How to break the paycheck-to-paycheck lifecycle even as prices rise – Boston 25 News

Between gas and groceries, everyone’s wallet is under strain these days.

In a survey published in February, Lending Club found that 61% of Americans say they now live paycheck to paycheck. This is an increase of 7% compared to last June.

“Wages don’t follow prices,” said Laurence Kotlikoff, an economics professor at Boston University. “So that makes it even worse in terms of what people need to be able to afford the basics.”

Professor Kotlikoff has just written “Money Magic: An Economist’s Secrets to More Money, Less Risk, and a Better Life.”

He worries about the number of Americans on the edge of an economic cliff. “The threat is that you start charging things with your credit card and you can’t make credit card payments anymore.”

Kotlikoff says the first step to getting back into financial shape is simple. “Everyone should make a budget to determine how much they should spend so they don’t go into more debt.”

The goal is to become more mindful of all expenses, even routine things. “Starbucks is too expensive for too many of us,” Kotlikoff said.

Ditto the price of buying lunch every day. Consider putting it in a brown bag.

“For a family that only spends a few minutes tackling these different moves, I think you can free up a few hundred dollars a month,” said financial writer Andrea Woroch.

She says to start by breaking passive habits like leaving devices plugged in 24/7. “You want to get into the habit of unplugging all your gadgets, even your computer, your laptop. . . that energy consumption can account for almost 10% of your energy bills.

Woroch suggests bundling home insurance with car insurance. “Even increasing your deductible can help you save. Last year I saved $1100 on my annual premium and that’s a lot of money! »

She also says to think about entertainment costs. “I think a lot of people have signed up to new subscription entertainment services during the pandemic to keep themselves entertained, but now that we’re moving on, you have to reevaluate, are you actually using those services?”

Kotlikoff thinks workers can be flexible in a tight job market. “You have to say, look, I can get a better salary here and my real salary goes down, what are you going to do about it? Do you want me to leave or not? People have to be aggressive.

Even the wealthiest households are feeling the pinch of rising prices. According to the Lending Club survey, 42% of Americans earning more than $100,000 a year said they live paycheck to paycheck.

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