“I couldn’t make ends meet. I was living paycheck to paycheck.”
“78 percent of U.S. workers live paycheck to paycheck.”
“Stop living paycheck to paycheck and sign up for our credit counseling service.”
The phrase “paycheck to paycheck” is a common one to describe a dire personal financial situation.
But I’ve been turning that phrase around in my head, and I don’t think it gets enough scrutiny.
Because in thinking about it, living paycheck to paycheck isn’t so bad, and in fact, I might go so far as to suggest that you strive to live that way.
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Paycheck to paycheck defined
Paycheck to paycheck is an expression used to describe an individual who would be unable to meet financial obligations if unemployed because his or her salary is predominantly devoted to expenses.
The crux of this situation, in practice, is that a person has their paycheck and their paycheck only. There are no savings to rely on, and (presumably) not enough money to create any.
But the phrase “paycheck to paycheck” does not necessarily imply any of that. To my mind, it implies merely that the paycheck is taken, used, and dispensed with in its entirety, and in isolation.
One paycheck…used up. Another paycheck…used up. And so on.
Far from being something to avoid, I think that’s great. I think that’s something to aspire to.
Because if you’re dealing with one paycheck at a time, without anything external, that means you’re allocating your paycheck entirely. Which is what I want everyone to do.
How to live paycheck to paycheck
I believe that the single most important action you can take to become financially secure is to allocate your income entirely, and in advance. So that means that before the month begins (I like a monthly basis), you figure out how much money you’re likely to make, and to make a plan: allocate to all your bills, and then allocate to various spending and saving categories, including your debt. See the following equation:
Income = Bills + Expenses
If you do this and stick to it, then you’ll have no extra, unaccounted for money. You’ll know exactly what you’ll spend. You know exactly what you’ll save.
You are, in a way, living paycheck to paycheck. Every dollar of every paycheck is accounted for, with none left over.
The only way this is any different from the people who traditionally are described as living paycheck to paycheck is that in our plan, there is facility to put money away in savings (as a bill or an expense, I don’t care how you track it).
Do you have what it takes to live paycheck to paycheck?
Some people don’t feel like they are stuck in the trap of never getting ahead and having to resort to credit cards.
I’d love to say that anyone, anyone, can get themselves out of that trap right now. But that’s not true. Some people are in really unfortunate situations (and before you judge, not all of them are of their own making).
But while some people can’t get out of their trap right now, a lot of people can. Probably you.
And I don’t want to hear that you’re one of the trapped people until you’ve made a plan for your money and stuck to it. For at least a month (the hardest part). For at least three months (the point where you start to slack off). For a year.
Because having a plan for your money can be equivalent to making a few hundred dollars extra each month. That’s not hyperbole; I’ve both seen it and experienced it.
If you’re stuck in a trap, why not try my plan, and dig yourself out? What have you got to lose?
Together, we can all strive to live paycheck to paycheck. Just not in the way that most people think of it.
But enough about me. Are you living paycheck to paycheck? What does that mean to you?
