Financial security now seems like a dream in 2023

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Financial — It is a time of economic uncertainty as inflation continues to run rampant across the country not long after the Covid pandemic had ravaged the world. Even as people heal and continue to rebuild, the problems continue to pile up.

Economically, Americans are not doing well, with payday being the only thing worth looking forward to. A recent report emerged showing that most, if not all, Americans rely on their paychecks to get by, leaving little to no room for personal leisure or the opportunity to save.

Read also: Interest rates shoot up for the 11th time in 17 months

A lack of financial security

A LendingClub report emerged to show that as of June, 61% of American adults have been living from one paycheck to another. Their paychecks have become a lifeline for them to meet essential living expenses, without room to save or splurge.

Bankrate also released a survey that said 72% (almost three-quarters) of Americans are far from financially secure due to their current financial standing. The survey also found that more than a quarter of Americans believe financial security is unlikely to happen.

Ida Rademacher, the vice president of Aspen Institute, offered her insight on the struggles, saying:

“There are actually millions of people struggling. It’s not something that people want to talk about, but if you were in a place where your financial security feels super precarious, you’re not alone.”

Concern from more than a decade

People living from paycheck to paycheck is no new struggle as it has persisted for years. In 2010, Principal Financial Group said 75% of working adults were concerned about their financial futures.

The 13-year-old report showed that, apart from 75% of workers, 61% of retirees were concerned about the future of their finances. Over a third of workers and 22% of retirees also stated the stress levels from their personal financial situation was higher than a year earlier.

At the time, the outlook of the economy had been bleak, and around two out of five workers and retirees thought the economy would worsen the next year.

“What I think we’re seeing is that financial concerns continued to persist,” said Principal vice president of retirement and investor services Luke Vandermillen.

“And there is a sense that the recovery will be longer than people had hoped.”

Back then, almost one out of five people told Principal that they increased their retirement savings while the number of workers who created financial plans also rose by 17%.

In 2010, more employers took an “opt-out” retirement plan requiring employees to decide between opting out of contributing to their 401(k) and other retirement plans.

Essential expenses today

In recent days, there has been a renewed focus on wage-earner anxiety while inflation and interest rates continue to go up.

The US Bureau of Labor Statistics released data saying workers typically bring home $3,308 per month after taxes and benefits. However, a closer look at the cost of some of today’s essential expenses provides a better understanding of why consumers feel strained.

According to Redfin, the median monthly rent in the US was $2,029 in June – an amount that accounts for over 61% of the median take-home pay.

Meanwhile, the Council for Community and Economic Research said the median mortgage payment for a 2,400-square-foot house stood at $1,957 monthly in the first quarter of 2023, accounting for over 59% of the median take-home pay.

Kamila Elliott, the CEO and co-founder of Collective Wealth Partners in Atlanta, has also noticed how the current economic climate has been affecting individuals.

“Inflation is really hurting individuals having stability in their housing,” she said. “If you have uncertainty in your housing, it causes uncertainty everywhere.”

Total expenses

Rent, combined with the food and health expenditures, lead to a massive expense for renters and homeowners. On a monthly average, food and out-of-pocket health expenditures cost $690.75 and $96.42, respectively. In total, American renters have a total expense of $2,816.17 while homeowners shell out $2,744.17.

The amount already accounts for over 95% of the median take-home pay for renters and nearly 83% for homeowners, excluding other expenses such as:

“So much of managing your financial life in America today is like drinking from a firehose that many households are not able to show up and impose a framework of their own design into their finances,” said Rademacher.

“Many are still in this reactionary space where they’re just trying to figure out how to make ends meet.”