Living Paycheck to Paycheck is NOW A LUXURY

We've talked numerous times before on this channel about how there's a growing number of Americans who are living paycheck to paycheck. But according to this most recent survey, apparently those people are the ones who are well off right now. I never thought I would hear or see the day when living paycheck to paycheck is now a luxury. But apparently that's where things are moving towards right now. And I know a lot of people have been asking where I am on my walks. I remember to tell you today I am at Dunphy Park here in Sausalito, California. Now, according to a recent survey of Americans who earn an hourly wage, 39% of those people said that living paycheck to paycheck would be an improvement from their current finances. And this survey was done by Talker Research, which is a market research firm. And when I read that, I was just kind of floored. I couldn't believe that that's how people are looking at things right now. If I was living paycheck to paycheck, I would actually be doing better than I am right now, which means that 39% of those people are actually living on credit cards. They're living on buy now, pay later. Those are the things that we're going to talk about in this video, because this is becoming a huge, huge problem that has just become so normalized that living paycheck to paycheck is now considered an improvement. Now, listen, guys, I'm not going to say that things aren't expensive and people have been forced into this situation. There are people who have been forced into this lifestyle because they just don't earn enough at their job to keep up with the cost of living. That is true. However, there's more to the story than that. One of the main problems and culprits of this is that wages have not kept up with inflation. And I did a video on this a couple of weeks back proving to you that at least over the past few decades, wages have not been keeping up with inflation, not anywhere close, actually. And when you look at the math, it's very concerning because as time passes, the wage and inflation gap continues to widen, which means that the more time that passes, then the harder it is for current wages to keep up with inflation. So really you're left with just a few options as somebody in this position, you can earn more money, you can spend less money, or you can do both. And some people probably don't want to hear this, but you might need to be tracking your budget down to every last cent that you are spending. If you're in this situation, you know, if you spend $1 on parking, it needs to be tracked. And that's the issue because a lot of people don't want to do that. And I don't blame you. I don't even want to do that either, because that is really getting into the nitty gritty. But if it's the only way to pull yourself out of financial trouble, then it might make a lot of sense to do it. And I think one thing that people are very underprepared for besides budgeting and keeping track of every dollar that's spent is changes in income. Whether you are self-employed or whether you have a job, changes in income can be a big stressor and put people in debt who previously were not. Because like, for example, when I was working as a real estate agent, I never knew how much money I was going to make month after month. Literally every month was a surprise. Some months were just a few thousand dollars. Some months were five figure months. Some months were literally zero. I mean, it was that all over the place. And that's despite my best efforts to try to keep, you know, clientele and the business running as much as possible. And so I learned pretty early on in that career that I would have to set aside money when I made a lot of money more than to pay my expenses that month for the months where I probably wouldn't make as much. That was just kind of something intuitively I knew. But the same rule of thumb can actually be used when you work a job. Because even when you work a job, maybe you get overtime, right? So you might have some weeks when you earn more than the average week. That's your opportunity right there to put away that extra money. Whereas most people will go out and spend it. That's your chance to sock a little bit extra away or pay off some of those debts and get out of the debt cycle and go above the living paycheck to paycheck lifestyle. And while that's happening, you should be working on some additional ways so you can simultaneously have some additional streams of income, whatever that might be. You know, I've mentioned a bunch of things here on the channel before. A lot of people choose to do gig work, you know, things like Uber and DoorDash and delivery apps, things like that. Instacart. Other people have maybe more professional services they can offer on sites like Upwork and Fiverr and TaskRabbit. The point is, those options exist and you can kind of go out there and start earning some extra money ASAP without even getting a second job. It's at your leisure. But you have to understand that increasing your income or getting a second job or even doing gig work is not really going to help you if you don't start budgeting and start paying off those debts and start decreasing your spending in any of the areas possible. And one of the best ways to get some lucrative gig work, especially on sites like Upwork and Fiverr, is to improve your professional skills. Maybe you can improve copywriting skills. Maybe you can design thumbnails for people like me on YouTube that need somebody to do that kind of stuff. Maybe you can learn how to edit videos. Maybe you can learn how to use AI in creative ways that can help business owners speed up their workflow and they'll hire you for that. Like, there's literally endless amounts of opportunities of things you can do now with the internet to earn a little bit of a side income. It's just a matter of whether or not you have the willpower to put some time and energy into learning it. See, it's kind of cool. Like, you're at the park here and then you just cross over and then you're at a little houseboat section over here. There's so many of these little houseboat neighborhoods here in Sausalito and I will be walking all of them, at least all the ones I can that are not gated, before I'm out of here. And you know, it's this situation that is turning an entire generation, like the younger generation, Gen Zs especially, to buy now, pay later. You know, to buy things like concert tickets, even Botox, cosmetic surgery, all kinds of things, you name it, that they can't really afford because they look at what everybody else has. They look at social media and they say, there's no way I can afford that. But then along comes Klarna or Affirm to say, well, actually you can't afford it. You can just buy now, pay later, worry about paying it in four installments and don't have to think about it right now. Here's an example of a girl at only 18 years old fell victim of the buy now, pay later loan and it had a 30% interest rate. Okay. And she decided to pull the trigger on an $1,100 mattress with Affirm. And before she knew it, she was turning to Affirm for things like groceries, haircuts, eyelash extensions, pretty much just living life, right? And soon enough, her debt ballooned to about $4,600, which required a $771 monthly payment. It is such a beautiful day to be out here on the water like that. These guys are paddle boarding, kayaking on Richardson Bay. I actually did the same yesterday. It's been really nice out here for that. Flat, the water feels beautiful. The thing is people fall into this trap of using the buy now pay later to buy some big ticket item that they can't afford. Right. But then they realize how easy it was just like spending money on a credit card and like, well, that wasn't very difficult. Maybe I can use it for some of these other everyday expenses. It doesn't hurt to throw an extra a hundred or 200 bucks on there. I can pay that off in a week, right? That's like the mentality anyways. And then you just see the payment, like, oh, it's only $20 for that week. It's only a hundred dollars for this week. And it doesn't seem like a lot until it adds up to $4,600 in debt. And this girl ended up having to take out an personal loan to pay off her affirmed buy now pay later loans. And that affirmed loan was at 14% interest rate. So much better than the 30% from buy now pay later. The 14% is still a lot guys. And interestingly enough, a lot of younger people are turning to buy now pay later due to the fact that it's becoming harder to get a credit card. In fact, I'll talk a little bit about this more in detail in a little bit, but credit card companies are making it more difficult to get credit cards and they're raising interest rates on higher risk borrowers. But buy now pay later is very easy to get. You can pretty much just get it at the checkout of almost any type of online retailer these days, sometimes even in-store retailers as well, which is a small, quick little check. And then this quickly snowballs into a situation where people feel like they can live beyond their means without a whole lot of consequences until they find themselves five or 10 grand in buy now pay later debt. And the other thing that we're going to talk about in a little bit in this video is that it's been very easy to get buy now pay later loans due to the fact that they check your credit, but the buy now pay later loans haven't had an impact on your credit score. So as long as your credit looks decent, then they'll give you the buy now pay later loan. And there's no check to see how many buy now pay later loans you already have. This other girl, a lot older, 28 years old, she started using buy now pay later loans after seeing the option on so many of the different checkout pages of the online clothing websites. I see this too, even on grocery websites. There's this website I love buying eggs and grass-fed beef from, things like that. You can buy it with Klarna, guys. So this girl ended up financing not just clothes, but then it ended up being car tires and ended up being a dining table. Then it ended up being concert tickets, then a washer and dryer set. Before you know it, she's financing $900 worth of Botox and filler injections. I mean, it spirals out of control quickly. You know, the ease of getting that loan and the ease of getting approved for that and taking that money is just too much of a temptation, guys. It really is. And the way that they're able to lure people in is not only with the ease of approval, but also with like the low payments, right? It makes it seem easy to afford with how low the payments are when you go for these loans. And these buy now pay later balances can get quickly out of control because both Affirm and Klarna can extend loans as large as $20,000 and interest rates can range all the way up to 36%, just as high as the highest credit card APRs that are out there. But now these buy now pay later companies are starting to see the losses add up now that too many people are getting overextended. Like Klarna, for example, they reported a 17% year-over-year increase in customer credit losses in the first quarter of 2025, hitting $136 million in losses. That's a firm who's based right here in San Francisco. They say that 3% of its Gen Z borrowers are not paying the company back in full across all its different loan plans. Some of them are even spending $1,000 on concert tickets. This was a big thing back when Coachella happened earlier in the year. You had a bunch of broke young people using buy now pay later to pay for those tickets. And it's very easy to fall into these traps, unfortunately. I did myself. I didn't use buy now pay later back in the day. That didn't exist yet, but definitely got caught up in the credit card game and added up some debt over the first few years that I could have one. And it was the same thing. You think you can pay it. Well, you charge a hundred bucks here. It's not that big of a deal. And then another hundred bucks there. Next thing you know, the bill comes and it's three, four hundred dollars and you can only pay 200. Now you're carrying a balance, you know, same thing. So earlier in the year, we talked about how they want to actually add the buy now pay later loans to people's credit scores. And Clarita, who is one of the biggest providers of the buy now pay later loans, just recently said that they would not share data about the bulk of its loans with credit bureaus until it gets assurances that its customers won't be unfairly penalized for using its payment options. The company Afterpay, who's also a buy now pay later loan company, said that they plan to withhold data until it has proof its customers won't be harmed as well. So what does that mean? Proof that customers won't be harmed. What are they referring to here? Well, right away, what I think about is because right now, buy now pay later loans are not reflected on your credit score and don't impact your credit availability or your debt to income ratio as soon as it becomes part of your credit score. Well, then all of a sudden, people aren't going to be able to be as approved for as many loans in general, including buy now pay later loans because their debt to income ratio will be higher. They'll be seen as a higher credit risk, which ultimately will lower their credit score, making it harder to get a loan. So the buy now pay later companies, of course, don't want this. Even banks are already telling people that using buy now pay later loans could definitely hurt your ability to get approved for a car loan or a mortgage in the future. As of right now, Affirm is the only major buy now pay later company that has started sharing all its customer data with credit bureaus, Experian and TransUnion. And Klarna right now is only reporting its longer term interest bearing loans, but not the pay in for installment loans that make up most of its U.S. business. That's how most people use it for. They use it to get that Grubhub ordered and get $35 worth of food and end up paying a hundred bucks for it. And right now, the way credit scores currently work is it penalizes borrowers for opening several new lines of credit in a short period of time. And that's kind of how buy now pay later loans work because every time you use it, you're opening up a new loan. So I wonder if the credit companies are going to start scoring that as the same thing as just using your credit card, right? Because imagine if every time you swiped your credit card, they consider that a loan application, then everybody's credit score would be in the toilet. So I think that's probably the model that they will move towards. And there's actually some evidence so far from Affirm that using buy now pay later loans responsibly and paying them off just like the credit card can actually raise your credit score. So we'll have to see how this is all going to pan out in the end. Personally, I don't see a whole lot of value in using these buy now pay later loans unless you use it for the four installments and you pay zero interest. And every single time you use it, you pay it off and you never actually pay any interest. So that would be the same thing, just like charging up your credit card and paying off the full balance every month. That I don't have a problem with. I think that is fine. It's a responsible way to use debt. But clearly, judging by everything we just talked about, this isn't how the vast majority of people are using it right now. Remember when I said a little bit ago that people are turning to buy now pay later because it's been harder to obtain credit? Well, if you take a look at your credit card APR rates lately, you might have noticed that the rates have been going up on the high end of the spectrum, but also going down on the low end of the spectrum, even though there's been zero movement in the Fed's interest rate policy. So this means that it's getting more and more expensive for people who are holding onto credit card debt and carrying a balance each month. And if you pay off your balance each month, who cares what your annual APR is on your credit card because you're never going to have to pay it. But what credit card companies are doing right now is they are increasing their APRs because they're looking at more and more customers as a risky bet as people start to add up their debt. And that goes back to what I was saying a minute ago. Imagine how that's going to look to different lenders once the buy now pay later data is fully integrated into the credit scoring system. I'm sure people who have four of those buy now pay later loans are going to be considered a much riskier bet than they are right now when it's not being disclosed. And so when credit card companies switch from a single APR to a variable range, it indicates that they're hedging their bets to be more cautious towards riskier borrowers with lower credit scores and more generous with more credit worthy ones. That's why I'm saying like, I don't even care what my APR is on any of my credit cards because I don't pay the interest. So it doesn't matter if it's 50%, I'm not going to pay it. Everything I charge, I pay it off at the end of the month and that's it. And one thing you should notice by now is that the more of a risk you are when it comes to debt, then the more interest you're going to pay. That goes for buy now pay later and with credit card loans. And the more payments you miss or the more debt that you have, then the higher your interest rates are going to be, especially once buy now pay later hits your credit score. And you know, one thing I've always found fascinating about these credit scores and the banks raising their interest rates on credit card holders and things like that is right now we're still in an environment where the Fed has not moved interest rates pretty much since the beginning of the year. They've been holding steady, but yet the interest rates on high yield savings accounts have been dropping since the beginning of the year. But the percentage that you pay on debt continues to go up. That is like the most unfair thing in the world and just goes to show you it's another way the financial system screws everyday Americans. And the APR on new card offers has increased for four consecutive months in a row now. And the average offer in July was 24.35 percent. That's your interest rate if you're getting a brand new credit card right now. And you better believe this is going to affect a lot of people because many people are carrying huge balances right now. Americans as a whole have a collective 1.21 trillion in credit card balance as of the second quarter of 2025. And I can't wait to see what the third quarter reading is going to come out at over the next couple of months, because I can guarantee you it's going to be higher, not lower. That number just continues to explode, just like the government's debt. You had 172 million customers carrying a balance on their credit cards right now with an average debt of over sixty three hundred dollars. So these credit card companies are getting rich off of your misfortune and your inability to control your lifestyle spending. You need to forget about what the Federal Reserve is doing as well, because even if they start lowering interest rates, it's going to have zero to little impact on your credit card APR rates, especially if you're carrying a balance. Guys, it doesn't really matter if you go from paying 25 percent interest to 24. Not really. The underlying message and lesson remains the same. Don't go into credit card debt. Don't charge things you can't afford to pay back. So let me know what you're doing to get out of debt right now. Let me know if this video has helped you in any way. And if you enjoyed this video, make sure you subscribe to the channel. And if you don't want to wait for my next video to come out, check out this one on the screen right over here. And I'll see you in the next one.