Please don’t criticize my TV habits – I watch the first 20 minutes of The View. What can I say, I love Whoopi. Well, today I watched the whole episode, and the last guest was some financial guru whose purpose was to put a positive spin on the economy. She put up a pie chart with the following statistics:
3% are wealthy
27% are financially comfortable
54% live paycheck to paycheck
16% are getting further in debt
But…how do you distinguish between the middle two categories? I wouldn’t classify myself as either.
Paycheck-to-Paycheck: I think agreement on this classification is fairly easy to attain. I would define this as anyone who couldn’t skip more than two paychecks without sinking further into debt. They’re probably debt-slaves as it is, or maybe their expenses are high because they have a lot of kids, an expensive medical condition, or just graduated college. That’s definitely not me.
Financially Comfortable: To me, this means that you have a sizeable portfolio, you own a reasonably successful business or you’ve got a very stable job, and you either own your home outright or have a very manageable mortgage. You could go out and buy a new car without needing a loan. You could afford to take a year off from work to pursue a dream and not return mired in debt. If you’re half of a couple, you could live well enough if either of you stopped working. I don’t qualify…well, maybe a little bit (could take a year off from life, as long as it was spent somewhere cheap like Thailand), but not in any other way. By my standards, I don’t qualify.
Clearly my interpretation sets the bar a bit high? Perhaps it’s as simple as:
- No need for a mental debate over purchases under $100?
- If your computer breaks, you don’t need to finance a replacement?
- Your emergency fund = at least 3 paychecks?
Where would YOU set the bar? What criteria would you consider indicative, or at least minimal?
Filed under: Debt