I’ll say it – You SHOULD be living paycheque to paycheque!
This is not the standard mantra of the financial independence movement – but hear me out I do believe for a lot of people, living paycheque to paycheque is not only just fine, it is preferable – especially in your high earning years where you are paying off debt and aggressively saving for retirement.
In fact, now that I think about it – why is there shame of living paycheque to paycheque? I don’t get it. I believe that money can essentially, have two effects on people. You can let it work against you or let it work for you.
What money is for One Dad
Debt is money working against you and saving & investing is money working for you. As you get older you need less of the former and more of the latter.
The typical middle class family that has children have a lot of demands on your paycheques – and that is just fine (within reason). The trick is to make the most of the demands on your paycheque – so much so that soon after you get paid, you are planning for the next paycheque.
Wait! Let me explain.
The One Dad family have a lot of demands on our paycheques, every week. Sports fees, after school fees, the power bill, groceries and…. well a lot of it is going to repaying the money that is working against us and a good chunk of it also is going towards saving to get more money working for us.
We decided a couple of years ago, after getting some savings & investment ‘critical mass’ to concentrate on accelerating how fast we can remove the money that is actively working against us – Car payments and mortgage payments. In less than three years, we will be completely free of any money that is working against the interests of us being financially free. At that time we can take that money and turbo charge our savings. (and maybe get something nice at the same time) 🙂
What we have done is increased our debt payments to the point where it hurts, just a little bit. This keeps our spending in check, prevents us from inflating our lifestyle and forces us to look for savings on the spending side. A lot of people talk about net worth, but at the end of the day, it’s your income that determines your lifestyle. By increasing the demands on our income now – we free our income to work for us in the future.
If you are living ‘paycheque to paycheque’ because you are accelerating debt repayment or are turbo boosting your savings rate – then be a proud ‘paycheque to paycheque’ liver!
Paycheque People Unite!
Obviously there are caveats here but the important thing is what you are doing with your income to help your household – not wether you are a little bit broke waiting for the next pay day. If your story is similar to ours, stop beating yourself up – enjoy watching the debt numbers go down, the investments go up and remember ultimately what you are doing is freeing the demands on your future income which sounds a lot like financial independence to me!