THE PAYCHECK TO PAYCHECK LIFESTYLE, HOW TO ESCAPE IT.
Each month, people in this country are struggling to make ends meet.
According to a recent survey from Charles Schwab, 59% of adults in the U.S. are living
paycheck to paycheck.
And I don’t think it’s an overstatement to say that living paycheck to paycheck is
regarded as an unpleasant way to live life.
There is no other way to put it.
In a world brimming with opportunities, and in a land regarded as the richest in the world,
living paycheck to paycheck is only selling yourself short.
It’s often synonymous with living in the moment, where you only have enough for that specific
period.
I can remember many times in the past when hopelessness silently crept up on me as I
used the last dollar in my wallet to balance the debts of the previous month, it would
leave me worried and stressed of how I would get by through the new month.
For many people, this could mean going home to eat what you can find, and possibly down
a few drinks before you sleep while still stressing over all your woes.
Only for you to repeat the same thing the next day, the next month and even the next
year.
In this lifestyle, you are trapped living in a cycle where you are working to pay off
debts, your savings are not increasing and you cannot even afford to invest in your retirement
plans.
As an enemy of financial freedom; living paycheck to paycheck can lead to serious consequences.
It is not a sustainable financial plan.
It breeds financial insecurity which is a threat to mental health.
Health experts have in fact warned that relentless stressing about money can undermine a person’s
sense of self-worth and personal meaning — a pattern of thinking that can lead to clinical
depression and even suicidal thoughts and behaviours.
Living paycheck to paycheck puts you at risk of accumulating debt.
Not only will debt payments eat away at your limited earnings, but they can also damage
your credit.
The more debt you pile-up, the more likely you are to default on payments, which can
seriously drag down and ruin your credit score.
Moreover, you will have no room to deal with unplanned bills.
For example, your car may break down, your home may be damaged or you could get injured.
What then?
You see, I know a couple of my friends who are living the paycheck life unconsciously.
And just because they’re making enough money to pay for their daily life necessities, and
a few extra things here and there, at the end of some months they would get a loan,
or ask me or some of my other friends for financial aid.
Which isn’t necessarily bad, but the thing is they don’t realize that they have a financial
self-discipline issue.
So if you can relate to the scenario I just painted and if you’re tired of living that
kind of life, then in today’s video, we’ll be sharing with you practical tips which you
can use to escape living paycheck to paycheck.
Method #1: Start something on the side that pays immediately
We live in a digital world, brimming with many online businesses and platforms.
It’s really an interconnected world with many people desiring to get something done
one way or the other, usually in the fastest way possible.
Hence, one of the best ways you can make some extra money, and hopefully in the long run;
gain your financial freedom is to start a side-hustle away from your 9-5 job.
To live a financially secure life, you have to find ways to create other streams of income.
It’s said that an average millionaire has 7 streams of income, but you don’t necessarily
have to be a million to have several sources of income if you can find ways to make a few
extra dollars here and there it’s still better than nothing.
Deciding to focus on your career and waiting till you start making a six figures salary
isn’t a bad thing, but it will sure take time, plus it comes with the risk of possibly
being laid off, in the future if things go south.
Some of my friends make a few extra hundred and even thousands online on digital platforms
such as YouTube, Fiverr, Shutterstock and the likes.
And I know a guy who makes a few extra thousand dollars by selling photos on Shutterstock.
So you can definitely make some extra money online.
There are many freelance digital marketplaces, and you can do things such as copywriting,
freelance editing and writing, web designing, being a graphics artists, social media managers,
virtual secretaries, and many other side jobs you can easily find.
Search it up and I’m sure you won’t miss something to do.
Method #2: Make a Budget that Prioritizes saving.
So everyone knows that they should control their spending right? and one of the best
ways to do this is to live on a budget.
However, although you might be thinking; ok that is so obvious.
Not everyone thinks so.
According to consumer debt statistics & demographics in America, the typical American household
now carries an average debt of over $137,000, and although yes, most of this debt is considered
“good debt” A.K.A a house mortgage, a good amount of this debt is due to lifestyle
inflation.
For some reason people love spending money they don’t have, but we’ll talk about
this later.
So one of the things you can do to leave the paycheck to paycheck lifestyle is to take
total control of where your money is going and deciding to set some aside.
Create a detailed budget that fully accounts for every dollar you spend.
Make a budget for the amount you spend on things such as your groceries, rent, utilities,
transport, entertainment, and so on.
Then proceed to budget some to save.
Even if your initial savings looks so little, start anyways and in time you will watch it
only grow.
Method #3: Reduce your Spending.
This one goes hand in hand with our previous tip.
When it comes to making smart money decisions and your ultimate goal; to live a financially
free lifestyle, cutting down on your spending might sound like an oxymoron, but it’s actually
one of the first and most crucial things you should do.
To reduce your spending is to save on items and areas where you are being careless with
your VERY HARD-EARNED money.
Spending every dime you earn (just like my friends) is what landed you in this mess in
the first place.
So when it comes to this issue, you have to be very disciplined with yourself and make
sure you stick to your budget.
I’m sure you’ve heard the saying; leaking holes sinks the ship.
And the same thing can be said about money.
So what you need to do is to first; find out areas where you are carelessly spending your
money, and then cut them out.
And one of the best ways to do this is by tracking your spending.
In the real sense of the word, this is easier said than done, but if you are patient enough
to track your spending for, say about a month, you should be able to identify the leaky areas
and make some adjustments or plug the holes (essentially, cutting it out).
One of the most significant ways to save money is to make effective and efficient lifestyle
changes.
Like eating out less, opting for a less expensive car, or choosing to pay less rent.
These changes are sure to free up some money for you to save.
The more you reduce your spending, the faster you can break free from the paycheck to paycheck
lifestyle.
It may not be possible to make big and drastic changes to your way of life right away, but
you can start with the small details.
Try to look for the smaller items in your budget that you can cut-out.
Maybe trim your grocery spending, make use of coupons, or reduce on entertainment by
choosing to invest in activities like reading, which is sure to improve your mental capacity.
Method #4: Owe no one nothing, but to love them.
Like I said earlier, people love spending money which they don’t have.
And that’s why a lot of them are in such a big financial mess.
If you keep piling-up debt, it can easily sink you into a very big financial mess, and
it will, unfortunately, become increasingly harder to leave the paycheck to paycheck lifestyle.
Debt is one of those tools that if used correctly can, in fact, prosper you.
But unfortunately, not a lot of people know how to use it correctly, so the safest thing
to do is to avoid it as much as possible.
Every time you are paying off your debts, it’s interest on money which you could have
saved.
All the interests, the fees, and the settlements which banks charge erode a lot of people’s
money.
Getting rid of debts is the most important step to make towards leaving a financially
stress free life.
Unfortunately, not a lot of people can control their desires, which unfortunately leads them
into this muddle.
Method #5: Understand your Spending habits.
Aside from cutting down on your expenditure, you have to take a step back and take a look
at your spending habits.
It’s only reasonable for you to have a grasp on where your money is going and be able to
track your expenses fully.
You see, if you know where your money is going you can control it.
When you start going on this fact-finding mission, like I mentioned earlier, you may
start finding leaks you weren’t aware of before which have been eating your money.
But now because you know where your money is going, you can plug the leaks.
As great as all this sounds, you won’t be able to do this if you don’t keep track
of your spending.
Method #6: Don’t compare yourself to what your friends or family have.
A lot of people and me included, struggle with this one.
We all live in a very materialistic society, and this reign’s true whichever part of
the world you come from.
Everybody cares about what people thinks about them; what they are wearing, what they drive,
where they live, what they eat, or even who they hang out with.
I used to care so much about what people think about, what clothes or shoes I was wearing,
what phone or watch I was rolling with, who I was talking to, and what I was spending
my money on.
Plus many other trivial things, which in hindsight when I look back were absolutely ridiculous.
Of course, I’m much older and wiser now and have somehow grown out of it.
I’ve come to realize that I don’t really care much about what people think of me.
And although by grace I’ve managed to overcome this social pressure.
This is something I personally know a lot of people still struggle with.
What I like to think is that, if you are personally comfortable with the way your life is, an example is
what you wear, where you live or what you drive, then own up to that.
Because I noticed, although one or two people might criticize you, most people have a lot
of their own personal issues and they don’t really care much about you.
Plus personally speaking, going into debt just to receive a few compliments isn’t
worth the stress of having to pay back the loan if you ask me.
Method #7: Limit your credit card usage.
This is a tricky one because countless number of people will turn to their credit card to
purchase everything from the mundane to life’s emergencies.
I know a lot of people who purchase just about every on their credit cards, and I see a lot
of this, with a few of my friends.
Whenever we go out anywhere, and they want to make a purchase, the first thing they do
is they remove their credit cards and swipe.
And I get it.
It’s easy, it’s convenient and it’s somewhat fun.
But you see the thing is, as convenient as credit cards are, many people aren’t consciously
aware or realize the interest they're also paying on that purchase.
To leave the paycheck to paycheck lifestyle, you have to limit your credit card use, because
the debt does pile up and fast.
According to a 2019 Experian Consumer Credit Review; on average, Americans carry $6,194
in credit card debt.
This is a huge burden which you don’t want to have to carry.
The rule of thumb when it comes to credit cards is, only use them in emergency cases.
Method #8: Automate your Savings.
Although this is the last method, saving should be by no means be the last thing you do, it
should actually be one of the very first if not the first thing you do when money lands
in your account.
The moment you receive your paycheck, you should put aside at the very least 10% into
an interest-earning saving account.
And I highly recommend that you automate this process, so that the moment you receive your
paycheck, 10% is automatically transferred into your saving account.
If you want to take this a step further, you can buy and hold index funds, invests in stocks,
bonds and so on.
So there you have it guys.
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Until next time.