Living paycheck-to-paycheck doesn’t have to be a bad thing. I’m not paycheck dependent, but I force myself into living on my paycheck after paying my future self in the form of retirement savings. According to a recent article Betterment, a recent survey showed 76 percent of Americans are living paycheck-to-paycheck. The author points out some people who live paycheck-to-paycheck aren’t broke. They simply have a purpose for all of their income. After I allow 10 percent of my income to be saved for retirement and 10 percent to be saved for emergency and big ticket items in the future, I have just enough left to pay the mortgage, car payment, credit-cards and other bills. Pretending to be broke motivated me to save more than $100,000 for retirement by age 40.
Saving more as I make more
Although I haven’t received a pay increase in a long time, I used to save my pay increases instead of letting “lifestyle inflation” ruin my good financial habits. It’s easy to get use to a higher income. When I get a tax return, I use the money to fund my Roth IRA account.
Making gradual changes
It wasn’t easy to live on what was leftover after saving some of my income. I gradually built up to living on 80 percent of my income. My ultimate goal is to live on 70 percent of my income. Each year, I increase the percentage that I save for my retirement and emergency savings accounts. My 401(k) plan allows me to automatically increase my savings rate for the future. It’s easier to take baby steps toward a financial goal than to radically change my savings habits overnight.
Living on one income
When I married my husband, I suddenly saw my household income more than double. But my expenses also increased. Instead of paying $75 a week on groceries, I began spending closer to $200 a week. My husband and I saved money by sharing a mortgage, utilities and, at times, a vehicle. During the Great Recession, we began practicing the art of living on one income. We chose to live on his higher income. The money I earned went to pay down our mortgage.
Overcoming my paycheck dependence all started when I got out of credit-card debt. After I got rid of my credit-card debt, I could focus on saving a portion of my income. Once I got that down, I focused on increasing my saving rate. It was challenging to live on one income, but that allowed us to pay down our mortgage. Once we are older, we should be able to live benefit check-to-benefit check assuming Social Security will still exist.
More from this contributor:
Becoming a Roth IRA Millionaire
How I Tricked my Family into Saving
I Refused to Pay off My Husband’s Credit Card Debt