You might imagine that as someone who screams financial literacy from the mountain tops the look on people’s faces when they hear that I choose to live paycheck to paycheck. It’s irresponsible! It contradicts everything that I advocate for. It makes me a hypocrite! Well let me explain first my reasoning.
I was always taught as a child and young adult that I should be saving. Save SOMETHING! Save 1/3, save for retirement, save to avoid going into debt, save 6 months of living expenses, etc. It wasn’t until I learned about inflation that I realized that “saving is for suckers!”.
I’m sure someone somewhere reading this is livid right now. Saving is for suckers? Since when?! I must not know what I’m talking about. No, the discipline around saving is important to cultivate but the accumulation of cash for the sake of accumulating cash is where many people go wrong. Gone are the days of the double digit interest rates on savings accounts, money markets, and CD’s. When you hold cash in deposits or under a mattress (god forbid) you’re actually LOSING money due to inflation. That simply means that the value of your money is decreasing every day while you are steady holding on to it.
So what can be done about this? And what does this have to do with me choosing to live paycheck to paycheck?
Simple. After reading Rich Dad, Poor Dad by Robert Kiyosaki I became sold on the idea of “paying myself first”. Then after reading George S Clason’s book, The Richest Man in Babylon I decided to make sure that my payment to myself was always 10 percent of what I made (or more). Applying these principals, I always take from my income and “pay myself” before I touch it for any bills, expenses, or debts. Of course coordinating that involves my knowing what’s coming in or going out and planning for it (budgeting). After I remove that money from my spending accounts, pay my bills, and account for the expenses from the time I get one check until the time I get the next, I’m literally in a check to check cycle. I sacrifice, I go without, I count down the days until my next check, however I’m CHOOSING to do so by choosing to pay myself first.
“But you said saving is for suckers!” And I stand by that. At present I have absolutely no liquid savings. So what do I do with all the money I pay myself? I immediately put it to work making me more money.
So yes, I choose to live paycheck to paycheck because I understand that money held will slowly lose value due to inflation. I have mastered the discipline of saving. I believe I should pay myself first and take 10% of the money I make for myself.
…sometimes however, I do give myself a bonus.