It’s a sad truth in America that most people live paycheck-to-paycheck. The average American waits to get their paycheck and then promptly spends most, if not all of it, never getting ahead and never saving for the future. When emergencies happen, they turn to credit cards or worse, payday loans to get through it.
Living paycheck to paycheck is no fun. It’s extremely stressful and places a large burden on your shoulders. Next to having debt, living paycheck to paycheck, or essentially living on 100% or more of your income, is not wise. So how exactly do you break the cycle and stop living paycheck to paycheck? In this article we’ll explore a little bit of why you’re living paycheck to paycheck and then offer some tips to help break the cycle.
Understand the System
One of the first things that you have to realize is that you can actually live on any income; it’s just a matter of choice and how you want to live. What did you do before the job you have now? How did you live in college? Your standard of living and your income are not tied together. Just because you get a raise at work does not mean you need to immediately raise your standard of living. We live in the richest nation in the world and are blessed with opportunity and the ability to choose our destiny. You have a choice in how you live!
However, we must remember that all of us are slaves to the system that we live in. One reason most Americans have debt is because of how society is designed. American society is a credit-based, debt-driven society. Even our own government is in debt.
Credit card companies play on people’s emotions and desire for instant gratification. They employ enticing tactics to convince you that you need their services to live a good life. They’ll tell you that a credit card can help you get the stuff you want or need now and you can pay for it later. But what they don’t tell you is that the interest you pay on the stuff you buy with your credit card adds up quickly. It’s very common to end up paying double or triple for that item that you needed “right now” when you have to go into debt for it. Financial guru Dave Ramsey is famous for saying “Debt is dumb and cash is king!”
In addition to this, society is designed to make you feel inadequate if you don’t buy more stuff and don’t buy bigger and better things. You’ve probably heard of the old saying that describes how people are always trying to keep up with their neighbors. The average American buys stuff they don’t need with money they don’t have to impress people they don’t care about. Think about how insane that sounds! It’s this mentality, in combination with our advertisement rich media-driven society, that makes it hard to resist going into debt.
But you don’t have to live this way. In fact the elite 1% of the nation don’t live this way. In the end, there are only two ways to break the cycle to get out of debt and stop living paycheck to paycheck: 1) Start saving money and living below your means, and 2) Make more money but don’t increase your standard of living.
Start Saving Money (And Living Below Your Means)
Learning to accept your situation and deciding to live below your means is something that you’ll have to do within your mind before you’ll ever see results. You have to make the choice that it’s more important to be financially secure then it is to have the latest and greatest stuff with all the bells and whistles. I’m not saying you can never have nice things. I’m just saying that we all need to learn to delay gratification. Save your money and make that purchase instead of borrowing money to get it.
To start altering the trajectory of your life you must learn to live below your means. This means buying stuff that you can actually afford including cars, homes, clothing, and food. One of the first things that you can do is to start saving money. You can start saving any amount even if it’s just a dollar. There are many ways you can do this. You can set up automatic paycheck transfers or setup transfers to occur each time you make a purchase. You can even set aside some additional money whenever you come across it. Start small but set a reasonable goal that you believe you can achieve. See if you can just save $100. Next, strive for $500, and then $1,000. Little by little you will reach your goals. It gets easier over time and you won’t miss the money you are saving because each transaction is small.
When I was a child I learned the concept of delayed gratification when it comes to buying things. Like most children I wanted lots of stuff and I wanted it now! I remember seeing commercials on TV and then wanting the things that I saw. Of course, my parents didn’t have the money to run out and get me everything that I wanted at a moment’s notice. I realized that getting these things would take patience and that they might ultimately be up to me to acquire.
I decided to start saving any money that I could acquire while also writing a list of everything that I wanted to buy. I kept this list updated and over time I was able to purchase many of the things that I wanted. Periodically, I would add items to it, and even rewrite the list occasionally. In doing so, I would remove things that I decided I no longer wanted. What I learned from this practice is that after a few days or weeks, I really didn’t want some of those things that I had originally put on the list. The allure of the commercials had worn off and these items were no longer important to me. This idea grew and today I still maintain a similar list.
Earn More Money
Earning more money is a little bit more difficult then saving money. However, you do have choices and decisions to make that will affect your income. You can choose where you work and how much you’re willing to work for. It might feel like you don’t have a choice but you do. And if you have saved up a good sum of money, and built an emergency fund, you’ll actually have more power to make more choices. Simply having a small cushion of money can enable you take more risks in the workplace.
However, in today’s economy it’s often necessary to work multiple jobs to get ahead. In fact, many people, including myself, have a primary job and then work on side gigs for additional income. Developing a side gig, like consulting, blogging, writing, selling crafts at a show, etcetera will create a second income source for you. Once you start bringing in a secondary income, you can start funneling that money into your savings or start some investments. You’ll also want to take some of that money and start re-investing it in yourself and your efforts to increase your income even further. However, it’s important to not allow yourself to become reliant on that additional income. If you do, you could be setting yourself up for problems if that money goes away for any reason.
It’s important when choosing a side gig to look for something that’s passive or semi-passive. This is the way to grow your income over the long term. If you focus your efforts on making passive income, then the money will grow over time. If you work really hard (think maybe 16 hour days) then eventually your side income could even surpass that of your primary job. And when this occurs, you may be able to quit your job and focus your time and effort on something that you really enjoy. In either case, there are only 24 hours in a day. Passive income will afford you the ability to increase your hourly rate and multiply your income.
Breaking the cycle of living paycheck-to-paycheck is tough but it can be done. You have to do things in small steps. It really is accomplished one day and one dollar at a time. Just like how debt accumulates slowly with small purchases over time, so too does getting out of your predicament. Rarely will a quick fix or get rich quick scheme ever work. Slow progress with small incremental changes will eventually lead to big changes and success.