According to a survey conducted by Talker Research on behalf of EarnIn, the average American has already mentally spent more than half of their paycheck before it even lands in their bank account. This survey polled 2,000 employed Americans making less than $75,000 per year and found that the typical American spends about 43% of their paycheck within the first three days of receiving it, in addition to the roughly 51% that’s pre-spent mentally.
Unfortunately, only 20% of those surveyed do not run out of money or have to live on a tight budget in the days leading up to their next check. Even worse, 56% of respondents said that less than 10% of their pay goes into savings. If you find yourself in this situation, it may be time to make some changes.
One way to start saving more effectively is by creating a realistic budget. According to a Harris Poll, 74% of Americans have a monthly budget, but 84% of those with a budget tend to exceed it. To create a budget that suits your lifestyle, track all your spending and identify areas where you can cut costs without sacrificing your values.
One area where you may be able to save is on insurance spending. Shopping around for home and auto insurance can save you hundreds of dollars a year. OfficialHomeInsurance.com and OfficialCarInsurance.com allow you to compare prices and plans from over 200 reputable insurance companies in just a few minutes.
It’s also important to prioritize building an emergency fund. The Federal Reserve reports that 37% of Americans do not have enough savings to cover a surprise $400 expense, and 42% don’t have an emergency fund at all. Ideally, aim to save enough to cover three to six months of essential bills in case of an emergency.
To avoid lifestyle inflation and make the most of any pay bumps, consider putting extra money into a high-yield savings account or increasing contributions to your savings or retirement accounts. Rather than increasing your expenses every time you get a raise, focus on investing in your future.
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