On my drive back from yet another Christmas meal with family yesterday, 3 turkeys in 3 days, I could not help but notice the 5 mile long traffic jam surrounding every shopping mall I passed. I realize that it is Boxing Day and that I have seen some great deals in the flyers but holy cow, you couldn’t pay me to sit in traffic, fight for a parking spot, and stand in line to pay (or credit) something else I don’t really need or can’t afford.
Sure, I would love a new computer or a larger screen TV for our family room (Our 40 inch seems tiny compared to today’s standards). I certainly have enough actual cash in my hands right now and lots of room on my credit cards. So why not? I deserve it right? And honestly, yesterday morning while sitting at my old, slow computer, I was ready to buy. But I didn’t. I didn’t because I decided that my word for 2018 is “financially free”. Ok that’s 2 words if you want to get technical.
I define financial freedom as not needing to worry about money. Money shouldn’t be a dominating force in making decisions in your personal or professional life..Being financially free, is the same as being free from hunger. Money will always play a role in your life. But you are free when it no longer becomes the dominating influence on your goals. Scott H. Young
I got to thinking about the differences between those that are financially free and those that live paycheck to paycheck, which I freely admit, I am guilty of.
Do the financially free have less stuff? Maybe but not necessarily.
Do the financially free make more money? Possibly but I dare say that even if we brought more money into this house, we would probably spend more.
Do the financially free have lower monthly expenses? Sometimes. As in the case of interest rates. The better your credit rating, the lower your percentage which in turn means that you will have lower borrowing costs.
So, exactly how do I get from point A, living paycheck to paycheck, to point B, financially free?
- By identifying why, year after year, my circumstances do not get any better,
- by understanding what’s holding me back from success, the internal and external blocks, and
- by finally, truly committing to doing whatever it takes to break free of the cycle of paycheck to paycheck.
Are you with me? I hope so. Let’s start here:
5 Reasons You Can’t Break The Cycle Of Living Paycheck To Paycheck
1. You avoid taking a financial inventory like the plague.
Do you know how much money you have in the bank? Do you know how much your fixed expenses are? Do you know how much you spend on groceries?
And I’m not talking about vague or approximate answers. I’m looking for exact, to the penny, numbers. Chances are you can’t answer specifically. And that’s a problem.
It’s time to bite the bullet and figure out exactly what your financial picture looks like.
2. You are able to identify problems and know what to do…but don’t.
Do you know what you do wrong? Probably. But knowing and then doing something to change it, is hard work.
I complain I can’t lose weight but I keep eating the same. I know the problem. I know how to change it. I just don’t do it.
Somethings gotta give right?
If you’ve taken a screenshot of your finances and identified you have a “eating out” problem, you have to bite the bullet and figure out how to stop eating out. Period. End of.
You have to WANT financial freedom. You have to learn how to forego instant gratification. And you have to keep your eye focused on the end zone.
But you must also allow for moments to treat yourself (or slip-ups) so you don’t fall off the wagon completely and revert back to your old ways. That is the real trick to succeeding. Allow for failure then get back to it. It’s going to be tough so be prepared.
3. You do not set short term, actionable goals or make specific plans for long term success.
So basically, you plan for nothing. You fly by the seat of your pants and hope that nothing bad happens. How is that working for ya?
Well, let me tell you from personal experience, it is extremely stressful.
You need to set short goals (a year of less) and long term goals. (5 years or more)
Once you have set your goals, move backwards, creating small steps. Adjust your goal if necessary. Nothing is worse than setting a goal that is so unattainable that it depresses you and makes you give up too fast.
For example, if you want to pay off a credit card that has a balance of $6,000 in one year, work backwards till you figure out how much you need to pay down with every pay. So in this scenario, $500 a month, or $250 twice a month. (Of course you need to factor in interest as well so your payments will be higher depending on your rate.)
If $250 is too much for you, you either need to adjust your goal of $6000 from one year to 15 months or you need to find a side hustle to help you meet your goal.
Setting goals is hard, grown up work but every time you think to yourself, “This is stupid, I can’t do this.”, I want you to remember how stressed you get when your paycheck does not last to the next payday.
4. Not having an emergency/savings fund.
I know you probably hear this money advice a lot. And deep down inside, you know how much it would help if you weren’t always one car repair away from being up sh*t creek without a paddle.
So why haven’t you started saving?
I think it is because most people think you have to put away a lot and quickly. But honestly, even $20 a pay (which is probably less than what you spend on coffee) makes a difference in a year. As long as you don’t touch it for stupid things of course. It’s called an “emergency fund” not a “I gotta go on vacation because I haven’t been away in awhile.” fund.
If you like to bullet journal, here is my spread for the new year:
5. You have a bad attitude or fatalistic view of money and debt.
This is the biggie.
I am always intrigued when I talk to people about money and their attitude towards it. I can’t believe how many people believe that debt is just a natural part of life so why fight it or try to control it. That attitude may serve you fine in your twenties but when you reach midlife like me, you will be pissed at why you waited so long to get your financial house in order.
While debt may be an integral part of our lives, it does not mean that we should welcome its accumulation. Debt is a heavy burden and has the ability to control every decision you make in your life, from where you work, live and how you spend your free time.
Ignoring debt or accepting it as a way of life is damaging. You need to control your debt, not the other way around.
Did you see yourself in any of the above 5 reasons? Are you ready to stop living paycheck to paycheck?
Join me and let’s make 2018 the year we take control of our money and our debt and really start to create the life we want when we retire. It will come sooner than you think so let’s get to work now.