Why Millions Live Pay-Check to Pay-Check

Last week we dove into a few articles that I found on Stats Canada that looked into average earnings, savings and net worth. After that the next logical step is to dig a little deeper into the how and why those stats came to be.

78% of people live paycheck to paycheck, what does this mean? Investopedia defines living paycheck to paycheck as an expression “that describes an individual who would be unable to meet their financial obligations if they were unemployed. Those living paycheck to paycheck devote their salaries predominantly to expenses. The phrase may also mean living with limited or no savings and refer to people who are at greater financial risk if they were suddenly unemployed or faced another financial emergency.” 49% of people say high monthly bills are the culprit for them living this way.

Overspending

46% of people surveyed stated lack of budgeting and financial planning is likely the main reason they are living paycheck to paycheck. Personally I think that is an absurd way to live, the idea that, “it will all come out in the end” is a sort of lifestyle that is definitely not for me.

Reasons they may think this way:

• Many believe planning is too difficult
• Worry it won’t allow them to have any fun, thus keep prioritizing wants over needs

The issue is you have no idea what you can afford or not so you will never be able to get out of this. At the very least I think everyone should go through a tracking exercise. Even if you don’t implement a budget I think simply knowing where your money goes will have at the very least a subconscious effect.

The next highest reason for living paycheck to paycheck was Low Income at 44%, which, in my opinion is our first perfectly reasonable response. If you fall into this category that’s fine, there is no shame in taking whatever work you can to put food on the table. This is the time to invest in yourself so that you can land a higher earning job in the future.

• Budgeting here is increasingly important as every little cut you make will make a larger impact
  • Perhaps this may even allow you to set a small amount aside incase something unexpected pops up or even to get some savings rolling

Which brings us to our next reason at 35% Unexpected Emergencies. Whether its car repair, medical, loss of job or major appliance breakdown over one third of people reported the reason they are living paycheck to paycheck was for unexpected reasons. This further illustrates the importance of budgeting and having a financial plan incase these things happen. Let me rephrase that last sentence, “when these things happen” as they most certainly will.

The remaining stated reasons were:

• 32% Rising Cost of Living
  • Americans spend on average $3,372 per month on essentials

Reported areas of Cost Cuttings

• 63% make meals at home and pack food
• reduce non essential at 57%
• 50% shop second hand

Thinking that leads to you staying broke

• “Everyone is having a hard time, so its not my fault”
  • This line of thinking is likely only partly true and can turn into a lifetime of excuses. Chances are there is at least one thing you can change to better your situation with a little discipline
• “It’s not my fault its X, Y, Z”
  • The main issue with this is that it leads down the slippery slope of never taking responsibility and getting yourself stuck in that negative mindset

Taking a cue from the secretly wealthy

Let’s take a cue from the secretly wealthy to aid with our budgeting and lifestyle choices. Typically you will see the secretly wealthy in nice comfortable attire that is unbranded. They don’t feel the need to flaunt their wealth and neither should you especially if you are living at or near paycheck to paycheck

Another thing they typically do is avoid talking about money or announcing how successful they are. There is little to nothing to gain by this. Why do they do this? One reason is likely that they are afraid people will treat them differently if they discover they are rich. Which I think is certainly valid.

Driving around in a practical yet understated vehicle. Most popular car manufacturers for millionaires are: 1) Toyota 2) Honda 3) Ford 4) Lexus 5) Subaru Driving something modest simply means someone is not all about appearance and values practicality over extravagance

Keeping a laid back attitude and carrying oneself with ease and humility are true signs of being secretly wealthy. There is nothing saying that we can’t attempt to mimic these traits to get in the right head-space. After all true wealth is being content in what you have and the ability to find happiness in the small things

Thats all for this week folks. Thank you for reading and I hope you enjoyed. If you would like to support me the easiest way is to subscribe over on my youtube channel or simply return here every Monday for my next blog post.

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I hope you all have a great week!