$100,000 Salary: Living Paycheck to Paycheck

The December 2008 edition of Harper’s Index revealed these startling statistics: 47% of Americans say they live “paycheck to paycheck”. 21% of these individuals say they make over $100,000 per year.

Americans have long been prideful of individual monetary gain and prosperity in life by one’s own efforts. This we can tell by our historically non-communist form of government in which America would be a classless society, with every individual being equal and unable to become independently wealthy. This pride, in effect, may have been the catalyst for the recent degradation of the American economy. We have a "money talks" society.

2008’s economic issues, reflected in Harper’s statistic, underscore the troubles we are already seeing in these beginning few months of 2009. President Obama is promising a long, arduous “…road to recovery [which] demands that we all act responsibly, from Main Street to Washington to Wall Street.” (White House) By realizing the dire straits of the current economy, identifying spending values and heeding expert advice, Americans can usher in a new, economically responsible society in the years going forward.

The poor state of the American economy, by these few months in to 2009, has hit each and every American in the form of increased local taxes, increase in food costs, adjustable rate mortgage maturity and/or job loss. According to money.cnn.com, 2.6 million jobs were lost in 2008 and about 200,000 job cuts had been announced by the fourth week of January 2009. On the day dubbed “Bloody Monday”, 65,400 more job cuts were announced on January 26, 2009 alone.

These staggering numbers have shocked many affected and to-be-affected Americans into implementing steadfast household budgets and abiding by their families’ collective spending morals to ensure a continued degree of material comfort. New York Times bestseller and internationally acclaimed financial expert, Suze Orman, advises that every family needs to communicate freely about money and reevaluate collective morals and cultural values. Orman explains that once a family sits down and realizes the deep rooted pleasures they find in their respective activities, the family can then start making sound, guilt free choices about where to spend its money. (msn money)

To figure out which values or morals are most important to you and your family, Finish Rich series author, David Bach suggests completing a “value circle”. He suggests that his clients write their values on a sheet of paper in the form of a circle. The circle represents that each value should support the next value. If the values cannot support each other, one must be deleted from the circle because it does not represent one’s true moral goals if values cannot be connected. Realize that values are not the same as goals. Goals are attainable items such as “I want to have a million dollars by the time I reach age 40”. A value would be, “Having a million dollars by age 40 would allow me to retire while I am still young.” Young retirement is the value and is what should have money spent toward it. Bach asks the questions, “What is really important to you?” and “What’s the purpose of money in your life?” to aid his clients in completing their value circles. (Bach 32, 33)

Can Americans expect a substantial upward trend in the national economy in the near future? The experts say, “No”.

Money weblog author, Tong Siak Henn, cites many contributors to the long-term economic problems that America will face, including, an increase in medical and pension costs for the “baby-boomers” (Exponential amount of births ranging the years of World War II), stagnation of lower socioeconomic family incomes and the decreasing value of the American dollar.

Suze Orman states in her new book, Suze Orman’s 2009 Action Plan: Keeping Your Money Safe & Sound, that America has a “long, slow period of recovery and it will be 2014 or 2015 before the economy is back in robust good health.”

In decent economic times, Dave Ramsey, the New York Times bestselling author of The Total Money Makeover, stressed the importance of resisting the urge to “keep up with the Joneses” (buying the new “toy” because your neighbor owns it). Rather, Ramsey advised Americans to save, in order: $1,000 as an emergency fund, pay off all debts, build up a six month emergency fund and then start saving to buy things without using a loan. Though it may be difficult for Americans to adequately save any substantial amount of money in these times, it is important for families to make it a moral priority to put aside even a small set amount each week for emergencies, debt relief and retirement before spending on material items. A 401K is a good vehicle to increase savings.

Finance advisors commonly suggest a standard percentage principle when helping their customers set up budgets. This standard says that only 25% of an individual’s (or household) gross income should be allotted for a mortgage. For some Americans, this number rises up to a whopping 40% of their gross yearly income. (Yelp.com) 15-20% of an individual’s gross income should be stashed in a 401K for retirement and emergencies. (Bach 87) (Gross income is money earned before taxes)

America’s poor economy will require the masses to become educated on finance and budgeting as soon as possible, yesterday rather. Americans are now forced to change how they spend their salaries and adjust the way they “think” about money. It has been about 80 years since the Great Depression. The frugal spending and strict saving habits that infected the “survivors” seem to have passed on with them. If we discipline ourselves into new spending habits based on deep rooted values and heed financial experts’ advice, we may be able to change this generation’s definition of “rich”: Rich with values instead of rich with things.

President Barack Obama, Suze Orman, David Bach and Dave Ramsey are the folks we need to be listening to right now. Most importantly, Americans need to side with the President and stop being so critical of the choices he's made thus far into his presidency. Obama has an incredible burden to bear and none of us could make the decisions he has made. Just has the President has said himself, there is no "fix all" answer and nomagic potion for the economy's problems. We are in a terrible state of affairs and every choice right now is going to look "wrong". There aren't any "right" choices right now, we are too far into the deep end.

 All photos courtesy of Lilligren.com

Bach, David. The Finish Rich Workbook. Broadway Books, New York. 2003.

CNNMoney.com. Worst Year for Jobs Since ’45, David Goldman. 9 January 2009. money.cnn.com/2009/01/09/news/economy/jobs_december/

Harper’s Index. Harper Magazine December 2008

Henn, Tong Siak. http://www.saikhenn.tripod.com/economy.html. 15 May 2008.

Orman, Suze. Suze Orman’s 2009 Action Plan: Keeping Your Money Safe & Sound. Spiegel & Grau, December 2008.

Ramsey, Dave. The Total Money Makeover. Thomas Nelson; 2nd edition, February 2007.

Yelp.com Online Forum: “How Much of Your Monthly Salary do you Spend on Rent?” http://www.yelp.com/topic/san-francisco-how-many-percent-of-your-montly-salary-do-you-spend-on-rent January 4, 2009.

White House Blog, The. Moving Forward, President Barack Obama. 31 January 2009. http://www.whitehouse.gov/blog_post/moving_forward/