Paycheck to paycheck

I read in the latest issue of Document magazine today that about 50% of workers live paycheck to paycheck, and about 25% of people who earn over $100K live paycheck to paycheck. Wow.

Also, the average household has about $8000 to $9000 in credit card debt. That's average.

So that means that over one quarter of people who have mortgages with any kind of balloon payments coming due, or variable mortgages where the payments are going to increase, are going to go into foreclosure. They have no money. And it's a pretty simple guess who has the credit card debt - those who live paycheck to paycheck, or those who don't?

Net usable income is going to be decreasing for most everyone too. Many (millions) are going to lose their jobs. But those who have jobs are going to see income erosion too - small or no bonuses, stock options that are worthless, retirees who have IRA's are going to have smaller withdrawls, some companies are moving toward fewer hours worked in a week, salary and wage freezes and reductions, temporary factory and business closings, increased fees and taxes at the state and local levels, and on and on.

On the other side is a reduction is wealth - house values plummeting (I doubt that many areas are increasing in value these days), IRA's and 401K's losing 10's of percentages, regular stock and bond investments decreasing, future stock options now worthless and can't be counted upon, other assets losing value now that people are saving, there is an over-capacity of many goods, and lots more people are broke.

People in debt and living paycheck to paycheck who have decided to begin to saving are deluded. It's way too late. They won't be able to dig out of their holes anytime soon (it takes many years). They are done. I expect the bankruptcy rate to skyrocket in 2009 and 2010.