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Proprietary Data Insights Top Stock Searches This Month
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The Difference Between Living Paycheck To Paycheck And Hand To Mouth
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Well, what do we have here? A change at the top of our Trackstar rankings. Just when you thought Tesla (TSLA) was safe, it’s Apple (AAPL), not Nvidia (NVDA), coming in as the stock investors search for most across the platforms of our 100-plus financial media partners.
It’s a similar story among financial advisors. While AMC Entertainment (AMC) remains the stock financial pros search for most, Apple jumped ahead of Tesla, taking the number two spot. While both stocks saw a decline in search interest from the big money, Apple’s drop wasn’t as pronounced.
Sort of surprising to see during a period that saw Elon Musk tell advertisers to go fuck themselves. Last week, The Juice gave our thoughts on Tesla’s crashing market share. This week — on Wednesday — we turn our attention to Apple. We have a love-hate relationship with the company these days. We’ll tell you why. Our mixed feelings actually have a little something to do with Tesla and an interaction between Musk and Tim Cook that, according to Cook, never actually happened. But first … today. You see the headlines at least once a month: 62% of Americans are still living paycheck to paycheck, making it ‘the main financial lifestyle,’ report finds That’s the latest number, as of September. And it keeps going up. You also regularly see data that says roughly half of Americans earning six figures report living paycheck to paycheck. Lending Tree recently reported:
This begs the question — are many of the people these reports place in the “paycheck-to-paycheck” category, actually living paycheck to paycheck? We don’t think so. One of The Juice’s favorite personal finance and investing writers — a guy out of Canada named Ben Le Fort — said it best in an article we often go back to: Living “Paycheck to Paycheck” Looks Different for the Rich. According to Ben, living paycheck to paycheck “is more of a feeling than a tangible financial benchmark.” When you live paycheck to paycheck, there’s no room for error: For people with a low income, living paycheck to paycheck might mean getting phone calls from the electric company threatening to shut off their power. Most people making $250,000 per year who claim to be living “paycheck to paycheck” aren’t actually — it just feels that way because the majority of their wealth is in illiquid assets. They may not have tons of cash left over at the end of the month, but their wealth continues to compound. Right on. Ben puts the relatively well-off not in the paycheck-to-paycheck category, opting instead to classify many of them as living hand to mouth, a phrase he lifted from a nearly ten-year old academic research paper: People making $250,000 experience living “paycheck to paycheck” in a radically different way than people making $50,000 per year … The researchers define the “wealthy hand to mouth” as households with little cash but a large amount of wealth in illiquid assets like housing and retirement accounts … They are spending whatever they can get their hands on. But they are lucky that, by definition, high-income earners are usually homeowners and have good jobs with retirement plans. This means they have forced savings via their mortgage and workplace retirement plan — which likely also has matching contributions from their employer. Right on, again. All of this said, living paycheck to paycheck can be a savings strategy for people with the means to live hand to mouth. If you have a six-figure salary, retirement fund and own a home, particularly with some equity, or rent a relatively expensive apartment, you absolutely might be house rich and cash poor. However, we’re certain that quite a few high earners in this type of situation end up with little to nothing left over at the end of the month because of needlessly high costs of living and excessive discretionary spending. When you’re comfortable, it’s easy to spend freely like this. So, Ben’s correct. It’s hardly paycheck-to-paycheck living. It’s more like money burns a hole in your pocket. Another way to phrase hand to mouth. Imagine, though, if, at the end of the month, you looked and saw some frighteningly low number in your checking account. Holy shit, how do I only have $63.27 left a day before I get paid and turn around to pay the mortgage or rent? If you don’t know where the money went, what are you doing with your wealth other than mindlessly spending it? If you look down the page and see a robust and growing savings or investment account balance or two, then you’re onto something. Ideally, you want to look at what you earn, keep your fixed expenses (your absolute needs) as far below that figure as possible, responsibly spend a little of the surplus on your biggest wants and save or invest the rest. The Bottom Line: If you live paycheck to paycheck on purpose — because you prioritize saving and investing — you create a level of cash security that helps spending come easier. This is just good money management. Rather than burning through your money every single month without a plan, create a line item for fixed needs and keep that amount of money in your checking account. Divide the rest between a savings account from which you do discretionary spending, another for an emergency fund, one more for general savings and, if you’re doing well enough, an investment account to plan for the long-term. It doesn’t take long to make a simple plan, then live by it. |
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