Why is it that some people get to go on elaborate holidays, have all the latest gadgets, and manage to have a brand-new car in their driveway? These are the same people who seemingly work the same job as you, earning the same amount of money as you. Meanwhile, your family hasn’t gone on a single trip this year and you’re driving a 10-year-old sedan.
While it might seem unfair that your neighbors and coworkers are living it up when you aren’t, there’s a good chance they aren’t balancing their budgets as well as you think. Here’s what could be going on behind closed doors.
They’re Living Paycheck to Paycheck
Living paycheck to paycheck — that is, spending all the money you earn in a month—is an epidemic in the US. According to CNBC, nearly two-thirds (64%) of Americans are spending most (if not all) of their money in a month. More strikingly, more than half of six-figure earners are living paycheck to paycheck, too.
Lower wage earners usually get caught in this cycle because they don’t make enoughto cover much more than their basic needs. High earners, on the other hand, can wind up living paycheck to paycheck (P2P) for a variety of reasons.
- They can be dealing with a lot of debt from taking out large mortgages, vehicle financing, and student loans.
- They might also be wasting all their money chasing the next best thing or experience. They’re the ones who only eat takeout, trade in their leases for the latest model,andtake vacations to far-off resorts multiple times a year.
When it comes down to it, anyone can live P2P; all this phrase means is that the money coming into your hands in a month leaves those hands the same month, too. For high earners living P2P, they have more money than most people, but the equation still remains the same. At the end of the month, very little of that money hangs around.
What is the Problem with Living P2P?
Living P2P meansyou prioritize today’s financial needs and wants over tomorrow’s. But what’s wrong with that? You only live once, after all. And besides, you’re still covering your budget’s essentials, like housing costs and other bills.
If that’s all you’re doing, you aren’t saving. And without savings, no amount of YOLO’ing can help you when you run into an unexpected expense you didn’t think to include in your budget. Just one unplanned trip to the vet can put you in an uncomfortable spot.
In an emergency, you might consider taking out an online loan. An online platform like MoneyKey tries to take the stress out of financial emergencies by making it easy to research your options. You can check out their website any time, day or night, to learn more about installment loans and lines of credit.
Online loans work under pressure by providing a convenient safety net when your savings fall short. But they aren’t meant to replace savings altogether.
Real security comes from saving for a rainy day, so you can tackle the unexpected without borrowing a loan online. It involves delaying fun expenses so that you can ensure you set aside enough money in your emergency and retirement funds.
The good news is that no one has to swear off fun things forever in the name of financial security. A balanced budget helps you cover everything—from today’s essentials to tomorrow’s safety nets and life’s frills. It just means you might not be able to update your wardrobe and go on a vacation right away.
So don’t try to keep up with the Joneses, whoever they may be. You don’t know whether they’re living beyond their means without saving money. Instead, stick to the tried-and-true method of a balanced budget.
