In addition to volunteering at Habitat For Humanity, I also volunteer at Neighbor To Neighbor which offers programs in eviction avoidance, utility shut-off avoidance, affordable housing, housing search, foreclosure prevention, and counseling including Financial Coaching, Debt Consolidation, and reverse mortgages, among other services. My role is to prescreen people to get assistance within Neighbor To Neighbor and direct them to external sources of assistance.
As a housing opportunity resource for Northern Colorado, Neighbor to Neighbor (N2N) services are designed to meet each individual where they are now – from homeless and low-income individuals seeking a place to live; to families needing assistance to secure their existing homes; to prospective buyers ready to explore the homebuying process. Our trained housing professionals assist clients through obstacles and develop personalized solutions to help them achieve their housing goals.
Neighbor To Neighbor’s Financial Coaching includes 1) Personal Credit Score Analysis & Loan Options, 2) Personalized Budgeting Plan, and 3) Referrals for lenders, agents & other housing professionals. As part of the coaching, the manager helps clients analyze their spending habits to understand where they are spending their money.
Underconsumption Core is a “personal finance” trend on TikTok with millions of followers. It advocates buying only what you need, not being influenced by social media marketing, and shopping for value. Underconsumption core can be found on TikTok here.
Somewhere around 65% to 75% of Americans are living paycheck to paycheck. I hope this article offers some useful ideas on how to cut spending and save more. It is divided into the following sections:
AMERICANS’ FINANCIAL STRESS
Living paycheck to paycheck is not limited to people with lower incomes. “Inside the Psychology of Overspending and How to Stop” by Jessica Walrack in U.S. News and World Report describes why some people overspend. She lists five common reasons experts say Americans are overspending:
- Social Pressure: Buying what you see others buying as a way to signal that you can afford it, too.
- Lifestyle Creep: When your expenses unintentionally creep up as your income increases.
- Emotional Impulse Spending: A study reports that shopping enhances feelings of personal control, which suggests it’s likely to alleviate sadness.
- Not Accounting for Inflation: If you don’t adjust your budget to account for cost increases, you’ll likely find yourself overspending each month.
- Credit Misconceptions: The truth is that you have to pay back every dollar, plus interest and fees.
Gili Malinsky at CNBC wrote about people living paycheck to paycheck in “More Americans say they are living paycheck to paycheck this year than in 2023—here’s why” where a survey found that 65% of Americans are living paycheck to paycheck. The reasons cited are:
- 69% cite inflation
- 59% cite lack of savings
- 28% cite rising interest rates
- 33% cite credit card debt
- 28% cite medical or health-care bills
- 21% cite layoffs or loss of income
- 15% cite student loans
I believe that it is critical to have emergency savings because they allow a person to overcome many obstacles such as temporary loss of employment and unforeseen expenses. Three of the above reasons are related to the cost of having debt. If people can eliminate debt, shift to more favorable debt, or consolidate it under more favorable terms, they can reduce interest payments.
Emily Batdorf wrote “Living Paycheck To Paycheck Statistics 2024” in Forbes Advisor, that a “2023 survey conducted by Payroll.org highlighted that 78% of Americans live paycheck to paycheck, a 6% increase from the previous year.” When asked how they plan to save money, respondents cited three major strategies.
- Nearly 63% of respondents say making food at home and packing food when going out is their primary way of saving money.
- The second most common way to save was cutting back on nonessential expenses (57%).
- The third is shopping secondhand (50%).
It can be convenient for dual-income families to buy takeaway meals, but it is costly. I have used the example of drinking my favorite cup of Peet’s coffee at home for twenty-five cents a cup instead of buying a cup for five dollars or more at Starbucks as a non-essential expense. People donate clothing and household goods to Habitat For Humanity Restore and Goodwill stores which are good resources for those wanting to shop for quality second-hand items.
Khristopher J. Brooks wrote “Americans continue to rack up credit card debt, hitting a record $1.14 trillion” for CBS News Money Watch. He described that U.S. consumers collectively owe a record $1.14 trillion in credit card debt which is up over 2% from the previous quarter. He adds, “About 7.18% of cardholders fell into delinquency in the second quarter, up from 5% in the previous quarter…” The average credit card interest rate is now over 24%.
FINANCIAL COUNSELING VERSUS FINANCIAL ADVISORS
Financial advisors usually help to determine investments, asset location, asset allocation, and produce a financial plan. Financial counselors provide a different service. People living paycheck to paycheck often have low savings so a financial counselor will probably be of more benefit than a financial advisor. John Egan describes the services and accreditation of a financial counselor as well as where to locate one in “What Is A Financial Counselor?” for Forbes Advisor.
Jean Folger provides a “Guide to Hiring a Financial Counselor“ in Investopedia. She lists typical support and guidance provided as:
- Build savings
- Create (and stick to) a budget
- Create a plan to pay down debt
- Deal with an immediate financial crisis
- Determine if you’re eligible for tax credits
- Improve your credit score
- Manage lines of credit
- Manage student loans
- Modify ineffective money habits
- Navigate available public benefits and community resources
- Set and realize financial goals
- Understand basic financial principles
- Improve your overall financial health
- Refer you to an investment advisor or financial planner when you’re ready
- Some financial counselors have extra training in other areas
Ms. Folger says that the price charged by a financial counselor is usually lower than working with a financial advisor or certified financial planner. “Financial counselors who work in private practice may offer a free initial session and then charge a flat fee for any subsequent meetings. Others may charge an hourly rate or a monthly subscription,” she adds.
The National Foundation for Credit Counseling (NFCC) is a nonprofit organization founded in 1951 that works with consumers through one-on-one financial reviews. The press release, National Foundation for Credit Counseling Warns of Skyrocketing Consumer Financial Stress, describes “critical level of financial strain where households are cutting back on food expenses and personal savings”.
To stop living paycheck to paycheck on your own, Julia Kagan suggests in “Living Paycheck to Paycheck: Definition, Statistics, How to Stop” at Investopedia that you can:
- Review your budget. Budgeting relies on tracking your expenses against your income… Look at every dollar you spend over a month to see if you can find out what may have increased your spending.
- Make sure you are saving. Living paycheck to paycheck often precludes saving. If you have little to no savings, start small—set aside 1% of each paycheck ($10 for every $1,000 you earn). And automate it so that you aren’t tempted to spend it.
- Pay off your debt. One downside of having no financial cushion is relying on credit cards with high APRs to cover emergencies of varying sizes. Depending on your situation, there are numerous ways to pay down credit card debt, including using a debt snowball strategy to pay off the smallest debt first, using a balance transfer on a credit card with 0% interest for a year or more, or getting a personal loan or a debt consolidation loan.
- Increase your income. Whether that means starting a side hustle, asking for a raise or a promotion, or finding a better-paying job, the extra cash can help you start setting aside more savings and/or pay of your debt faster.
From my experience volunteering, there are also public and non-profit organizations that provide Resource Navigation which assist with programs such as qualifying for affordable housing, utility credits for low-income people, and food assistance. The waiting lists can be long though.
UNDERCONSUMPTION CORE
“About half of TikTok users under 30 say they use it to keep up with politics, news” by Colleen McClain at the Pew Research Center is informative in many ways on how younger people get their news through social media. Underconsumption Core is embraced by Gen Z (ages 12 to 27) along with other age groups to a lesser extent and fits within several aspects of financial counseling.
Omar H. Fares, Lecturer at the Ted Rogers School of Retail Management Toronto Metropolitan University and Seung Hwan (Mark) Lee, Professor and Associate Dean of Engagement & Inclusion, at Ted Rogers School of Management, Toronto Metropolitan University wrote “Understanding ‘underconsumption core’: How a new trend is challenging consumer culture” in The Conversation. They say that underconsumption core “champions minimalism and frugality, and encourages people to maximize the utility of their purchases and buy only what they truly need, challenging the culture of consumerism.”
The rise of this trend can be linked to several challenges facing young people today, including increasing economic pressures, environmental concerns and social pressures, all of which are particularly affecting Gen Z and younger Millennials. If you’re also feeling financially squeezed, this trend might resonate with you.
Similar to the deinfluencing trend, underconsumption also appears to be a reaction to overconsumption — especially the way influencers have normalized it by posting haul videos. By promoting underconsumption, online users are rejecting and pushing back against this aspect of “influencer culture.”
The authors advocate to have a balanced approach to budgeting material purchases and experiences and improving your financial literacy. They suggest that one start “by creating a budget that ensures basic needs and baseline expenses are met.”
CONSUMER SPENDING AND THE ECONOMY
The Federal Reserve raises interest rates to make borrowing more expensive and to slow down the economy to fight inflation. Vicky Nguyen describes the underconsumption core movement in this NBC News video and that if it persists, it could contribute to an economic slowdown.
According to Lucia Mutikani at Reuters in “US consumer spending solid in July; inflation rises moderately”, “U.S. consumer spending increased solidly in July, suggesting the economy remained on firmer ground early in the third quarter…” Gross domestic product rose to 3.0% annualized in the second quarter. The unemployment rate jumped to 4.3% in July and inflation as measured by the Personal Consumption Price Index has fallen to 2.5%. Ms. Mutikani says “Consumers are also saving less and tapping savings to fund their spending.”
Michael Rainey writes “Powell Says ‘Time Has Come’ to Cut Rates” in The Fiscal Times. Federal Reserve Chair Jerome Powell signaled that the central bank plans to start cutting its key interest rate soon.
The probability of a recession starting in the next year is low but significant. The New York Federal Reserve estimates that the probability of the US economy being in a recession, based on the yield curve, in July 2025 to be 56%. J.P. Morgan Research estimates the probability of a U.S. and global recession starting before the end of 2024 to be 35%. Goldman Sachs analysts estimate the odds for a U.S. recession next year to be 25%.
I suspect that the trend to become more cost-conscious will gain momentum with time and increase savings rates. A recession, if and when it occurs could devastate those without savings.
Closing
I stopped living paycheck to paycheck somewhere in the 1980s as I graduated from college and obtained stable employment. My parents were raised during the Depression, and I grew up during the stagflation of the 1970s so saving and living beneath my means came naturally. Still, dual-income families like mine in the 1990s face challenges, time constraints, and financial stresses. The empty nest years were a period of playing catch up. I have been fortunate but could have done better.
Volunteering at Neighbor To Neighbor highlights to me the financial struggles that people are going through. Pandemic-era assistance is declining and services are evolving. Some are interested in the Financial Counselling and debt consolidation.
