Money-Savin’ Mama has some tough love for you this New Year. It stems from a phrase I hear employed professionals utter far too often. “I live paycheck to paycheck,” they lament.
Sorry, but I don’t buy it.
There are people who do live paycheck to paycheck. They typically work long hours for low pay, support kids and have faced unthinkable, unfortunate life circumstances.
But if you buy fancy coffees at a coffee shop on a regular basis, you do not live paycheck to paycheck.
If you go out to the bar or eat at restaurants, you do not live paycheck to paycheck.
If you always upgrade to the latest and greatest tech toys or fashion trends, you do not live paycheck to paycheck.
If you spend money on trips, cigarettes, mani/pedis or sporting events, you do not live paycheck to paycheck.
And if you put more than a third of your paycheck toward housing or more than 10 to 15 percent toward a car payment and other transportation costs, you are not living paycheck to paycheck.
You are simply unwisely spending the money you do earn.
Does this mean you make enough money to do everything you want? No. That’s why you need to prioritize. Learn to distinguish your needs from your wants.
In his 2004 book “The Automatic Millionaire,” personal finance author David Bach explained the genesis of his most famous principle, The Latte Factor. A woman named Kim called him to the carpet, saying his advice to save $5 to $10 a day was unrealistic because – you guessed it – she was “living paycheck to paycheck” and “barely making ends meet each month.”
Bach walked her through a typical day’s expenses. First, she stopped at Starbucks for a nonfat latte and muffin. At 10 a.m., she bought a supplemented juice and PowerBar. Before lunch, she had already spent $11.20.
He showed her that, through the magic of compound interest, her daily latte would cost her nearly $2 million by the time she retired.
If you can trim the fat (and nonfat lattes) from your budget, even for a few months, you’ll likely find enough money to snowball a debt payment and/or stash some cash in an emergency fund. Track your expenses for a month or two to see where your dollars are really going.
Still struggling? Financial guru Dave Ramsey suggests getting “gazelle intense” – trim every last bit of fat until you are a lean, mean, money-saving machine. Because in truth, you can’t afford not to save for your future.
Here’s the key, though. It’s more than just making the numbers work. It’s your attitude. If you think you have no money, you will have no money. You won’t treat the money you earn with the respect it deserves. Realize the power of your paycheck.
Too many people fall into the trap of thinking that spending cuts are painful. That not spending money on non-necessities is a deprivation. Instead, you need to adopt an attitude of abundance and prosperity.
Look at what you have instead of what you don’t. Be grateful for what your money does allow you to do. Appreciate the things in life that don’t cost any money. And learn to love the money in your bank account more than the cup of coffee in your hand.
Sherri Richards is a thrifty mom of two. She blogs at topmom.areavoices.com