Are you Ready for Tomorrow?

Kennedy Torrez, Journalist

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By the age of 40, most American citizens are living paycheck to paycheck.They are unable to go out and buy the things they want because instead they are buying the things they need. Most people think living paycheck to paycheck is not a big thing but here’s their mistake: they have failed to consider emergencies which will happen in life, or inflation, or the statistic that due to the increase of life expectancy they could be financially responsible for a parent at the same time they are raising their family.

 

Emergencies:

  • What happens if you end up getting sick or injured and have to go to the hospital or become permanently disabled? If you’re already living paycheck to paycheck you will be unable to pay your medical bills. Many Americans have to choose between what type of healthcare they can afford and what their doctors are recommending. More Americans will decide they can not afford medical procedures or medications and not seek the healthcare they need.  Often, there are consequences: health deteriorates, additional conditions develop, partial medication lessens quality of life and longevity. 

 

  • What happens if you get fired/ laid off from your job?

 

If you are already living paycheck to paycheck and you get let off or fired, you no longer have the necessary monies for life’s essentials. A perfect example is when the Federal Government was closed, their employees were no longer able to meet their minimum obligations.  Once the cupboards run dry you have to find immediate assistance through food banks and churches. It will become necessary to apply for public assistance programs which can take months before you receive any benefit. Your utilities will be turned off : heat, water, cable, cell phone, this will be followed by late and delinquent payments to credit cards, car loans and rent/house payments. Late payments will immediately affect your credit rating which is used to determine your future interest rates and possibly employment.  It will become difficult to find another job because your credit score will drop, you may not have a phone anymore, it will become difficult to pay for gas to get to interviews if you still have a car. Most employers also require an address and possibly a car, if your these have been repossessed the probability of finding a job narrows exponentially. The other option is to file for Bankruptcy, that is if legally you can do so, and don’t forget, that will also cost money to hire an attorney. While bankruptcy can eliminate some debts, it can also be used against you in the employment process, credit process, interest rate and banking process and does not guarantee certain items will not be repossessed or auctioned off to offset a portion of your debt. By losing a job while living pay-check to pay-check it really can become the domino in the process of spiraling downward to poverty and possibly homelessness. 

 

  • What happens if you need to make a home  repair?

 

If you are living paycheck to paycheck and only able to pay for basic necessities, your might find yourself unable to pay for repairs. What I mean by this is if something breaks where you live and you need to repair it, you may not be able to. This could mean a small repair becomes a bigger one. For example, a hail storm or some kind of weather problem occurs and you have to pay someone to fix it so you can live in your home or it does not further deteriorate. Another example of a repair is what happens if you own a car and you get in an accident or something else is wrong with it. If you want to be able to use the car you need to fix it and you will also need to be able to pay for fuel. Also take into consideration what happens if you get a flat and end up stuck on the side of the road. You will need to pay for a tow truck along with the repairs. If you are a teen this could be detrimental if your parents aren’t willing to help you out with the costs. Also remember that all cars are required to have some kind of insurance. 

          

Inflation:

What happens if you can afford a $4.00 tube of toothpaste now but  when you retire and receive a social security check that same tube of toothpaste costs 30.00 or 40.00 dollars. Inflation: This is when there is a general increase in prices over the course of a set time period. Meaning overtime things become more and more expensive. So you may be able to afford something  like a toothbrush now and in a decade or two you won’t be able two you simply can not afford this product. Also when you are thinking about savings even if you think you are saving a lot now, in the future its value won’t be as much as you originally thought.

In conclusion, when you are financially planning you should expect emergencies, inflation, and life changing. Somethings you can do to be better prepared for tomorrow is to pay yourself first, set up a savings account and put a certain % of your paycheck  into it monthly and before you pay anything else. If your employer offers a 401-k, and especially if they have a matching program, it is never to early to begin to contribute. Insurance, not having enough insurance can be expensive. Make sure your car insurance is adequate to cover you if your in an accident and your at fault. Home owners/renters and health insurance are also a non -negotiable.  You may also want to consider a Long Term Care and Life Insurance policy while you are young enough for them to be affordable. Today you can make good choices in being a good steward of your money. Does you coffee have to come from Starbucks? Do you really need that new pair of shoes? Do you have to see that concert? Create a budget and stick to it. Set a goal and don’t let talented marketers convince you that you have to have their product, even if it is a HydroFlask that “everyone” else has. As a reward for good practices set a dollar limit to   “spoil yourself” with every now and then. It is tempting to acquire new things, it even gives you a temporary dopamine burst which feels good, but unfortunately doesn’t last. Remember, having at least three months worth of short term saving available will make becoming unemployed less worrisome. Also, if you find yourself living paycheck to pay- check, think about making changes to what you spend, living within your means, getting additional education or training to help increase your salary and desirability to employers. The choices you make now, in addition to the choices you make daily will result in what your Net Worth and credibility will be.  The higher your net worth is the more you will be afforded better interest rates, more favorable lending opportunities and most of all more security in building a stable and sustainable life.