Hello, I'm your host, Mr. Chuck, a retired accountant turn truck driver, I reduced by debt in a relatively short period of time. That reduction to achieve financial freedom takes commitment, confidence, determination. percentage of Americans living paycheck to paycheck. Many Americans are living paycheck to paycheck. So don't feel alone. This is a common problem among middle income and high earners, high earners making over 100,000 per year. So it's not the income that's the problem. Perhaps spending too much with too much debt is a problem. So what does it mean living paycheck to paycheck, and I looked that up paycheck to paycheck, is an informal expression, describing one's inability to pay for living expenses. Due to the loss of income or inability to budget. People living paycheck to paycheck are sometimes referred to as the working poor. living paycheck to paycheck can occur at all different income levels, and nerve brutal on that definition and ability to budget. They're not getting named Buddy a break there. I have two links in my show notes, where I'm getting some information from Insta pedia.com articles, personal finances, why high earners to live paycheck to paycheck, and the other one is investopedia.com articles, budgeting when broke. And you can find those links in my show notes. Why upper middle earners are living paycheck to paycheck. At least 1/5 of Americans with six figure income live paycheck to paycheck, that's 20%. And if you have a lower income, it's a higher percentage is closer to 59% or 60%. For those under 100,000, living paycheck to paycheck, that majority of Americans consider themselves middle class have optimistic views of their finance, even though many don't have substantial emergency fund. I think it was only 20% or less had emergency funds that could cover a surprise expense of$400. This is happening a high cost of living due to housing and education costs is among the reasons why some high earners live paycheck to paycheck. And that's not only high earners, I would suppose that would be under $100,000 a year. If you got housing costs going up, you have education cost going up. And maybe if you're a lower income earner, you don't have education costs. But if housing costs are rising way above your affordability, then you're going to be struggling. Perhaps that's the reason why there's so many homeless people in California, I have no reason why. But that's probably could be one of them. So I know in some areas of California, you have these high income workers coming in and they're paying a million dollars plus for a home, that anywhere else in the country, you might be able to get for 100,000. So that's driving the cost of housing up, which then that drives up the cost of taxes, because now taxes are gonna go up because the value of the houses are more, so the property taxes are going up. So you pay more there, then everybody's got to make up for that. So they charge more for their products or goods are selling. So then food goes up, services go up, everything goes up. It's partly due to inflation and partly due to in Pacific area and the demand on housing and other resources available. So what's behind the cash crunch? Understanding why so many high earners struggle begins pinpointing the potential cause of their financial woes. That could be one quarter, and I would say that's the number one because if you're paying more for housing, that means you got to borrow more for your mortgage. Then when you borrow more free mortgage that's less money available out of your paycheck. So then you got to borrow for other items such as furniture to put in the house and borrow have other personal loans. To try to cover the gap, so you're starting in a negative and you're just spiraling downwards. So the basic debt for this credit card balances, mortgages and or student loans. Those are the three main debt problems, credit cards, mortgage, student loans, student loans and credit cards, he can pay those off, say, under 10 years or less. A mortgage is usually a 30 year endeavor. Unless you, you know, been paying off for a while and it could be shorter, if you refinance, maybe he can refinance, it took 20 years. But not necessarily, depending on the interest rate you're paying on your mortgage. If it's less than 4%, you're probably better off paying that off last, because you got cheap money. And another reason that you're stable or more paycheck to paycheck is due to inflation. The cost of things you're buying on a regular basis keep going up, but your salary or your income, may not have gone up for a year, sometimes a couple years. I know I hadn't had a pay raise in about two years. And or the way I had to pay raises do more work. But there's no work so there's no money. So you know, it's a it's it's a catch 22 You know, he can make more money by working more is what they tell me at work. But then I asked him I want to do more work? Well, we don't have any. So you need to give me a pay raise. So I make more for what I do for when I do it. They don't follow my principle on that. But that's, you know, that's what falls in the many people's problems. And most of the monthly expenses include payments to student loans, other debts, health care, transportation, and childcare. And as the child gets older and goes to college, you got more debt because of college loans. So that is important, why you should start savings for everything early on. Now, how are you going to get out of this problem? Let's assume you're making whatever you're making, that doesn't really matter. But you're living paycheck to paycheck, you get paid on Friday, you go to the grocery store, you pay one or two bills, and you basically got $20 to live on till the next pay period, payday. That's living paycheck to paycheck. Then the next paycheck, you pay a couple more bills, you go to the grocery store, put gas in the car, and you got $20 leftover and you're living paycheck, you know, you go wait to the next payday to pay any more bills. So that's living paycheck to paycheck. How do you break that cycle? Well, if you have a lot of credit card debt, and you got student loans, and if you're trying to pay extra on those two items quit doing the extra. If you've been making payments late, that's a no no. He got to make the minimum payment on all your credit cards, and all your student loans, and your mortgage and any other loans that you may have, on time, no later than a due date, and make the minimum payment that they want you to pay. Why we're going to tell you about that, though, because the first thing and budgeting when you're broke is you want to avoid immediate disasters. Don't be afraid to request Bill extensions or payment plans. These requests are often granted if your biggest worry is eviction from your apartment, talk to your landlord, but also see if you get extensions on any other expenses to free up money for keeping a roof over your head. For instance, suppose that your rent is $650 and you're$200 short. Your bundle phone bill and cable bill is $60. your electric bill is $100 and your cell phone bill is $40. If these payments are postponed until your next paycheck, you can pay your rent now and avoid eviction. So I guess the principle here is to spread out when things become due. Rent is normally due at the early beginning of the month. If you can get your phone and cable bill and your electric bill and any other bills in the middle of the month, maybe half of them in the middle and the other half towards the you know not quite at the end because you got to get ready for the beginning again. So you can pay everything on time. So one of the first things you could do, other than asking for a bill extension or payment plan is ask them to move your payment date to a another day, another date. So if he got everything due on the fifth of the month, rent, utilities, phone, cable, everything due on the same day, get some of those moved away, so that you can pay the rent, and then pay the rest of them the next pay period. I hope that helps. But you got to be making the minimum payment of on these type of bills, you need to pay the full amount, whatever is due. Because if you don't, you're just getting farther behind. And then number two is review credit card payments and due dates. I disagree with this, if you're only making minimum payments on your credit cards, you're flirting with a disaster credit score. However, avoiding credit card payments will only worsen your debt. If you don't make any payments, your credit score is gonna go in the can, if you're making a minimum payments on time, your credit score is gonna maintain maintain, it's not gonna get any worse, it could improve. That's why I say make the minimum payments and why I'm going to tell you, if you make the minimum payments on all your credit cards, and you have two or three credit cards that you were paying extra, let's say you're paying $100 Extra on three cards, that's$300. For that one month, now open up a savings account and put that $300 in a savings account. Now you have an emergency fund of $300. You do it again, the next month. Now you have $600, you do it again, the third month, you have 900. And you keep doing that until you have 1000 1500 or $2,000. That's called an emergency fund. And why do you want to do that, because one of your goals is quit creating new debt. Now the only way to do that is have money available to pay for something, if an emergency would happen, if you get a tire flat tire on your car, need a battery for the car. Or if you have a child that breaks an arm, you can at least pay part of it without creating new debt. And that will help you in the long term. And gotta pay everything on time because you don't want to be paying the late fees and the additional interest that they're gonna charge you on those things. And they're going to get their money's first, whenever you make a minimum payment, they're gonna take the interest first. And then they're gonna take their late fee second. So you may not be reducing the balance that you owe. So you if you don't incur late fees, and you pay everything on time, the interest is going away, and you're slowly reducing your balance. So we're going to talk about how you can speed up that process. And number three, if you're really struggling paycheck to paycheck is PRI or tising bills, go over all your bills to see what be paid first and then set up a payment schedule based on your pay days. Okay, that's pretty good. It's almost like budgeting. In fact, it might be even called budgeting. So what they're saying is get all your paperwork out of all the bills that you pay Porter in order by the due date. First one is due on the fifth of the month. This was due on the seventh of the month. This went due on the 12th of the month that was due on the 23rd of the month that was due on 25th and so on. Now try to group them by your pay period. And when you're going to have the money to bail. And that's what you want to pay. You will want to leave yourself some ketchup time as some of your bills are already late. That this is the case call the bill companies see how much you can pay now to get back on top towards positive status. Tell them you're catching up and going on a stricter budget. Be honest about what you can afford to pay sometimes is instinctual to say you'll pay the full amount on your next paycheck. But you may not have the full amount available after other expenses. Take her yeah, don't call them and say we want you know to make a deal or a payment plan. Don't want as much money as possible upfront Then I'll want a pretty big amount every month. And that may hurt you. Maybe you can only afford $5. So don't agree to$25. Maybe you can afford $10. So don't agree to 100 I think you get my point. For now ignore that 10% rule. These are people paycheck to paycheck, they're really struggling. They're saying stash and 10% of the income in your savings account is daunting. When you're living paycheck to paycheck, balance your budget before starting incremental savings, it doesn't make sense to have $100 in a savings plan. If you're fending off debt collectors, so I kind of agree with that. But if you're making everything payments on time, you make the minimum amount the debt collectors are leaving you alone. So you take that extra amount that you're is applying toward those credit cards or their student loans, and you put it in your savings account. Review your past month spending is called look at last month's spendings called that's your budgeted amount. And then you want to go through that. And is there anything in there that you can do away with? Is there anything in there that you no longer are using in you can counsel then is there anything in there where you can get a better plan, such as cell phone plan, cable plants, internet service plans, where you could get a better plan with more with the same service or better for a lesser price, you should be doing that at least once a year. Because cell phone bills keep going down. There's always something new out there, you can switch carriers if your phone is paid for. And this is the reason I don't have pay for my phone, you know, monthly, I pay for my phone up front. So I can have a unlocked phone, I can go to any carrier I want, I can switch from whatever carrier I currently have to a new carrier where I can get this better, or same service for less money until you get to the point where you can't find one any cheaper. And that's where I am. And if you stay there long enough, you get grandfathered in. And they won't ever raise the price on yet because you got that plan. But once you leave the plan, then your price is gonna go up maybe they're also number six, negotiate credit card interest rates, good luck with that. I've never tried doing that. I don't know if anybody has done it, you can, but they'd be more likely if you tried to make a payment plan with them would be better. And the payment plan would be the minimum payment. eliminate unnecessary expenses, we kind of cut that cover that journal a new budget for one month while we were already doing it. Okay, so I say you got to keep putting money into your emergency fund or your savings account, I say you need to make the minimum payments on all your loans. Everything do. If you have utilities, that you can set up a budgeted amount. I think that's what they call it. I pay the same amount for my electric bill and my natural gas bill every month for one year. Then the utility companies review my account, if I've overpaid, they apply it and I go a month where I don't make any payments or very little payment, and then they adjust to next years. So I pay the same amount every month. So I pay the same amount on the same date. Every month. I know how much I need and when I need it. That's what I do is my utilities. If your utility companies offer that, you need to look into it. Why are you only making the minimum payments, I covered that a little bit. You want to make the minimum payments, so that you can set up your set emergency fund which is a savings account, and you can put money in there. So the first step of getting out of debt or reducing your debt is one quit creating new debt to make the minimum payment. Three, make the payment on time the due date. And then for take the extra money. If there is such a thing. Take the money that you Then apply an extra on any of that debt, and put it in your savings account. If you already have a savings account, make sure you have an emergency fund equal to at least three months of your expenses, how you know what your three months of your expenses gonna be? Well, that's where tracking your expenses comes in handy. If you have an application, that you put it in, everything that you spend through your checking account through all your credit cards, and you put in everything that you spend money on, and the dollar amount, the date, what it is, you know, who it's to, and maybe what it is, and you categorize that groceries for food, and rent, housing, car payment, gasoline, car repairs, transportation, etc, then you can generate every port, after 30 days, you've done that for 30 days, Generate Report by category, set up a stress spreadsheet or write it down. And that's your new amount, you budget it for the next month. And try to stay in that same range or less. So then the next month as the first pay comes along, maybe it's the first week is your weekly pay. So first paycheck of the new month, you do from the beginning of the month, to that pay period, do another report by category and you put it in actual, then the next pay, you do the same thing from the beginning of the month to that pay. And you put the update your actual amounts to, you know, the new totals. And you do that for the whole month. Why you do that. So you can see where you're spending your money, you can see f you're going over your budget amount, and your budget amount was what you paid the previous month. And maybe sometimes it's okay, that you need to determine if it's okay, maybe one of the reasons was the previous month, it was very hot out and you run the air conditioning. And now the it's cooled down and you don't run the air conditioning. So your electric bill decrease, that's a good thing. Or the next month is going to be cool also, so you won't run AC. So now your new budgeted amount should be decreased out. So that extra money you can save up and put in your emergency fund. And you keep building your emergency fund your savings account until you have three two to 3000 more than what you need for your emergency funds. So let's say you're just getting started, you want $1,000 emergency fund. So you build up your savings, you got your $1,000 emergency fund, he keep doing the same thing, he keep putting money in there. And now you have 3000 or 3500 per se in your savings account for the whole time you're building that up to 3500. That's money you have available in case an emergency would arise. So once you get up to 3500, if you know you have no big bills coming up, if you know whatever bills coming up, you be able to cover from your paycheck. Once you at that point, you take the $2,500 extra excess over the 1000. And you apply it to one of your bills you want to pay off, maybe it's a credit card, and you should pay off, use the snowball effect where you pay off the lowest balance first for the first credit card, then after you get that to zero, do not close that cart, do not close that account. You want to maintain that account that don't use it, maybe use it and the month or two down the road, charge one item on it and pay it off again, you want to maintain a zero balance. Now you want to start applying the money you build up your savings again, by doing the same thing, then you will apply it to using the Avalanche method, the highest rate of interest first. So you get the higher rate of interest. The faster you can pay those down the less interest you gotta pay, the less interest you're gonna pay the more principal you'll be able to pay in that fast You got to get out of debt. Believe me, it works, this is what I've done. And why do I want to pay off that lowest balance first, because I want to have one credit card was a zero balance. And I want to maintain that zero balance. And then when I get to credit cards, I want to do the same thing, I want to maintain zero balance on two credit cards. Now maybe every two or three months, you charge one small item 10 $15. And then you pay it off. And you can pay off the next pay, you don't have to wait a full 30 days paid off the next day, he just that keeps the card active. And then some day down the road, they're gonna send you an offer, transfer your balance from another car to this card. And we'll give you 0% interest for 12 months or 18 months, or whatever the offer would be. And they're going to charge you 3%. So you pay 3%, you take a $2,000 balance off a credit card where you're paying 21%. So within a month or two, you're gone to recover that 3% that you paid to transfer the balance by paying less interest on the higher rate interest card. This is how you can get your credit cards out of debt and pay a whole lot less interest. He got 12 months, 18 months, whatever that offer was to pay off that credit card. And it's going to be paid off much faster, because you're not paying interest. I hope that makes sense. You do that and you win, then that credit card gets paid down, you'll get that same offer again, and you can transfer another mounts over and do the same thing. And you can start, the more you do this, the more you save up and build up your savings account. The more times you have two or $3,000 rate you're paying down a credit card. All once your your debt is gonna start disappearing faster and faster. He's gonna start out slow in the beginning. But then over time, you're going to pick up speed, and it's gonna go faster and faster and faster. So the less debt you have, the faster your savings is going to build up, the faster you're gonna be able to apply extra money on another debt. And over and over and over. I'll be back in one moment with my final thoughts. If you find this podcast helpful, and you think it may help somebody else, please refer them to reduce debt increase wealth. On your app that you listen to this podcast, please look to see if you can rate and review, reduce debt increase well, and I appreciate anyone who does that. living paycheck to paycheck, more than 50% of Americans are doing it. So you're not alone. Some of the reports I read said 70% Or even higher, and it's all levels of income. Even if you're making 100 150,000 a year, those people were living paycheck to paycheck, where or maybe you're making 50,000 a year or 40,000 a year. Those people are law those people are living paycheck to paycheck. The number one reason is the cost of living where you live. So the first option would be to move to an area that cost less to live. So if you're in a suburb of a large city, maybe another suburbs of that same large city, you could move may be a little bit less expensive for housing. How do you know if your housing is too much? If you're spending more than 35% of your take home pay for your mortgage or your rent, you're paying too much for housing. You need to find a cheaper place to live. If that's not an option, anointing you do is look at your debt. Do you have too much debt cluding your mortgage because you already decided moving was not an option. So if you have student loan debt, credit card debt, personal loans, plus auto loans, how much of that debt can you get out of he need to reduce your debt to free up money to pay for your living expenses. That way you're not struggling to pay for it. If you have a budget, if you know the percentages of the numbers. You can manage your money Whoa, whoa, why easier. So it's 35%. For housing, it's roughly 15% for transportation. It's roughly five to 10% for food and entertainment. You get to guess you may to start tracking your expenses. You need to create a budget, you need to have a debt reduction plan in place. And you need to follow through on that, or nothing will change. Another reason why you may be living paycheck to paycheck is inflation. The cost of everything keeps going up, but your pay is not going up. And over time, you're getting farther and farther behind. That's even more important that have less debt. under this circumstances. Go back and listen to tracking expenses. Budgeting, debt reduction plan, personal finance, and learn more and prove yourself and you'll be glad you did. So