We Live Paycheck to Paycheck

We Live Paycheck to Paycheck

There are a plethora of stories in the news media about how Americans are struggling financially. Income inequality is going to be the great economic issue of the next election. Americans aren’t saving as much as they used too, they have a plethora of debt, and some would even say that there spending is out of control. According to one study, 75% of Americans live paycheck to paycheck. Even those people who make a lot of money (e.g. over $100,000) over 1/3 of them are living paycheck to paycheck.

In some respects it is easy to see why people live paycheck to paycheck. Median incomes have not grown as fast as inflation. People are making more, but they are also spending more and have to spend more on things like housing, food, and the like. Moreover, we have more consumer and student loan debt than ever before. So it makes sense.

Mrs. ROB and I also live paycheck to paycheck.

Now before people start raising money for us or having us go down to the local soup kitchen for food we live paycheck to paycheck, in some respects, by choice. Yes, I said that, “by choice.”

The reason that we do this by choice is a few of the choices I have made over my financial lifetime.

First, I made the choice to max out my retirement savings. For the first time ever, I will max out at the allotted IRS amount of $18k a year for 401(k) and 403(b). I am mandated by my employer to save 10% of my income. However, I choose to put extra money toward retirement, which lowers my monthly income.

Second, we chose to put our mortgage on a 15-year fixed rated mortgage. We spend more on our mortgage, interest, taxes, and insurance, then we did on our rent. However, my home will be paid off a bit quicker than other people.

Third, we chose to move 45 minutes away from our work. Mrs. ROB and I work, at least part of the time, at the same university. We commute 4 days a week, at least 45 minutes, which increases the amount of money we spend on gas and time in the car. Prior to that I lived only 1 mile from campus. I could walk to work. However, homes in that particular area were double what we pay here and we didn’t like living in that particular community. So our transportation costs have gone up considerably over the past year.

Fourth, I have a lot of debt. I have, at the time of this writing, at least $80,000 in loan debt, not including our mortgage. I want to have this debt paid off. I pay extra money every month to pay off the one loan in the next year or so. In fact, I put about $400 extra per month on that particular loan. If I don’t do that this loan will be around our necks for the next three years.

Fifth, we decided to buy a new car last year and Mrs. ROB’s student loans also are other debt payments that we have. Those loans, most likely won’t be paid off for a few years (at least the student loans won’t be).

Sixth, I do have a small emergency fund set aside in case we need it. It isn’t much, but I chose to keep just a little money to the side in case something goes wrong.

All six factors, including other spending, contributes to why we live paycheck to paycheck. In some respects, this is by choice. I mean I could, if necessary, free up extra money by refinancing our mortgage to a 30 year, putting less into retirement, and/or paying less on my loans.

But I am trying to get to a better place financially. I am trying to free myself of the shackles of debt. When you have debt, in my opinion, you are chained to someone or something else. I don’t want to be chained anymore. I want to be free. So I will live paycheck to paycheck as long as I need too or some kind of emergency comes up so that I can have greater freedom on the other end.

4 thoughts on “We Live Paycheck to Paycheck

  1. I guess it comes down to how one defines “living paycheck to paycheck.” My guess is that the experts who are concerned with the people who are living paycheck to paycheck assumes that these people are not saving for retirement (or paying ahead on their mortgages and so on). The big fear is that many people are going into retirement with lots of debt (mortgage debt, credit card debt, student loan debt, etc.), but you are future focused and, if you can do it, will be in a much better place when you arrive at retirement age.

    1. You are right it depends on the definition. But there are times during the year when I have to do mental gymnastics to make sure that I have enough money for the mortgage. This is particularly true during the months of January, June, and August because of gaps in the extra money/classes I earn. So it isn’t just paying extra debt. I literally have to figure out and pay things ahead of time or make sure I have enough.

  2. I had never considered this definition of living paycheck to paycheck as you describe in your article Jason. I guess then the answer for us is that we have lived that way for years!

    This is really an example of saving first and automation put into practice. You could certainly relax your debt payments, refinance the mortgage, and reduce the amount you are contributing to your retirement. But then why would you want to be like everyone else? 🙂

    1. Hi Bryan, you are right. I don’t want to be like everyone else. And once some of this debt is paid off I will naturally have more money. However, I might just go to living paycheck to paycheck in a different manner b/c I am thinking about taking that extra money and saving even more in retirement accounts with a 457 plan. I know paycheck to paycheck is to signify that we are one paycheck from being destitute. That is not true for us. However, during the summer and at other points during the summer I have to do mental gymnastics and seriously plan to make sure we can pay all those bills. Part of that is because my wife doesn’t get summer pay and the extra work I do, the money, comes in fits and starts. So I do struggle a few weeks every year.

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