Every so often, I run across a news article that further confirms that saving money is no longer common sense in today's world. I recently ran across one such article when reading Yahoo News. I was stunned to find that Reuters had reported that over 7 of 10 Americans are living paycheck to paycheck. I want to start off this chapter by sharing with you the statistics in this article to further demonstrate how the U.S. is deteriorating economically. I also hope to reinforce the reasons why you should follow the strategies discussed in the previous chapters.
A financial survey was taken with approximately 6,169 Americans who were working at full time jobs. This survey was held during November and December of 2006. This study is extremely accurate, and it only has an error margin of plus/minus one percent. Having said that, I will present you with some statistical information that is scary, to say the least. First, the study indicated that 47 percent of the people who were living paycheck to paycheck were women, while only 36 percent of the participants were male. Over 40 percent of the women also stated that they didn't feel they made enough to live comfortably, while only 29% of men felt the same way. Despite the many rights that women have been given over the last 80 years, this study also indicated that women still earn 77 cents for every dollar a man earns in employment fields that are comparable. This means that the income distribution between men and women is still not equal, even in 2009. This study also indicated that women are much more likely to be single parents. Perhaps one of the most shocking things about this study is the following fact:
Of those people who earned incomes that were a minimum of $100,000 per year, 19 percent frequently or always live paycheck to paycheck. The last line I wrote is so important that I put it in bold text, and you may want to go back and read it again. How is this possible? How can people who make a six figure salary be living paycheck to paycheck? This should never happen. However, as shocking as this information is, I'm not done with the statistics. While the study showed that over 50% of the participants set up a budget each month, 1 in 5 didn't follow through with it. The study further indicated that the reason most people didn't stick to their budget was because of eating out.
The study went on to state that 26% of women did not save money each month, while 17% of men reported the same thing. For those who did save money, only 14% saved $500 or more, while only 28% saved $100 each month, and 16% saved $50 or less. This study paints a sad picture of the America we live in today. Is it any wonder that the average American owes $10,000 in credit card debt? Is it any wonder that so many people are finding it harder to get by? How can we call ourselves the richest country in the world when the typical person can barely save decent amounts of money each month?
In this chapter, I will show you explicitly how to save money on clothing, food, shelter, and automobiles. After shelter, these expenses play a key role in why so many Americans are broke, in debt, and unable to save decent amounts of money each month. Before I do this, I want to talk a bit about the fact that 19 percent of people making $100,000 a year are living paycheck to paycheck. When you think about it, it doesn't make much sense. How can this be? One thing that you must understand is that a "high income means nothing." During research for this book we spoke to numerous people who have six figure salaries, and despite the fact they make a good amount of money, most were not saving anywhere close to some of our subjects that were making half as much. Making $100,000 year should afford you the ability to save a minimum of $40,000 per year which then could be invested into a revenue generating opportunity.
The problem with many six figure people is simple: When they make more, they spend more. Six figure income people tend to have luxury cars, expensive clothes, large houses, and expensive jewelry. They tend to have expensive electronics, they take expensive vacations, and they eat expensive food. To them, it makes sense. If you talk to most of these people, they will tell you about how they make a large income, and how they deserve to spend it on whatever they want. While this may be true, this life style in many cases may also lead to bankruptcy and even poverty. Who is to say that you will keep that six figure job forever? In a day and age where more companies are downsizing and moving their operations overseas, is anything certain? Getting a degree from a university is no longer a guarantee that you will gain high quality employment, and I will talk more about this in later chapters. However, many six figure people become victims of their own income. They act as though their income will last forever, and they will use it to enjoy the "good life." More often than not, these people aren't as rich as they make out.
Because many six figure people don't have a high net worth in comparison to their income, they take on large amounts of debt. Because they have a high paying job, they assume they will be able to pay excess debt off. These are the people that will generally have $400,000 mortgages, $35,000 luxury vehicles, and a great deal of credit card debt. If they are lawyers and doctors, you will also want to add on the tens of thousands they will have in student loans, if not hundreds of thousands. When you take all these expenses, add them up, and subtract them from the net worth of many six figure people, you will often find that they too have a negative net worth. This does not even take into consideration the heavy tax burden they carry.
When you look at it this way, many six figure people are no different than the average American. They put on a great display. If you saw them out driving or shopping, you'd get the impression that they were the definition of wealth. In reality, they are often the definition of debt. Even if you don't make anywhere near $100,000 each year, this book teaches you how to become financially secure while saving money to invest in projects and opportunities. When you save 30 to 50% of your income, it doesn't matter whether you're making $20,000 a year or $100,000 a year. Your net worth will increase, and you will have "wealth," which is more important than "income." You won't live paycheck to paycheck, you can do more than others in your income bracket, and most importantly, you will put yourself on the path of financial independence leading to the day you no longer have to work for anyone.
Ignore people who think they're better than you just because they make more. Let them be the hare and you be the tortoise. Over the long term, I guarantee you will crush them. While there are many people out there who have both a high income and a high net worth, they are the exception rather than the rule.