According to a 2023 survey, 78% of Americans are living paycheck to paycheck.
Fed’s 2022 Economic Well-Being of U.S. Households survey, revealed nearly 37% of Americans struggle to cover a $400 emergency expense. The rising cost of living, coupled with stagnant wages, has left many people feeling financially overwhelmed.
Assess Your Financial Situation
According to the Bureau of Labor Statistics’ latest Consumer Expenditure Survey, the average American household spent $24,298 on housing in 2022, equating to approximately $2,025 per month.
So, create a comprehensive list of all your income sources, including salary, freelance work, side hustles, and any other sources. Next, list all your expenses, from rent or mortgage payments to utilities, groceries, transportation, and discretionary spending. Finally, note all your debts, including credit card balances, loans, and any other financial obligations.
This detailed assessment will help you understand the full scope of your financial situation.
Prioritize Your Expenses
Not all bills are created equal, and some expenses are more critical than others. Start by identifying your essential expenses, such as housing, utilities, groceries, and transportation. Non-essential expenses, such as dining out, entertainment, and subscriptions, should be put on hold or reduced as much as possible.
Create a Budget
Start by listing your essential expenses and ensuring they are covered by your income. Allocate any remaining funds to non-essential expenses or savings. Using budgeting tools or apps can make this process easier and more effective. These tools can help you track your spending, set financial goals, and stay on top of your budget. Statistics show that individuals who use budgeting apps save an average of 10% more each month compared to those who do not.
Negotiate with Creditors
With the average household debt in the U.S. exceeding $90,000, it’s clear that financial stress is a common challenge. Many creditors are willing to work with you if you are proactive about your situation. Contact your creditors and explain your financial difficulties. Ask if they can offer any assistance, such as a temporary reduction in payments, a lower interest rate, or a modified payment plan.
Seek Financial Assistance
Government programs, non-profit organizations, and community services can provide financial assistance and support. For example, programs like the Low Income Home Energy Assistance Program (LIHEAP) can help with utility bills, while local food banks and community centers can provide groceries and other necessities. In FY 2023, an estimated 5.1 million households received heating cost assistance through LIHEAP.
Increase Your Income
According to Market Watch, over 54% Americans opted to have a side hustle in the last 12 months to supplement their primary income.
There are many opportunities to earn extra money, such as driving for a rideshare service, delivering groceries, or offering services like dog walking, babysitting, or house cleaning. Look around your home for items you no longer need or use and sell them online through platforms like eBay, Craigslist, or Facebook marketplace. According to eBay, In 2022, the average income of a seller in the US was $59,000.
Consider Debt Consolidation
Debt consolidation involves combining multiple debts into a single loan with a lower interest rate. This can make your monthly payments more manageable and reduce the total amount of interest you pay over time. There are various ways to consolidate debt, such as taking out a personal loan, using a balance transfer credit card, or enrolling in a debt management program.
Utilize Community Resources
In addition to government programs and non-profit organizations, there are many community resources available to help individuals in financial distress. Local churches, community centers, and social service agencies often offer assistance with food, clothing, housing, and other necessities. Reach out to these organizations to see what resources are available in your community. These resources can provide vital support during challenging times.
Reevaluate Your Living Situation
Since 2000, the average size of single-family homes in the United States has generally increased. It peaked at 2,467 square feet in 2015 before decreasing to 2,299 square feet by 2022.
If your housing costs are a significant burden, it may be time to reevaluate your living situation. This could involve downsizing to a smaller, more affordable home, moving to a less expensive area, or finding a roommate to share expenses.
Plan for the Future
Start by setting realistic financial goals, such as paying off debt, saving for a major purchase, or building an emergency fund. Having clear goals can provide motivation and direction as you work to improve your financial situation. Research shows that individuals who set specific financial goals are 42% more likely to achieve them.
