Paycheck to Paycheck – AHHHH!!!

by AB@AspiringBlogger.com

Just so it’s out there up front – Mrs AB and I make a LOT of money. I don’t say that to brag, but I want to make sure everyone knows where I’m coming from before we get started. With July barely beginning and the weather unseasonably cool (we didn’t even reach 90 degrees today, and we normally are well into triple digits by now) I thought it would be a good time to address a good habit for the second half of 2013 – saving.

CRAZY!!!

I read an article last week on CNN saying that 76% of Americans are living paycheck-to-paycheck. They defined this as having less than six months of living expenses in a savings account. In a survey performed by Bankrate.com (which formed the basis of this article) less than 50% of 1,000 people surveyed had three months of living expenses saved and 27% had no savings at all. I honestly can’t believe people can live this way. Mrs AB and I have over $40k in the bank (which would last over a year if we both lost our jobs) and I’m still in that “OH CRAP, WE HAVE NO MONEY” mode right now. I understand that the amount of money you have in your bank is definitely relative to your income level and your obligations – but with no emergency fund or just a tiny one – even a small problem can become a full emergency and derail all of your plans.

For example, if you have no emergency fund and you have car troubles – like you need new tires, or your break down on the side of the road, etc….what do you do? I guess if you have no money in your savings account you just put it on your credit card and move on. Unfortunately, that just puts you further behind and you end up owning more and more.

STOP THE MADNESS!

What’s the solution to all this madness? Well, it’s very complicated, so you’d better go and get a notepad and pen, and put on your thinking cap. The solution is… STOP SPENDING ALL YOUR MONEY! Wow, that wasn’t really that hard, was it? I understand that Mrs AB and I live in a fantasy land where we make a crazy income and that most people are not as fortunate. BUT, if you make less money, then you need to adjust to that reality. As I’ve talked about before, broke people do stupid things – don’t be like them! Just because all of your friends are going out to dinner doesn’t mean you need to. Just because everyone else has a car payment, doesn’t mean you need one. See what I’m saying here?

While it’s a very complicated problem, at it’s core it has a simple solution – spend less than you earn. If you bring home $2,500 a month and you spend $2,500 a month – you will never get ahead in life. But if you cut down your spending – just a little at a time – you can grow your savings to support you in minor emergencies and eventually in retirement. I’ve seen people on Facebook talking about saving $1/day for 2013 – which is a good start. Personally, I think you should at least strive to hit J Money’s $5/day millionaire plan. It’s an old article, but the content is still relevant – save $5/day for 40 years – and you could end up with over $1 million!!! Of course, the stock market has to be going in your favor (it is), but at the end of the day you will only have put in around $73k of your own money and you could wind up a millionaire…pretty sweet!

MOVING ON

I’m a little off topic here, but I think it’s relevant to think about the future when discussing emergency savings (or any savings really). Some people get on their soapbox and will say “I work hard and I’m going to spend what I’ve got now” and that’s their right…unfortunately. But it’s very short sighted. I’d like to recommend that them, and mostly you – my readers – take the long-term view. With a little moderation you can live a great life now, while also saving for an awesome future. One that won’t have you worrying about month-to-month emergencies, minor bills, or anything else in that same category because of your freakin’ awesome emergency fund. And one where you won’t be worried about retirement – because you’ll be saving for that along the way. Oh, and if you can do more than $5/day for retirement – I recommend you do it – that way you can be financially independent even sooner!

I think I’m done with my little rant – thanks for listening. As we start the second half of 2013 I hope you’ll take a minute to reevaluate your savings strategy and make sure you’re putting away money for short-term and long-term needs. It’s important, and obviously most people out there aren’t doing it!!!

AB

$2.49 .COM at GoDaddy.com! Expires 5/14/13

{ 11 comments… read them below or add one }

Mike Martel July 2, 2013 at 4:51 pm

Hi AB,
I generally agree with you. People shouldn’t live paycheck to paycheck. There are way too many things that come up – car, appliances that will have you looking to the credit cards to fix. I do think that people should shift their thinking more towards earning more money. What can they do to increase their income to meet whatever their lifestyle goals are. As an aspiring blogger, I am guessing that is your goal – to make money through your blogging. So I save save, but at the same time look at creating multiple streams of income.

Reply

AB@AspiringBlogger.com July 4, 2013 at 9:27 pm

Hi Mike,
I think you have a great take on it. While yes you should save, there definitely needs to be a “mind shift” towards earning more – especially if you’re at the lower end of the earning scale. And you are correct – earning income through blogging/online methods is my eventual goal – so any sort of work I can do now to build up income streams are things I’m looking at. It’s definitely slow going, but I think it will be worth it in the end! I’m open to any suggestions you have – care to share any??? πŸ™‚ Thanks for stopping by!
AB

Reply

Mike Martel July 5, 2013 at 9:31 pm

Well, the key is to develop your list (list of subscribers). You are starting to get some decent traffic if you have an Alexa rating of 597,000. How do you collect subscribers? You should be offering some form of opt-in incentive. I don’t see an opt-in form on your blog.

Once you get a decent sized list of let’s say 1,000 you can start offering products your list might like. I am guessing your target is people who want to start blogging. Now you can develop your own product or find quality products from other people which you earn affiliate revenue from. Continue to grow your list, offer products, wash and repeat.

Reply

Crystal July 6, 2013 at 6:24 pm

How do you get people to sign up. I notice man visitors on my blog everyday but not many take the time to sign up for email distribution.

Reply

AB@AspiringBlogger.com July 8, 2013 at 9:50 pm

Yeah – I definitely need to work on a list/opt-in/etc – I’m lacking in that department! Thanks for the advice – it’s definitely on my list to start working on!
AB

Reply

Martin July 4, 2013 at 6:42 pm

I feel like that all the time. I am always short of money. Well, your post is a reminder to me that I need to work harder on my emergency account. I just depleted my reserves paying off some debt. A scary move, because now my emergency account is very low and I do not feel comfortable.

Reply

AB@AspiringBlogger.com July 4, 2013 at 9:31 pm

Hey Martin,
Congrats on paying off the debt – that’s a great move! While you may have less money right now, you also have less debt piling up – so it’s a step in the right direction I’m sure! While Mrs AB and I don’t follow our budget very closely anymore, when I was earning less I watched every penny. Do you have a budget? If not, I’d recommend creating one (you can find some info on the “My Finances” page to help you get started) to track your spending and making sure you aren’t letting any money slip through. Getting out of debt is a rough road, but once you’re there – the journey towards building some major wealth seems to take less time than you’d imagine. You just have to stay positive (oh, and build up that emergency fund!). Let me know if I can help!
AB

Reply

Betsy Muse July 5, 2013 at 8:49 pm

Hi AB, I saw a similar study earlier in the year that I believe was put out by AARP and the numbers were similar. I think one of the biggest problems is that so many people spend more than they earn. If they don’t do something to break this habit, just earning more isn’t going to help them because they will probably continue to spend more than they earn.

Reply

AB@AspiringBlogger.com July 8, 2013 at 9:53 pm

Hi Betsy,
You make a good point. People need to work on first changing their habits before anything else. There are lots of people out there making TONS of money and spending even more! A big problem (in my opinion) is that a lot of the people who need the help – don’t know that anything is wrong. They don’t see a problem with the paycheck-to-paycheck lifestyle, because it’s all they know. Education is key, but it’s not getting to the right people. Thanks for stopping by!
AB

Reply

Crystal July 6, 2013 at 6:23 pm

Great advice. Common sense to some but others really struggle to look to the long term. Many people I know have the mentality that you can’t take it with you or they could die anytime and want to enjoy their life in the moment. I myself like to be prepared. I recently lost my job and was very thankful that we had saved an emergency fund to help in the meantime so I could go back to school.

Reply

AB@AspiringBlogger.com July 8, 2013 at 9:55 pm

Hi Crystal,
Great perspective – I think there needs to be a balance. Once you’ve covered yourself for an emergency, then there’s definitely the opportunity to have some fun and spend a little more. But as you found out – having an emergency fund helps a lot more than a shiny toy in the garage when you lose your job! Awesome job being prepared – what did you go back to school for?
AB

Reply

Leave a Comment

Previous post:

Next post: