I found this story to be so important to the everyday lives of most working individuals. It originally was posted on May 13, 2016 on Financial Juneteenth. I hope you find it very helpful.
By Robert Stitt
What constitutes a lot of money? How much would it take for you to no longer struggle financially? These are not easy questions to answer. In reality, regardless of your answer, they are even harder questions to live out. Studies show that lifestyles tend to adjust to earnings, so a person struggling to get by on $25,000 a year would not necessarily increase savings with a $50,000 a year income. Instead, statistically, the lifestyle would change and the person would now struggle to get by on the new salary.
What it comes down to is that a salary does not cause people to live paycheck to paycheck. Often, it is financial discipline that determines how much money is left at the end of the month.
According to Black Enterprise, “In 2015, the number of six-figure earners living paycheck to paycheck was a whopping 25 percent.” When asked why, with all of that cash, they still struggled to make ends meet, 33 percent admitted it was a lack of financial discipline. The main culprit? Sixty-eight percent said it was eating out.
How can you stop living paycheck to paycheck? If you earn over $100,000, the first step is to realize that it is not your salary that makes you rich. You won’t accumulate wealth if you don’t reign in the spending and control the budget. In other words, it is not what comes in that makes you wealthy, it is what stays with you.
The obvious second step is to evaluate life choices. Do you need the car you have? What is your mortgage or rent situation? If your housing is taking up more than 35 percent of your income, you need to consider making some changes. Also, start cooking some of your own meals.
The third step is to put aside a portion of every check for savings. If you have high-interest debt, pay that off first or your savings will actually be costing you money each month, but once that is taken care of, set aside 20 to 30 percent for savings and investment.
Last, but certainly not least, don’t keep up with the Jones’, Johnson’s, or whoever else you find that you are comparing yourself to. Your finances are yours, your children are yours, and your future is yours. Don’t let somebody else determine how you spend your money.