Paycheck to Paycheck is No Way to Live

Paycheck to Paycheck is No Way to LiveI’ve been very fortunate in my life never to have lived paycheck to paycheck.  Although I attribute a lot of my financial success to myself, I’ll be the first to admit I’ve also gotten lucky.  I bought a house at the very bottom of the market, when rates also happened to be at their lowest, simply because that’s when I happened to graduate.  I landed a high paying job straight out of college through a random contact I met at a party.  But even though I’ve gotten lucky here and there with my finances, there’s still a big part of saving that has nothing to do with luck.  It has to do with self control, smart spending habits and willpower.

Pimpin’ Savin’ ain’t easy(as Big Daddy Kane once said).  If saving was that easy then we’d all be good at it and we’d all have plenty of money saved up for a rainy day.  But I can assure you that most people don’t.  I never would have guessed that so many people I knew were living paycheck to paycheck until I quit my job.  A majority of my friends, family and co-workers were shocked that I would quit my job without first securing another.  They figured that since I wouldn’t be working I wouldn’t have enough to pay the bills.  That couldn’t have been further from the truth.

Different Kind of Paycheck to Paycheck Living

When you think of paycheck to paycheck, you usually think of very low income people struggling to make ends meet.  Although that’s the traditional definition, there are plenty of people who make good money but still depend on their paycheck to pay the rent, pay for food, etc.  We don’t think of these people as poor though because they have a lifestyle of high consumption.  They spend a lot so they must be rich.

Numbers-wise I can really only speak about my own industry’s(engineering) salaries.  The average aerospace engineer’s salary is just over $63,000 and that number is right about in line with how much my former employer paid new hires.  There were single people at my company making $60,000(or more!) complaining to me that they didn’t make enough money.  I don’t care where you live, $60,000 is a lot of money and it should be enough to comfortably fund retirement accounts(10-15%), buy nice things and still have some money left over to save.  Here’s an example of what $60,000 would look like after taxes.

In California, you would take home $2,556 a month after taxes(federal, state, medicare and SS) and after contributing 10% to a 401(k).  $2,556 isn’t a ton of money but it should be plenty for a single young professional to live a very comfortable life in almost any citiy.  I used to pay $900 for a room in a 3,000 sq ft. house 5 mins from the beach in one of the nicest areas of San Diego.  That left me about $1,656 for spending/saving.  In an average month I spend $1,000-$1,250 so that would allow me to save a minimum of $300 a month.

Calculations can be found here.

Even though I consider myself pretty cheap, there are still a lot of things I spend money on.  I love to travel, having been to over 15 countries and I love to eat.  Within my budget though, I prioritize these things.  I know that I can’t have it all at this point in my life, so I sacrifice some on my housing and entertainment.  I live in a reasonably priced older apartment but in a very nice, central location.  Instead of going out to fancy meals all the time, I buy high quality groceries and cook myself.  These are just a couple of examples of what I do to get away from the paycheck to paycheck mentality.

My Industry

I work in an industry with high turnover and in my four years at my last company I saw many people come and go.  Without fail though, every time they would leave, they would go straight to their next job sometimes with no time off at all.  I never understood why.  All people do at work is bitch about how it’s only Monday and how they can’t wait for it to be Friday.  But when the time comes to switch jobs, whether for more money, better hours, closer to home, whatever, they jump right into the next job without ever taking a break.

I actually liked my old job and my 2 3 month hiatus has still been amazing.  It’s been a refreshing and cathartic experience to not have to work a day job and if I didn’t have another person to support I probably would have continued this hiatus indefinitely.  Since I don’t depend on my paycheck to survive, I was afforded the freedom to take off 3 months and could have probably gone longer if I didn’t also have a wedding to save for :)

Saving Without a Purpose

I’ve always been one to save and since I started building multiple sources of income I’ve been able to save a substantial emergency fund(think years and not months).  If someone were to ask me why I was saving all that money I didn’t really have a great answer until now.  I saved all that money because it gave me financial flexibility.  In this case, it gave me the flexibility to take time off in-between my old job and my new job.

I never knew exactly why I was saving all that money but I knew it would come in handy one day.  Some people might save with a purpose and some might not but the important takeaway is that saving is what gives you the flexibility to do nearly anything.  If you just can’t take your job anymore and you want to travel around the world for a year, your savings will allow you to do it.  It’s not the smartest financial decision in the world but sometimes you have to put your mental health and physical well-being ahead of your wallet.

They say that money doesn’t buy happiness but in this case I couldn’t disagree more.  By saving the past few years since I started working, I’ve bought myself three months of downtime and the experience has made me very happy.

Readers, what do you think about the paycheck to paycheck mentality?  Are you one of those people who has a high paying job($60k +) but would struggle if you couldn’t get paid for a month or two?

-Harry @ the Four Hour Work Day

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I'm Mr. 4HWD, I started this site because I think everyone should be able to work at a job they enjoy and still have time to do all the fun stuff. I don't want to retire early, I want to work four hours a day on the things I love for the rest of my life.

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Comments

  1. says

    There are a lot of people at my work making far more than the national average who complain constantly about how little money they have. Honestly, I just don’t get it. These are folks in a professional career making pretty decent money by most people’s standards who don’t have a “pot to pee in or a window to throw it out of.” It doesn’t really concern me, but it do to sick of hearing about how broke they are (followed by a conversation about where they are going to order lunch from). Insanity!

    • says

      Yea I know exactly how you feel. Saving isn’t easy but I see people complaining about money and not doing anything about it ever! All they do is bitch and complain. If I want/need more money I’m going to go out and get it done instead of sit back and hope that more money falls in my lap.

  2. Buckley says

    $60,000 may be a decent living in a lot of places, but in the bay area it’s scraping by. It means you’ll be living in a studio or rooming up in a crappy part of town with 3 other people.
    That $2,556 doesn’t stretch very far when $2,000 goes towards rent for a studio. I have a family in the burbs, my rent is higher than that $2,556 would cover. I’m not living large either, just a small place in a decent neighborhood.

    I do agree with the point of the article though. We could all reduce our “needs” and get by on much less.

    • says

      Yea the numbers completely change if you base it on a family so I’m not sure that’s a fair comparison. I know SF is expensive but as a single person I think you could find a nice room in a decent neighborhood in SF for 1k a month and that would leave you $1556 a month.

      To be blunt though, if you only make 60k and have a family you shouldn’t be living in SF if you don’t want to live paycheck to paycheck. That’s the whole point of my article, people get too dependent on one source of income and one paycheck so that they have to make tough choices like living in SF and only making 60k a year or moving to a nice city like Denver where housing prices are 25% lower..

      If you limit yourself to one income you depend on that source and it will dictate where you live, how much you save and your lifestyle. Not easy to flip things, but that’s what I’m trying to do and encourage others to do :)

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