Hello everyone! How are you?
Why do most of us still live paycheck-to-paycheck despite a few (or several) salary increases?
I am sharing three (3) practical financial lessons on breaking the cycle of living paycheck-to-paycheck that you can start applying now.
Different employee groups seem to have developed a code which stands for their anticipation for the next payout. In one Company, they have the #abangers (abang is Filipino word which means to wait) and in another they have the “MSN” which means “may sweldo na ba?” (Is the money in the bank?). There’s one where employees just ask, “Positive?” And when you hear an affirmative, “Positive!” you know what that means. In one group, a round of applause means it’s been paid out. In all cases, they have strong Payroll systems but sometimes there are instances of earlier pay as in the case of the payout schedule falling on weekends or holidays. Such is what they always anticipate.
Jokes abound, too. These are two of the examples found on the net.
Every money joke seems to be a hit and only goes to show how relatable this is because at one point or another, this happened (or is always happening) to us.
Now, let’s move on to what I wanted to share.
Lesson 1: Salary Increase ≠ Lifestyle Change
It makes me wonder why someone earning Php12,000 (222USD) will say s/he has zero left on his/her bank account around the time of the next payout; someone earning Php120,000 (2, 222USD) would say the same!
Of course there are people who get it. They understand that our expenses shouldn’t be more than our earnings. And that expenses should neither be equal to earnings. Unfortunately, this is where many of us fail. In the words of Francis Kong, “galit sa pera” (roughly translated to “hate or dislike money”). Many of us seem to dislike money so much that the moment it comes, we always find a way to rid ourselves of it. Shopping, latest gadgets, Starbucks, brand new SUV, branded clothes, shoes, whatever. Relate so far?
In other words, we always find use for money. No matter how little or how much we have, there’s a reason to spend. Our lifestyle matches our income. So if before Team Lead drives a sedan, when promotion comes, (now a) Manager goes out to buy an SUV.
This is where I admire my husband. When I met him in 2010, he was a Manager, and the only Manager I knew who wore an old Timex watch, used an old android phone and rocked an old pair of glasses. Don’t get me wrong, he’s not old and didn’t (and still doesn’t) look one. In 2008 he got a car lease as a benefit from his previous Company. It was a sedan, the cheapest in the list of cars he could avail. Ten (10) years, 2 Companies and 3 promotions later, he still drives the same car!
Not too many are like him. Do you know anyone? Please, let’s publicly commend that person for being financially smart.
I know someone who recently got promoted to Team Lead with around 10% increase in salary and some additional benefits. He thought he deserved his own condo unit and his own car. He was given a low downpayment so he went for it! A few months later he said, “I didn’t know car maintenance is this much and that there are dues and the condo upkeep is way beyond I can afford.” Sounds familiar?
Lesson 2: Stash Money In Your Savings Or Investments
Suppose it is but natural for us to dislike money and at the instance we have it, it is second nature for us to want to get rid of it. Let’s just say, because that is what’s happening anyway. So, what if we create another bank account or have a system at home where we put away money for savings or investments first thing after receiving our hard earned money.
How much that is is dependent on your personal preference and needs, desires and well, the lifestyle you already have.
10%? 20%? 30%? Really up to you! What’s important is there’s this money.
To help you, there are banks that does automatic transfer at a frequency and amount of your choice. Inquire from your bank and make keeping money a (an automatic) habit.
Not into savings?
You can also spend for things that appreciate in value through time. No, cars don’t count because things like that depreciate. Real estate and gold are classic examples here.
You can also get something that you or your child can use later such as a VUL (which is guaranteed insurance benefit and fund accumulation) or any other financial product, pension plans and so many others. A few people I know trade. Stocks. You can also use your money to buy stocks from trusted Companies so that there’s earning potential for your money.
Lesson 3: Wants ≠ Needs
This is where it gets confusing, thanks to the advertising firms. Many “wants” are slowly becoming “needs” even if they shouldn’t be. The divide between wants and needs, which used to be very clear is at the brink of collapse.
Starbucks seems to be a need because most people need coffee to function properly. Well, that in itself is a want, not a need, in most cases, right? I thought I couldn’t last a day without coffee but when I got pregnant, my OB advised against it so I didn’t drink and guess what, I was perfectly fine the whole 9 months! Next, why buy a Php100++ (1.85USD++) coffee if you can get it for a quarter of the price in another store. Some Companies even offer free coffee!
That’s just one example and I know you can think of many others. Feel free to share your thoughts in the comment section below.
Why We Shouldn’t Live Paycheck-to-Paycheck?
Well, that you are not liquid is risky on it’s own, and because my friends and followers are smart, you know why. What you probably don’t realize is this –
no job is stable, no one is indispensable.
You may be a high ranking official – in a position of power, in one of the Fortune 100 Companies, but hey just one reorg can cause you your job.
You may be the smartest, the most advanced thinker with a huge leadership potential. What if you chanced upon a boss who is your exact opposite. I’m telling you, that won’t fly. You will want to leave your job, regardless, and wouldn’t it be great that while waiting for your next job you have money for your and your family’s needs?
Remember, living paycheck-to-paycheck is not financially sound. We need to keep in mind that our lifestyle should not necessarily change each time we get an increase, that no matter how little or how big we receive a part of it should go to savings or investments and that wants are not needs.
I am still a work in progress, thankfully I have my parents and husband who are constantly reminding me. But it’s great to start somewhere and to start now. I know that many of you are, too.
Thank you for taking a moment to visit. I hope you found this helpful. At least to serve as a reminder or an eye-opener for some. Please share this to your friends, family and colleagues who also need a reminder from time to time.
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