Problem #18: How can I “Get Ahead”?
How many times have you or someone else said, “I’ll never get ahead.” or with a frustrated tone, “Why can’t I get ahead?” When people say this, they are usually discouraged. But what would it look like to “get ahead”? And how can you get ahead?
Most Americans live paycheck to paycheck. It is commonly reported that roughly 75% of Americans live this way (see this story at CBS News). This means that if they lost their job or source of income, they would have nothing – except the government – to fall back on. In other words, when a paycheck comes in, it is used in its entirety to pay for needed living costs (housing, food, utilities, transportation). There seems to be nothing left over.
A good definition of “getting ahead” would be: simply – not living paycheck to paycheck. If you didn’t get a paycheck for a few weeks, you could still pay your bills – at least for a short time.
I’ll give you 3 more indications that could signal that you “are ahead”. With each indication I’ll also give you an action that can help you to “get ahead”. Hang in there. As you’ll see, you are not alone.
INDICATION #1: You have $1000 or more in Savings.
Actually, having any kind of emergency fund would be an indication that you are ahead – at least a little bit. Obviously more savings means you are farther ahead (you can cover more expenses for longer until you can get a new job). The percentage of Americans with no savings is staggering. It is reported (check out this story on Bankrate.com) that 47% of Americans would not be able to cover a $400 expense without selling something or going into debt (definitely a no-no). When I saw that statistic, I was both amazed and stressed at the same time. The importance of an emergency fund cannot be overstated. If you do have some savings, I would urge you to set a goal to save at least a few months of expenses. But if you have any kind of emergency savings – Congratulations! You are “ahead”.
Action to “Get Ahead”
If you fall into the group of people with no savings – or less than $1000 – I want to offer some encouragement. You aren’t alone. The first step to saving is to set up a budget to find out how much money you actually have left over. Most people without a budget have concluded – incorrectly – that they can never save any money because there isn’t any left over. I’ll let you in on a secret – Budgets tend to find money that you didn’t know you had.
Check out this post to learn how setup a budget – Budgets Find Money
INDICATION #2: You have a retirement account – that you contribute into regularly.
This indication is similar to the first one. It involves savings. What makes this category of savings is that this money is specifically ear-marked for use in retirement. You can’t use it for expenses today without incurring penalties. It resides in a 401k, ROTH, or other similar IRA (Individual retirement account). As an aside: I would not recommend withdrawing or borrowing against retirement accounts. The disappointing fact is that roughly 33% of Americans have $0 saved for retirement. So if you have money in a retirement account, you are “ahead”.
If you happen to have – and are contributing to – an IRA, but you don’t have any emergency savings – we need to talk. Just based on the statistics, there are quite a few of you out there. I would encourage you to pause your contributions while you build up your emergency funds. Money saved for the future will be of no use to you if you need it now. And if you have to withdraw money from your IRA for an emergency, you will lose any future benefit because of penalties.
Action to “Get Ahead”
If you fall into the group with no retirement savings, don’t worry. You can open a IRA anytime. The sooner the better though – don’t wait. Time is the biggest factor when it comes to compounding interest. Again – similar to Indication #1, try to cut your lifestyle enough to put some money away for retirement. A budget can help here too.
INDICATION #3: You have no debt – except maybe a mortgage.
The amount of debt that we as Americans have is staggering. According to recent reports all non-mortgage debt totals roughly $4 trillion. Needless to say, if you have debt (credit card, student loans, or auto loans), you aren’t alone. Debt is one of those things that seems to be “just a part of life” for most people. (Check out this story from CBS News) This is defeatist attitude. It doesn’t have to be true about you. Don’t let your debt rule your life. Get angry at your debt, and do what it takes to get rid of it!
Action to “Get Ahead”
To pay down your debt, you first need to have extra money (more than the minimum payments) in your budget. I feel a little bit like a broken record (How many of you even know what a record is anymore? much less a broken one?), I’m saying the same thing over and over. Get a budget – Use it – Stick to it. You also need to have the discipline to use your left-over money towards debt instead of impulse purchases.
Obviously, you could have 1 or more of these indications present in your life and still not feel “ahead”. Some may have retirement savings but no emergency fund. So many more have crushing debt loads along with some savings. Remember, we’re all on a different journey through this life. I would encourage you today to take a snapshot of your finances and adjust as needed. If you don’t know where to start – start with a budget. Or contact me and let me help.
Remember if you don’t control your money, it will most certainly control you.
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