Stop Living Paycheck to Paycheck

September 13, 2008

I read a statistic today that blew my mind:

21 percent of those with salaries of $100,000 or more are living paycheck to paycheck

What Does a $100K Salary Mean to You?

I remember the days when I was making $21K per year and supporting a family of three. I remember thinking that if I made $100K with my frugal lifestyle; I could practically live like a millionaire. Well, my income has gone up dramatically and so has my lifestyle. But, I’m definitely not living like a millionaire. I still have to worry about the cost of gasoline and groceries. I still have to weigh my purchases against all of the monthly bills and unexpected costs. The only difference between then and now is that I have some cushion to fall back on. One day, I hope to be a millionaire and still live a frugal lifestyle. Until that time comes, it’s nice to know we can survive a couple of missing paychecks.

Big Hat, No Cattle

I still laugh about this saying, years after I first read it. That’s what one millionaire in Texas had to say about another person in the book, The Millionaire Next Door. When I read this great book, it was the first time I realized that high income doesn’t always equal wealth. Having been low income my entire life, I just assumed that rich people had high incomes and poor people had low incomes. Nothing could be further from the truth. The real truth is that saving and investing equals wealth. A high income won’t create wealth or protect those who never save. As soon as their income is interrupted, they are just as vulnerable as anyone else. Foreclosures are affecting everyone.

Protecting Yourself and Your Family

This is a no-brainer. Saving up a couple thousand dollars could mean the difference between keeping or losing your home. It could mean the difference between paying rent or getting kicked out of your apartment. It could mean the difference between years of struggle or a minor bump in the road. I know people who wouldn’t dream of being uninsured, yet they have no savings to fall back on. They are leaving their families exposed to all matter of financial horrors, simply because they want to live a lifestyle beyond their incomes. It doesn’t make good financial sense. The new car or the trip to Hawaii won’t help you when your income disappears. Having some savings will.

What Does your Future Hold?

As time passes, the benefit of saving and investing becomes less about small events and more about the big picture. Everyone has a different dream for his or her future. But one theme is consistent; the more money you have put away, the more choices you have available to you. If you envision a life of leisure, you will need money to travel or play golf. If you would like to volunteer or to help others, you will need money to sustain yourself. If you wish to give to worthy causes, you will need money to donate.

The Bottom Line

The bottom line is so obvious that I could have skipped this section. The only way to stop living paycheck to paycheck is to save money. The only way to avoid big problems from small setbacks is to have some funds set aside. And, the only way to have a future that you are in control of is to become financially self-sufficient.

Saving and investing are the vehicles to get you there.