Living Smart P2P

Denise Trowbridge

For many parents, after the mortgage, bills and groceries are paid for, there is barely enough money to last until payday.

About 75 percent of households live paycheck-to-paycheck, with little or no savings, according to surveys by

This is not just an issue for the working poor. Two-thirds of people living paycheck-to-paycheck are affluent-on-paper parents who own a house, have retirement accounts and other assets. They just don't have much in their checking and savings accounts.

If this is you, don't beat yourself up. Raises are hard to come by, and prices for everything from doctors' visits to gasoline are up. Still, you have to break the cycle, because life is nothing but constant curveballs, whether it's a flat tire or a pink slip. Without savings, each hiccup can push you further into debt and closer to crisis.

Righting the ship means going back to the absolute basics of personal finance: Save something - anything - and cut expenses, said Betsy DeMatteo, a consumer science educator with The Ohio State University Extension.

"You really do need to pay yourself first," she said. "If you don't put any money aside when you first get paid, life will happen and everything will be gone at the end of the month."

Small amounts count. If you haven't saved because you might only have $5 or $10 here or there, start tucking that into a savings account or piggy bank. Every dollar matters.

"It might only be $100 at the end of the year, but that is enough to cover a flat tire," DeMatteo said. "It's money that doesn't have to go on the credit card."

The second step is to track spending and comb through every expense looking for fat to cut. Make a list of expenses ranked from most to least important to you, DeMatteo said.

"Think about what you really care about, then cut from the bottom of the list.

"It's not about how much you have, it's about priorities," she continued. "People think a budget means they're never going to have fun. It's the tool to get the life you want to have. Focus on what you're giving yourself in the future."

That isn't easy, in part because we expect so much more than our penny-pinching grandparents. Grandma didn't have a smartphone in her pocket with a data plan, or cable television. She couldn't shop online. Purchases were planned. Budgets were made and stuck to. Monthly bills were kept to a minimum.

"There's been a massive shift in lifestyle in our country," said Paul Gydosh, managing director of Kensington Wealth Partners in Columbus. "We drive much nicer cars and live in much nicer homes than our parents did at the same age."

Our elevated lifestyles and expectations have become so common, we don't even see we're living large, Gydosh said, and the true cost is high expenses - and lower savings.

But if keeping up the trappings of a middle-class life is driving you to the poorhouse or keeping you from paying down debt or saving for what matters - such as retirement, emergencies and college for your children - it's time to seriously reconsider what you need and what is a luxury.

It could mean cutting cable, rolling back to "dumb" cellphones or eating more meals at home. In some cases, extreme changes might be necessary, such as moving to a smaller house, trading down to one less car or a used car, or sharing living space with extended family.

Mind the pounds, not just the pennies: Cut large recurring expenses. For ideas, refer to Brian O'Connor's book, The $1,000 Challenge: How One Family Slashed Its Budget Without Moving Under a Bridge or Living on Government Cheese.

Just start now. "Life happens and, with no emergency fund, you end up digging the hole deeper and deeper," DeMatteo said.