4 answers
Olayinka
Student
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why is salary earners still find it difficult to lives ?
like why do majority depends on loans all the time
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4 answers
James Constantine Frangos
Consultant Dietitian & Software Developer since 1972 => Nutrition Education => Health & Longevity => Self-Actualization.
6167
Answers
Gold Coast, Queensland, Australia
Updated
James Constantine’s Answer
Dear Olayinka,
Overcoming the Hurdles of Living on a Fixed Income
Surviving on a fixed income, such as a salary, can be a daunting task due to a variety of reasons. These reasons can be classified into two categories: those that are inherent to the nature of salaried income and those that are influenced by wider economic and societal factors. Let's delve into some of the major obstacles that salaried individuals often grapple with:
1. Unpredictable Expenses: Unlike workers who are paid by the hour or per task, salaried individuals receive a set amount of money at specific intervals (like weekly, bi-weekly, or monthly). This can pose a challenge in managing finances, particularly when faced with unexpected bills or irregular expenses.
2. Rising Living Costs: In numerous regions globally, the cost of living has been escalating at a faster rate than wages for several decades. This implies that even though salaries have been on an upward trend, they may not be matching the escalating costs of essentials like housing, healthcare, education, and so forth.
3. Dependence on Debt and Credit: A significant number of individuals resort to loans and credit cards to bridge the gap, especially when confronted with unforeseen expenses or sudden drops in income. However, this can lead to a vicious cycle of debt and interest payments, making it even more challenging to achieve financial stability. As per a report by the Federal Reserve Bank of New York, the total household debt in the United States rose to $14.6 trillion in the first quarter of 2021, up from $13.1 trillion in the first quarter of 2019.
4. Limited Financial Literacy: A considerable number of people lack the necessary knowledge and skills to manage their finances effectively. This can result in overspending, inadequate saving, and poor financial decision-making. A survey by the National Foundation for Credit Counseling revealed that only 40% of adults feel confident about managing money and credit wisely.
5. Income Disparity: Lastly, income inequality significantly contributes to the financial stress experienced by many salaried individuals. When a minor portion of the population controls a major chunk of the wealth, it results in less money circulating in the economy, leading to stagnant wages and inflated prices for goods and services. This can create a vicious cycle where individuals struggle to meet ends meet despite working hard and earning a steady income.
Cited References:
Federal Reserve Bank of New York: “Quarterly Report on Household Debt and Credit” (2021)
National Foundation for Credit Counseling: “Financial Literacy Survey” (2020)
Stay Blessed,
JC.
Overcoming the Hurdles of Living on a Fixed Income
Surviving on a fixed income, such as a salary, can be a daunting task due to a variety of reasons. These reasons can be classified into two categories: those that are inherent to the nature of salaried income and those that are influenced by wider economic and societal factors. Let's delve into some of the major obstacles that salaried individuals often grapple with:
1. Unpredictable Expenses: Unlike workers who are paid by the hour or per task, salaried individuals receive a set amount of money at specific intervals (like weekly, bi-weekly, or monthly). This can pose a challenge in managing finances, particularly when faced with unexpected bills or irregular expenses.
2. Rising Living Costs: In numerous regions globally, the cost of living has been escalating at a faster rate than wages for several decades. This implies that even though salaries have been on an upward trend, they may not be matching the escalating costs of essentials like housing, healthcare, education, and so forth.
3. Dependence on Debt and Credit: A significant number of individuals resort to loans and credit cards to bridge the gap, especially when confronted with unforeseen expenses or sudden drops in income. However, this can lead to a vicious cycle of debt and interest payments, making it even more challenging to achieve financial stability. As per a report by the Federal Reserve Bank of New York, the total household debt in the United States rose to $14.6 trillion in the first quarter of 2021, up from $13.1 trillion in the first quarter of 2019.
4. Limited Financial Literacy: A considerable number of people lack the necessary knowledge and skills to manage their finances effectively. This can result in overspending, inadequate saving, and poor financial decision-making. A survey by the National Foundation for Credit Counseling revealed that only 40% of adults feel confident about managing money and credit wisely.
5. Income Disparity: Lastly, income inequality significantly contributes to the financial stress experienced by many salaried individuals. When a minor portion of the population controls a major chunk of the wealth, it results in less money circulating in the economy, leading to stagnant wages and inflated prices for goods and services. This can create a vicious cycle where individuals struggle to meet ends meet despite working hard and earning a steady income.
Cited References:
Federal Reserve Bank of New York: “Quarterly Report on Household Debt and Credit” (2021)
National Foundation for Credit Counseling: “Financial Literacy Survey” (2020)
Stay Blessed,
JC.
Chinyere Okafor
Educationist and Counseling Psychologist
548
Answers
Port Harcourt, Rivers, Nigeria
Updated
Chinyere’s Answer
Hello Olayinka,
There are multiple factors that can make it challenging for individuals who rely on their salary to live comfortably and necessitate them to depend on loans.
1. Cost of living: The cost of living continues to rise in many areas, making it difficult for salary earners to keep up with expenses such as housing, healthcare, and education.
2. Stagnant wages: In many cases, salaries have not kept pace with the increasing cost of living, leaving workers with less purchasing power.
3. Unexpected expenses: Many people struggle to cover unexpected expenses such as medical bills or car repairs, leading them to take out loans in order to make ends meet.
4. Debt: Some people may already be burdened by debt from student loans or credit cards, making it difficult for them to save money or cover necessary expenses without taking out additional loans.
5. Lack of financial literacy: Many people do not have a good understanding of how to manage their finances effectively, leading them into situations where they need loan assistance.
Overall, the combination of rising costs and stagnant wages can make it difficult for salary earners to live comfortably without relying on loans as a financial crutch.
Best wishes.
There are multiple factors that can make it challenging for individuals who rely on their salary to live comfortably and necessitate them to depend on loans.
1. Cost of living: The cost of living continues to rise in many areas, making it difficult for salary earners to keep up with expenses such as housing, healthcare, and education.
2. Stagnant wages: In many cases, salaries have not kept pace with the increasing cost of living, leaving workers with less purchasing power.
3. Unexpected expenses: Many people struggle to cover unexpected expenses such as medical bills or car repairs, leading them to take out loans in order to make ends meet.
4. Debt: Some people may already be burdened by debt from student loans or credit cards, making it difficult for them to save money or cover necessary expenses without taking out additional loans.
5. Lack of financial literacy: Many people do not have a good understanding of how to manage their finances effectively, leading them into situations where they need loan assistance.
Overall, the combination of rising costs and stagnant wages can make it difficult for salary earners to live comfortably without relying on loans as a financial crutch.
Best wishes.
Brian Baptista
Financial Accounting
9
Answers
Rocklin
Updated
Brian’s Answer
Hi Olayinka,
That's a great question. I'm sure you will get a lot of great answers from other folks too. There could many reasons why people take out loans, but I'll try and keep it simple.
In a lot of cases (but not all) it's about cash flow, meaning how much available cash you have to live your everyday life. Let's say you had $15,000 and you needed to by a car and that car costs $15,000. If you were to use all your cash to buy that car, you would not have any available cash for food, rent, utilities, entertainment, etc. In other words, you would not have any available cash (cash flow) to do all the things you need to live your everyday life.
So instead, if you take a loan of $15,000 for let's say 5 years, you would make a car loan payments of $300 a month for 60 months. Because you are only using $300 a month out of your $15,000, you still have a lot of available cash to do all the things I mention above. Of course, when you borrow money, you will have to pay interest so for that $15,000 you borrowed, you end up paying $18,000 after 5 years due to interest.
This may sound odd to pay that much in interest, but that's how folks are able to navigate in this world where things cost more than the money they currently have. In another example, almost every home is bought with a loan because not many folks have so much available cash that they can buy a home outright with cash and still have money to live on.
Hope this helps a little bit. Like I said, there are many reasons to take a loan, but this is a simple reason why it is a common strategy.
That's a great question. I'm sure you will get a lot of great answers from other folks too. There could many reasons why people take out loans, but I'll try and keep it simple.
In a lot of cases (but not all) it's about cash flow, meaning how much available cash you have to live your everyday life. Let's say you had $15,000 and you needed to by a car and that car costs $15,000. If you were to use all your cash to buy that car, you would not have any available cash for food, rent, utilities, entertainment, etc. In other words, you would not have any available cash (cash flow) to do all the things you need to live your everyday life.
So instead, if you take a loan of $15,000 for let's say 5 years, you would make a car loan payments of $300 a month for 60 months. Because you are only using $300 a month out of your $15,000, you still have a lot of available cash to do all the things I mention above. Of course, when you borrow money, you will have to pay interest so for that $15,000 you borrowed, you end up paying $18,000 after 5 years due to interest.
This may sound odd to pay that much in interest, but that's how folks are able to navigate in this world where things cost more than the money they currently have. In another example, almost every home is bought with a loan because not many folks have so much available cash that they can buy a home outright with cash and still have money to live on.
Hope this helps a little bit. Like I said, there are many reasons to take a loan, but this is a simple reason why it is a common strategy.
Todd Thompson
Engineer
6
Answers
Cañon City, Colorado
Updated
Todd’s Answer
Hello! There are several reasons why many salaried individuals might find themselves relying on loans, and it really depends on the type of loan in question:
1. Primarily, loans are taken out for big-ticket purchases such as homes or vehicles. It's generally advisable to limit loans to these types of large, necessary expenses, or perhaps for starting a business or pursuing an entrepreneurial venture.
2. A common challenge many people face is living beyond their means. It's vital to always keep a budget and live within your means. This requires a good deal of self-discipline, and it's always a good idea to avoid loans or debt whenever possible.
3. Depending on the prevailing rates, there might be times when taking a loan could be more beneficial compared to other investment options. Some individuals prefer to take a loan at a low interest rate and then invest those funds in stocks, businesses, and so on, with the aim of earning a higher return.
Remember, financial decisions should always be made with careful thought and planning. Keep pushing towards financial independence and remember, you've got this!
1. Primarily, loans are taken out for big-ticket purchases such as homes or vehicles. It's generally advisable to limit loans to these types of large, necessary expenses, or perhaps for starting a business or pursuing an entrepreneurial venture.
2. A common challenge many people face is living beyond their means. It's vital to always keep a budget and live within your means. This requires a good deal of self-discipline, and it's always a good idea to avoid loans or debt whenever possible.
3. Depending on the prevailing rates, there might be times when taking a loan could be more beneficial compared to other investment options. Some individuals prefer to take a loan at a low interest rate and then invest those funds in stocks, businesses, and so on, with the aim of earning a higher return.
Remember, financial decisions should always be made with careful thought and planning. Keep pushing towards financial independence and remember, you've got this!