We’ve all heard the jokes:
- “I’m so broke, I can’t pay attention.” – Ron Kittle
- “A bank is a place that will lend you money if you can prove that you don’t need it.” – Bob Hope
Being broke is no laughing matter. When I look inside an empty wallet, I’m not laughing.
Living Paycheck to Paycheck
Some call this “living hand-to-mouth,” but the outcome is the same: people stretching their salaries until payday rolls around again.
No money for savings, none for investing, no retirement plan.
Praying the ancient air conditioning unit will hold on through just one more summer.
Stressing because the rent is due the same time as the baby’s pediatrician appointment.
That’s living paycheck to paycheck.
What’s the Problem?
In January 2017, The Fiscal Times reported nearly half of all Americans live paycheck to paycheck. When surveyed, the five most prevalent responses to why we live this way were:
- Credit card debt (24 percent)
- Employment struggles (22 percent)
- Mortgage or rent (18 percent)
- Health care costs (10 percent)
- Taxes (4 percent)
Break It Down for Me
According to Statista, American’s median household income is over $1,300 less than it was in 1999. The Pew Research Center reports America’s middle class households have suffered under wealth stagnation over the past three decades.
Yes, you read that right: three decades.
The average rent for a tiny one-bedroom in New York City is $3,100. In Miami, expect to pay $1,700. San Diego will set you back $1,430.
Nearly half the residents of Chicago admit they can’t afford to live there.
Rent continues to rise around the nation. For example, it rose 10.2 percent in Denver in 2015, 8.5 percent in Kansas City and 7.2 percent in Portland.
Monthly living necessities are another story and vary across the country. Estimated 2015 monthly expenses for a family in Houston run $5,051. San Francisco will cost you $7,649 per month. Washington, DC? $8,874.
People are searching for ways to combat this hand-to-mouth existence. We have become more transient in our employment. Long gone are the days of spending 40 years with the same company.
We also change careers or industries when it gives us a break from the paycheck-to-paycheck routine. According to the U.S. Bureau of Labor Statistics, the employment prospects for insurance sales agents is projected to rise faster than the average rate of all occupations from 2014 to 2024. U.S. News lists insurance sales agent as #2 in their Best Sales and Marketing Jobs rankings.
Solutions Involve Choices
What I notice about the reasons why I’m broke is they are fixable through my own actions and decisions.
Allow me to explain:
1. Credit card debt. Simple: don’t use credit cards to keep up with a lifestyle you know you can’t afford. Traditional financial wisdom will tell you to cut up the cards you have to stop spending money you don’t have. Develop the fiscal discipline that later allows you to use credit cards as a business tool rather than keeping up with a lifestyle you can’t afford.
2. Employment struggles. If your job isn’t paying enough, start your own business on the side. Consider the insurance business. A home-based moneymaker is far superior to a second punch-a-clock job if you have a family and want more time at home. Simply getting a second or third job is jump asking to compound the problem. It’s the same linear thinking of trading MORE time for dollars.
3. Refinance mortgage, downsize or even rent. If you’re living in a house you can’t afford or an apartment that’s above your means, look toward moving. If that’s not an option, investigate refinancing at a better interest rate. Take in a renter. Utilize AirBNB to monetize a room or couch you’re not using. Taking on this debt was your choice, so find ways make it work.
4. Health care costs. Cut this by getting healthy. Go for a walk. Cut the carbs. Hit the gym. Pay attention to elections: make affordable health care an issue. Increase the deductible on your health insurance and be willing to pay out of pocket when need regular checkups.
5. Taxes. Most people will want to simply address this by waiting for favorable legislation. That will take years, you need money today. Meanwhile, it’s another reason to consider starting your own business. Normal expenses in your everyday life can actually be tax-deductible expenses as an independent contractor, freelancer and aspiring entrepreneur.
The cold, hard reality of the situation is this: there’s only one way to get out of the paycheck-to-paycheck lifestyle: make more and spend less.
Leaving the Marine Corps, I chose to focus and take 100% responsibility of my financial situation by focusing clearly on income creation and control. The results? I haven’t taken a paycheck from anyone but me since 2001, broke six-figures of cash flow a couple years after that and made my first cumulative million dollars in income before I turned 35.
Give a man a fish and he’ll eat for a day. But teach him how to fish, he’ll eat forever.
It is that simple, and that difficult. But it is ultimately a personal decision we all must make.
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