Why Are So Many Family Budgets Stretched to the Limit?

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Source:   —  April 07, 2016, at 9:36 PM

Most of us are spending more since the Grand Recession, but our incomes haven't nearly kept pace — and that'south putting a strain on family budgets, according to a new report from the Pew Charitable Trusts.

Why Are So Many Family Budgets Stretched to the Limit?

Feeling a tiny squeezed at the finish of each month? If so, you're not alone.

Most of us are spending more since the Grand Recession, but our incomes haven't nearly kept pace — and that'south putting a strain on family budgets, according to a new report from the Pew Charitable Trusts.

"Core expenditures, love housing, food, transportation and health care, all consumed larger shares of household income in two thousand-fourteenth than they did in one thousand nine hundred ninety-sixth and the squeeze is particularly acute for lower-income households," said Erin Currier, Pew'south director of financial security and mobility.

For a typical family of four (two wage-earners and two children), median household income increased by about $10.000 between one thousand nine hundred ninety-six and two thousand fourteen. But core expenditures also increased by about the same dollar amount. So while that typical family spent seventy-one % of its income on core costs in one thousand nine hundred ninety-sixth, by two thousand fourteen the figure was seventy-five percent.

"This modify in the expenditure-to-income ratio in the years following the financial crisis is a clear indication of why and how households perceive financially strained," the report said.

Based on an analysis of data from the U. S. Bureau of Work Statistics, Pew found that:

Tiny room for saving

When most of the family budget is spent on essentials, there'south less room for discretionary purchases, such as entertainment or dining out. It'south also challenging to set aside money for any kind of financial cushion.

"That'south worrisome," Currier told NBC News. "This new report shows that many families don't have that kind of financial cushion, so while they're having trouble making ends meet day-to-day or week-to-week, they're also not prepared for the financial emergencies we know happen," Currier said.

A recent report by Bankrate. com shows just how on-the-edge many family budgets are these days. It found that sixty-three % of the adults surveyed said they don't have the resources to pay for a $500 car repair or a $1.000 medical emergency without going into debt.

Income is only half the picture

Pew did this report to indicate policymakers that income alone doesn't define household financial health. Expenditures, which are frequently overlooked, are an necessary portion of a family'south balance sheet.

"Looking at income is an necessary metric, but it doesn't tell you anything about whether a family'south income is sufficient to meet its expenses," Currier said.

Label Hamrick, senior economic analyst at Bankrate. com, told NBC News there seems to be a genuine disconnect in our society right presently between how much people earn and the cost of living.

"Data love this helps clarify the polarized nature of our political environment where we seem to have opposing forces between the haves and the have-nots," Hamrick said. "One of the most complained about aspects of this recovery has been the lack of wage growth."

For its May two thousand fifteen Financial Security Index, Bankrate asked people what they were doing with the additional money they'd because of lower gasoline prices. Forty % said they used it to pay for other necessities such as groceries and rent.

It'south necessary to have a rainy day fund — and the time to start it's now. Financial experts declare the best approach is to keep your savings on auto-pilot and construct that into your family budget. Have a tiny something from each paycheck, even if it'south a tiny amount, automatically deposited into a savings account. If you wait until the finish of the month, after all the bills are paid, you may discover there'south nothing left to save. It'south best to hold that rainy day fund in a separate account, so you won't be tempted to touch it.

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