47% of American Adults Living Paycheck to Paycheck

47% of American Adults Living Paycheck to Paycheck

James Gaspero, Jr., Esq.
Ferry Joseph, P.A.

According to a recent survey from the Federal Reserve Board, 47% of American adults said that they could not cover an emergency expense of $400 without having to sell a personal possession or borrow money.  Though there have been multiple indicators evidencing this reality amongst a large swath of the population, it is still no less jarring to see such a high percentage of Americans living paycheck to paycheck.

One major contributor to this issue is the percentage of income people are committing to their savings.  In 2014, the average savings rate was reported as 4.8% of personal income, far short of the 15% minimum savings rate recommended by many financial advisory groups.  Further, in contrasting the present rate with the 7-10% average savings rate of the previous generation and the 10-13% of two generations prior,  it becomes obvious rather quickly that the current generation will not be prepared for retirement.

While these numbers may paint a bleak picture, not all hope is lost just yet.  An increasing number of adults are becoming more aware of the consequences of living beyond one’s means and opting to become financially independent.  Financially savvy proponents of financial independence often define the concept simply as possessing enough income to pay for reasonable living expenses for the rest of one’s life.  Specifically, financial independence focuses upon 3 key areas: reducing expenses, increasing income, and investing.  By spending less personal income on frivolous purchases along with employing means to increase one’s earning power then placing the savings in shrewd investment vehicles, the practitioner gains greater freedom from present debt while simultaneously ensuring the financial well-being of their loved ones as they reach retirement.