It is a lifestyle known by many names — paycheck to paycheck, hand to mouth, scrimping or scraping by, to name just a few. However, no matter what you call it, seven major disadvantages rear their ugly heads when you continually mismanage your money.
1. Your money never works for you. When you live paycheck to paycheck, your money is always working for someone else. There is never “enough” money to keep up with your obligations; you wind up paying higher interest rates or being hit with late payment penalties as a result. Your money works for everyone you owe, except the person who matters most: you.
2. You are stuck in a rut. When you have “just enough” to make it from this payday to the next, you are stuck in a rut. You cannot experience new, exciting things because you cannot afford to do anything out of the ordinary.
3. You cannot account for emergencies. Emergencies are not a matter of if, but a matter of when they occur. From the higher than usual power bill to unplanned medical bill to the unexpected car insurance deductible, living paycheck to paycheck makes these life events more stressful and costly. When you do not have enough money to account for emergencies in your normal pay cycle, someone is paid late, and you are hit with the shortfall. Eventually, late or missed payments find their way to your credit report, damaging your credit rating and hurting your financial health for a long time to come.
4. You are never prepared. When you are scraping by, you are not planning for loftier, predictable expenses like Christmas, back to school shopping, birthdays or other special events. Your hands are in your pockets at the last minute, and all that is at the bottom is lint.
5. You feel shame, and even a little envy. Looking around, it seems like everyone else is doing better than you are financially. This can lead to increased stress, missing friend’s parties or events and even destroys long-term relationships, if you let it.
6. Your priorities become cockeyed. You start focusing on whether or not you’ll have enough money for small luxuries; a bottle of wine, a case of beer, a pack of cigarettes or enough money to buy a lottery ticket, instead of focusing on your budget, and planning for your future.
7. You are less likely to budget. You might consider yourself the best at moving money around and finding money when there isn’t any left, but when you live paycheck to paycheck, you rely so heavily on your creativity that you forgo the practicality of a budget. If you fail to plan, you plan to fail, no matter how creative you may be.
The sooner you take steps to correct your budgeting issues, the easier it is to dig yourself out of a hole, plan for the future and find true financial freedom. If you do, you will find that you do not have to live paycheck to paycheck anymore, and that you never really did to begin with.