Eight Ideas for the 78% of Americans Living Paycheck to Paycheck

This week, Harris Poll released the stunning results of a survey that indicated that a whopping 78% of Americans currently live paycheck to paycheck. Some of the other stunning findings from this survey:

+ Nearly four in ten (38%) of Americans don’t participate in a 401k, IRA, or similar retirement plan.
+ More than half (56%) of American workers feel they will always be in debt
+ More than half (56%) of Americans also save $100 or less a month
+ Almost one in ten (9%) of American workers making more than $100,000 per year are living paycheck-to-paycheck

Perhaps just as amazing is this Bankrate survey, which indicates that 57% percent of Americans don’t have enough cash to cover a $500 unexpected expense, and that half of Americans with an income of over $75,000 a year don’t have enough cash to cover such an unexpected expense.

Here’s the reality: the vast majority of Americans are completely unprepared for any kind of unexpected financial event. Something as simple as a failed car starter can send their financial life whipping in the wind, without a clear path for handling it. Something like a job loss or a major unexpected illness will bring about very rapid changes in their entire way of living.

That’s a bleak picture, no matter how you slice it. It’s also a picture that many Americans simply refuse to face. Instead, it often sneaks up on them in the quiet moments of reflection: in the shower, on the subway, while driving kids to soccer practice, in bed just before sleep. It’s also there, in the background of life, as a constant shadow.

I used to be in this exact boat. We had tons of consumer debt. Our non-mortgage debt was in the six figures. I remember that exact feeling all too well: the feeling of subtle dread at getting the mail, the feeling of worry when I was in the shower, the desire to buy things a little more and party a little harder just to prove to myself that life was okay.

It wasn’t. We almost fell off that proverbial cliff.

Fast forward to today. We’re debt free. We own our own home without even a mortgage. We have more than adequate savings for retirement, healthy savings for our children’s education, a huge emergency fund, and extra savings beyond that for things like car replacements. We’re on pace to retire early.

The difference is night and day, not just in terms of our finances, but our overall quality of life. There were definitely moments that were not easy along the way, I would not trade my current life for my old life for virtually anything.

Here’s the thing: most Americans are where I used to be; relatively few Americans are in the financial place that my family is at today. Between the two groups, there’s a field that looks quite treacherous and challenging, but it’s actually not nearly as bad as it seems.

Here are eight things I want to shout across that treacherous field, ten things I want to shout to my past self and the 80% or so of Americans that are in that same boat.

“If you’re convinced you have to spend money to enjoy life and that more joy comes from more spending, you’re making the single biggest financial mistake you can make!”

You don’t have to spend much money to enjoy life. There, I said it.

Study after study has backed up this fact. Once you meet a certain income threshold, one that’s somewhere between $30,000 and $70,000 a year depending on where you live, additional income doesn’t add any additional happiness to your life.

Why? The purchases you make beyond those covering your basic needs do not add any sort of lasting happiness to your life. Any quality of living improvement that comes from spending money beyond that basic level is eaten up by the stress brought on by having less financial flexibility and more career dependence.

Let’s put it a different way. Let’s say you make $60,000 a year. $35,000 or so covers your basic living expenses – basic shelter, basic food, basic clothing, basic utilities, a small amount of entertainment. You have some choices with the remaining $25,000 a year, but the reality is that if you spend that money on things that will bring you some degree of happiness, that happiness is counterbalanced by the stress of spending everything that you earn.

You put yourself on a financial tightrope where one misstep can send things in your life crashing to a halt.

But wait a second – doesn’t it feel really good to splurge?

“You really don’t need most of the stuff you spend money on – it just provides those little bursts of happiness that don’t last and leave you feeling miserable!”

The reality is that most of the things that we spend money on beyond our basic needs provides a little burst of momentary joy that quickly slides away and leaves us roughly at our base level of happiness that we were at before.

Think about it. You buy a new television for your family room and the process is really fun! You love having this big, bright new television in your family room! It feels great!

Flash forward three weeks and it’s just a device sitting in a corner on which you watch the same old television programs that you were watching before you spent $1,000 on that new television.

You go out to lunch with coworkers and it’s fun! You have a few laughs together and you drop $30 on the check.

Two days later, no one can even remember where you ate. Why not just eat with the same crew out of a brown bag in the office or go to a park or something and save yourself the $30?

This happens over and over again. You buy some item and have a burst of fun doing it, but then that new purchase is forgotten or becomes part of the normal landscape of your normal unchanged life. You’re doing the same things you do every day without any real change.

That’s the reality of most of the things we spend money on beyond our basic needs. They provide a little burst of happiness that simply doesn’t last. It vanishes, and we’re left with the same life we had before. Often, we completely forget the purchase at all.

But what we don’t forget is the stress from not having enough money to feel secure or to make ends meet. We spent our money on a bunch of forgettable stuff, and now we stand in the shower hoping that the car will start this morning because there is no way we can afford this right now. Even if the car starts, the whole thing is still stressful.

The vast majority of spending beyond our basic needs matches this pattern. It gives us this little burst of happiness that fades so quickly, and we’re left in slightly worse shape than before.

Most people get on board with the idea of constantly buying things. They want constant little bursts of pleasure in their lives and keep riding that wave, but underneath that is a bedrock that’s wearing away. It’s not built on anything, and when it crashes, it crashes hard.

“Your reward for working hard is low stress and fun! Neither involve spending money!”

“I work hard! Shouldn’t I have fun?”

Absolutely, but fun does not have to equate with spending money! Spending money and fun are two completely different groups of things with some overlap, but the amount of fun things to do that doesn’t involve any significant spending money is enormous.

Everyone’s different, of course, but I can literally list hundreds of things I enjoy doing that involve very little spending. I love to read. I love to go on hikes. I love to go to the park and play soccer. I love to make meals from scratch. I love to play board games with my friends. I love to go to community events. I love to watch occasional television, but I’m really picky about what I watch and I don’t bother with just anything. I love to do a slow Wikipedia crawl where I’m learning about new things. I love doing some types of exercise (again, some things I don’t enjoy, while others make me feel great). I love doing things with my family, even simple things like just going on a wandering walk.

I can go on and on and on like this. There really is no such thing as boredom in my life.

The thing is, unless I’m specifically choosing to do so, none of those things involve spending money. I mean, I can always buy a new board game, but I don’t need to – I have a lot of games on my shelves. I can always buy a new book, but I have a ton of them already and a ton more are available at the library.

However, fun is about doing things, not buying things. It’s about using the things you have to have a great experience, not simply buying more stuff that you may or may not have time to use or enjoy.

I don’t want to buy books, I want to read them. I don’t want to buy games, I want to play them. I don’t want to buy sports gear, I want to play sports. I don’t want to constantly upgrade my camping equipment, I want to go camping.

Fun comes from doing, not from buying. The little burst of pleasure that comes from buying doesn’t last long and you’re right back where you started, except with a little less money in your pocket. However, the experience of delving deep into doing something you truly enjoy is something that lasts and lasts and it costs almost nothing at all.

“A lot of modern culture works to confuse your sense of needs and wants!”

I’m not even talking about advertisements. I’m talking about much of the actual culture – television programs, magazine articles, news reports, music, films, everything. The vast majority of it depicts aspirational lifestyles adorned with products of all kinds that are put there to convince you that you need those things to have the great life that’s being depicted.

There’s a rich, well-dressed, beautiful family on television. In the back of our minds, we want to emulate some of the things that they do in order to be more like them… and the easiest thing to do is to buy some of the stuff they have on the table.

There’s a news report about the benefits of some life-changing product. It sounds great. We want some of those benefits, so that product gets lodged in our heads and nudges us toward a purchase.

A new restaurant opens in town and receives breathless media coverage, even though the food and ambience really isn’t anything new. You hear about it and suddenly you want to go, to enjoy what you think will be a great meal and be a part of something.

It’s subtle, but it’s constant. We are constantly being pushed to spend money on something new, on something more than what we have. We are constantly receiving hints that in order to be happy, in order to be smart, in order to be beautiful, we need to buy this new product. Every single psychological button we have is being pushed, leaving us feeling somehow inadequate if we don’t buy.

It’s hogwash, every single bit of it. You already have a rich life. You don’t need stuff to make it rich. You don’t need expensive “experiences” to make it somehow great – it already is great.

Don’t let the airbrushed images of what someone else wants to sell you convince you that your life isn’t already amazing.

“Most of the things that create lasting happiness don’t involve spending money!”

If there’s one key truth I’ve figured out in my adult life, it’s that the only way to anything approaching lasting happiness is contentment with yourself and your life. If you’re content with what you have – if you aren’t constantly seeking more, more, more – you’ll find that happiness naturally bubbles up in your life.

My happiest moments in the last few months came from feeling a lack of major stress in any area of my life. It came from doing something simple that I really enjoy, like curling up for three hours with a great book or going on a six mile hike through a gorgeous park. It came from spending time with people whose company I deeply enjoy.

Those experiences were on top of a foundation of life meant to produce contentment. It came from taking simple steps to keep my stress low – meditating every day, putting aside devoted time for hobbies, keeping my body in decent shape through exercise and better diet, and so on. It came from staying on top of known stressors in my life and taking care of them before they got out of hand.

Part of that, of course, is taking care of money.

“Being in bad financial shape adds constant stress to your life, which contributes to feeling absolutely awful!”

Financial uncertainty provides a cloud of constant stress over your life that drags down everything. It is really, really hard to find a state of contentment when you are living under a constant cloud of financial threats due to living paycheck to paycheck. Without that contentment, it becomes even more tempting to just spend money to have that burst of joy, to feel good for a while.

It’s a cycle, one that’s very hard to break, of course.

When I was stuck in that cycle, I constantly felt a glimmer of worry about finances. I was often afraid to check the mail. I wanted to avoid bills. I sometimes had to juggle credit cards to avoid public embarrassment. I wondered at night if I was ever going to achieve any of my dreams. My thoughts in the shower were about how things felt directionless.

And that’s just when things were flowing along normally.

Anytime anything went even slightly wrong, the panic and worry crept right up on me. I would get upset so easily at unexpected financial events because they usually meant some sort of crisis. Almost always, I had to juggle things very carefully to avoid a meltdown.

Sometimes, I did melt down. I remember some very painful moments along the way.

All of this added up to a lot of stress, and that stress subtly wreaked havoc on my health. I gained weight. I didn’t feel good. I got sick quite often. I felt like I was completely lacking energy.

Yes, some of the stress was professional, too, but that was also led by the financial stress. I couldn’t mis-step at work. I couldn’t afford the risk. Standing up for myself at work was a very risky proposition, especially after our child was born.

Stress was eating me alive. It was making me unhappy. Poor financial decisions were right near the core of it.

“When in doubt, cut out expenses! You can always bring them back later!”

What can you do? Cut the expenses! Cut, cut, cut! Cut out everything that isn’t essential and build back from that later on!

Empty out your closets and sell off everything that you’re not currently using or going to use in the very near future – if it’s just sitting in storage, it’s just locked-up money. Don’t dream of using it – sell it and use the money to patch up your finances.

When you move, move to a smaller place, not a bigger one. It’s cheaper, there’s less to upkeep.

When you replace your car, get a late model used one – or consider whether you can live life without one.

Cut your cable bill. Cut your cell phone. Cut your internet. If you can’t imagine living without those things, try. Turn them completely off for a while and find out that your life won’t fall apart without them. It won’t!

Eat at home! Make your own meals! If you want to eat outside the house, pack a picnic lunch, toss it in a bag, and go eat somewhere beautiful! Eat your lunch under a tree in the park! That’s far better scenery than a $100 restaurant!

Dig into hobbies that involve doing things rather than buying stuff. Read books that you borrowed from the library. Go to free community events. Start a garden. It goes on and on. Cut back on your hobby spending that isn’t associated with the multitude of free things.

Cut, cut, cut! When in doubt, cut! Sell that stuff! If you end up really regretting one or two of those choices later on – and, trust me, you won’t – you can always get it back.

“When in doubt, ask yourself if you’ll remember this when you’re eighty!”

This is the one question I’ve come to ask myself when it comes to purchases. Will I really remember this purchase when I’m eighty?

It’s such a powerful filter. It gets rid of so many meaningless day-to-day purchases. I won’t remember this candy bar when I’m eighty, so why am I buying it?

Here’s what I will remember about the food I eat when I’m eighty. I’ll remember maybe one or two meals eaten at restaurants with great friends and family – and that’s fine. I’ll remember a few meals that I made myself from scratch for a dinner party at home with friends. That’s it. Everything else? Why bother spending more than the minimum on it?

What will I remember about the cars I owned? I barely remember anything from the car cycle that I owned before our current one. Honestly, it’s nothing more than a tool to get from point A to point B, so I just buy the one that does it at the best bang for the buck with reliability.

The only thing I’ll remember about my television is the programs I watched on it. I won’t remember the stunning glory of 1080p versus 1080i. So, I get a television upon which I can watch the shows I want to watch at the lowest price. (In fact, if I lived alone, I wouldn’t own a television at all.)

I won’t remember these things when I’m eighty. What I will remember is the great moments with people, the moments when I don’t feel any stress and I’m completely in the moment with someone I care about. What I will remember are some of the great books I read and some of the amazing hilltop views I hiked to.

Everything else is just details. Why throw money at it? Why spend myself into stress and worry for things I won’t remember when I’m eighty?

Final Thoughts

I wish I could shout all of these things to myself as I was about to graduate college. So many of the choices I was about to make in the next several years were just farcically bad. I spent piles of money on things that I can just barely remember if I really try to. They have no impact on my life.

What does have an impact, even today, is all of the money I wasted. If I hadn’t wasted that money on stupid things and properly used it, I would not be working right now, at all. I would be fully retired, filling my days with fun and people and almost no stress at all.

Don’t let the constant pursuit of stuff and expensive experiences fill your life with stress. Don’t put yourself on an employment and lifestyle tightrope that fills you with unbelievable stress every time it jiggles. Don’t believe that the things you buy will bring you any sort of lasting happiness, and instead seek it from within. Erase those financial worries by spending less than you earn, wiping out your debts, and building such security that it no longer matters too much if you get a pink slip. Relish the natural joys that life has to offer.

The paycheck to paycheck lifestyle is a trap that leads almost inevitably to stress and unhappiness. Get off that train, the sooner the better.

Good luck!

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