More Month than Money: What to Do?

Adam Rust

If you find that you often run out of money before the end of the month, you are not alone. Tens of millions of American households live paycheck-to-paycheck, with little or no cushion to overcome a difficult month.

Last May, the Federal Reserve published a study that shocked many people. The Fed found that forty percent of American households had less than $400 in liquid assets. Liquid assets are an economist’s term for “cash you can lay your hands on now” such as money held in a checking or savings account or in an investment account that could be drawn on without having to pay penalty fees. It excludes assets such as equity in a home or a car.

The situation presents sub-optimal choices for anyone. It hurts to want to pay back your debts but to find yourself in a place where you cannot do so. It is possible to respond in several ways, some of which are better than others. For example, you could stop opening your mail. Alternatively, you could stop opening your mail and stop answering your phone. Neither would be good because all you would do is sink yourself further into trouble.

Your first step should be to prioritize where you allocate your remaining dollars. Naturally, you have to eat. You have to get to work, so you still need to have money for gas or transit fares. If you don’t pay your utilities, you take the risk that you will be living without water or heat. You have to pay the rent, too.

You know that paying for necessities like food, shelter, and transportation should come first. Can you find enough money to cover those expenses?

If you can’t, then you need to get creative.

The next step is to ask yourself if you are willing to ask for help. Would you feel comfortable going to a local food pantry for groceries? Find your local food bank here.

Some landlords will let their tenants pay the rent late without charging a fee. An experienced landlord knows that even a good tenant will sometimes have a difficult month. Ask your landlord if this is a possibility, as it may be something that he or she is willing to consider, especially if you have been trustworthy in the past.

Making a partial payment of rent may also be possible, but not likely. Your landlord may be reticent to do this, because by accepting any amount ofmoney, he or she loses leverage in a possible eviction action of money, he or she loses leverage in a

Could you access your pay early? The wages you have earned but not yet received in compensation are a kind of an asset. Your employer may have a program in place to pay wages early. Wal-Mart recently established a nationwide program for its associates to receive a portion of their already-earned wages before payday.

You Can Receive Your Pay Early by Direct Deposit with these Accounts
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Broke person emptying pockets looking for spare change

WiseWage has an account that offers early access to pay. The Varo Money account has Early Direct Deposit available to account holders. As a condition of participating, you have to have arranged a recurring direct deposit into your account. Varo can do this because they receive a message from the processor of your payroll that a wage payment has been requested. Usually, those messages occur in advance of the day that you receive your check. For example, if you typically receive your direct deposit on Friday morning, your company’s payroll department may have initiated the request to pay as early as Wednesday.

You may need to downscale your lifestyle if making ends meet becomes a regular challenge. Unfortunately, your most significant expenses tend to be hard to change. Ending a lease early means that you will have to forfeit your deposit – a non-starter. Most people owe more on their car than it is worth.

You could sell your furniture, clothing, and electronics. Still, while you like your stuff, can you bank on the likelihood that other people will feel the same way about your turtlenecks? Owing to eBay and our graying national demographic, even the best antique furniture goes unwanted. An interior designer, accustomed to creating open spaces with modernist décor, told the New York Times that even “an English antique represents something that is kind of sad and tired.” If you have a bunch of particle-board stuff from “Rooms on the Go,” then you may face a similar problem.

The underlying truth is that wages need to go up because the cost of living has been steadily increasing. Televisions might cost less, but everyone pays more now for communications, for food, and housing. The federal minimum wage has been frozen at $7.25 since 2009.  

Will it get better in the future? It’s hard to know. I do worry that the "more month than money" problem isn't a concern of our policy leaders in Washington

I digress: Recently, I attended a conference where the number two official at the CFPB told a group of non-profit community development advocates that the prospects for low-income consumers had never been better. His lens was informed by 18th-century economic thinkers such as Adam Smith   and 19th-century thinkers like John Stuart Mill.

An excerpt:

"Well, we have a significant amount of evidence demonstrating that markets improve the lives of ordinary people. Two centuries ago the average world income was about $3 a day in today’s money. It’s now $33 a day. And the average American worker today earns about $130 a day. The economist Deidre McCloskey calls this “The Great Enrichment.” It was driven by what she calls “the liberation of ordinary people to pursue their dreams of economic betterment.” That liberation results from the application of the self-evident truth affirmed by our Founding Fathers and generations of Americans since: equality before the law, self-determination, and ordered liberty. Or as their contemporary Adam Smith put it, the practice of “allowing every man to pursue his own interest his own way, upon the liberal plan of equality, liberty, and justice.”

There are a lot of apples and oranges here: There has always been a gap in the incomes enjoyed by workers in India and those in the United States. Moreover, we are taking about numbers that are not adjusted for inflation! As well, the use of average income as a barometer glosses over the problem of income inequality. The people at the bottom of the scale are not lifted when hedge fund returns soar.  

I wish we had leadership in Washington that relied on more recent evidence, but things have changed.

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