 percent said they would be forced to rely on credit to get them out of a financial jam. Sixteen percent said they would borrow from loved ones if they didn’t have the funds readily available, and 7 percent said they would be forced to sell or pawn their belongings for the cash. Only 15 percent said they have a rainy day fund in place devoted to emergencies.
Breaking the scenario of living paycheck to paycheck requires a great deal of discipline and tighter budgeting, but this can be a good way for consumers to strengthen their finances. Professionals, such as a financial adviser or credit counselor, can help families determine their financial weak spots and provide them with guidance to overcome funding shortfalls. As the new year approaches, households may consider speaking with a professional to help them get their finances on track.