Update: June, 2020 - Well, it looks like the recession has arrived suddenly! With the Coronavirus/COVID19 pandemic currently sweeping the world, I put together a FREE Financial Crisis Survival Guide (blog post with available printable PDF) to help those of you either preparing for or responding to a cut in hours, layoff or termination.
Here's the blog post for the guide: Financial Crisis Survival Guide (Version: COVID19) Blog Post Version
Here's the free downloadable PDF version of the guide: Financial Crisis Survival Guide (Version: COVID19) Downloadable PDF version
Yes I know, I’m calling living paycheck to paycheck a dumpster fire, precisely because that’s what it is. We all know it to be true. It’s not fun, but that’s the reality.
And by the way, this is not "poor shaming" or any of that kind of nonsense. The inter-webs have plenty of that elsewhere. That's not what we're doing here.
This is purely calling out the paycheck to paycheck cycle for what it feels like when you’re in it: a straight hot stinky dumpster fire.
How do I know? Oh, I've been there. Let me tell you about it.
By the way, you can download this list for free, by filling the form below:
I lived inside the hot stinky dumpster fire of paycheck to paycheck for years. Then, in a moment, I just got sick and tired of being sick and tired.
The anxiety and depression I experienced from a 3-ish period of living paycheck to paycheck had become pervasive, overwhelming and completely debilitating.
Mercifully through a friend, I discovered Dave Ramsey’s material and paid off $43k worth of debt in just 2.5 years.
I outline the story in salacious detail in my post $43k Paid Off!
The whole point is, if I can do it, so can you.
I want use this as an opportunity to talk about all the ways it's possible and help you to formulate your own plan, so you can jump out of the dumpster and extinguish the fire.
Yes, I would say paycheck to paycheck is an emergency much like this one.
Yes that’s right, 78% of the US population lives paycheck to paycheck.
Just pause and think about that for a second....
That means that almost 8 out of 10 people that you and I interact with every day are quite literally one paycheck away from a financial disaster.
Do you find that statistic surprising? I did at first, too. Then I started coaching clients about 10 years ago (after I finished eliminating my debt) and began to see just how “normal” it is.
But, the even more surprising part (to me) about this statistic is that it doesn’t matter what the income level is.
As an example, this Forbes article: 78% Of Workers Live Paycheck To Paycheck outlines even some workers who make $100k plus still live paycheck to paycheck.
I’ve seen it in my own coaching practice. Case in point, one couple I coach takes home over $10,000 per month and spends…. you guessed it, that very $10,000 per month.
They didn’t even have a $1000 emergency fund.
Do you "get down" with Pinterest? If so, would you consider saving this pin to your favorite board?
The Forbes article outlines a 2017 survey by CareerBuilder that includes some other interesting and alarming statistics:
Time to call this guy...
No more living in a burning dumpster, I say! Let's be on a mission to cut the number of folks living paycheck to paycheck WAY down and let's start with YOU!
I want to give you a list of some of the best “tactics” I’ve recommended to coaching clients to help them climb out of their burning dumpsters.
Keep in mind that these “tactics" are part of an overall strategy/foundation we use called: “8 Steps To Erase Debt”.
Here are 26 proven tactics to help you build the skills you’ll need to escape your own personal dumpster fire.
You can resume once you’re out of the paycheck to paycheck cycle (and also out of debt).
This will probably be tedious and overwhelming at first and it won’t be perfect. Resolve to start imperfectly and go for it.
Then, you can just adjust or cut as you start keeping track of everything you’re spending money on.
I cover this in the post: What To Do When You Can’t Pay Your Bills.
Go get my free budgeting forms and start writing out your first budget.
I recommend doing it on paper (as opposed to an app or computer program) for at least 3 months.
This way, you can focus on learning how to budget rather than on learning how to budget AND learning the ins and outs of an app.
It sounds more difficult than it actually is.
It's really all about sitting down, writing out what's due and when and then aligning those bills with your pay periods.
Make sure they get plugged into the “income” side of the budget and are assigned appropriately inside of the outflows portion of the budget.
Whether it’s a pen and paper, a smartphone app or a fancy form you download, resolve that every penny that gets spent, gets logged.
This means every time you go spend money, immediately come back to the budget and “reconcile” or subtract what you’ve spent from the available amount in the budget.
This one is going to be tough because it’s going to force you into some uncomfortable decisions. Don’t worry, it’s normal. When doing this exercise with new clients, they typically will progressively change their definition of “nonessential” as we move through the budgeting process.
This is commonly called “The Debt Snowball”. Pay the minimums on all but the smallest. Pay the smallest off and move on to the next smallest. Again, you have access to all my free forms.
Craigslist, FaceBook Marketplace, Ebay, LetGo, Freecycle are all great platforms to unload your unused/unwanted stuff for much needed cash.
This one is REALLY tough for us Americans. We love our cars. But let me challenge you here: how bad do you want out of this dumpster fire?
If you’re living paycheck to paycheck, we need to go for a scorched-earth policy when it comes to any conveniences or luxuries.
If it’s Netflix, Hulu or Amazon Prime, you can just suffer through using YouTube until you can afford to reinstate your subscriptions.
Even then, I’d advise austerity until you’ve eliminated your debt and saved at lease 6 months of expenses for an emergency.
I know this may be challenging at first, so just try to start with as much as you can. Even $50 starts the cycle and gets you away from using credit cards for all of those financial miscalculations.
This keeps you from having to use those credit cards whenever an emergency pops up, which it inevitably will.
If it makes sense, you can start using the envelope system.
This is where you have a cash envelope that you stuff with cash every month for certain categories (like: gasoline, groceries, hair care, etc.).
Cash is HARD to part with, much harder than a card swipe parting you from your hard earned money.
That’s a good thing!
Vow to never use debt EVER again.
Definitely do this for your car insurance. It lowers your monthly premium, but you MUST get the $1000 emergency fund in place so that if there is an accident, the new and higher deductible won’t have to go on one of the credit cards you just cut up. :)
This is where you challenge yourself to not spend money on anything outside of your necessities.
And again, if you want a free download of the list, just fill the form below.
The main idea with all these tactics is to start to try and find every single extra dollar we can find, not spend it, save it and/or use it to pay down debt.
As you probably know, the walls of the dumpster are quite high and we need to build a pile of (fire resistant) dollars on which to stand in order to jump out of it.
So, those are the tactics, now let’s briefly review the overall strategy these tactics fit into.
My encouragement to you is to take action today. Look at implementing at least a handful of these this week and then work toward implementing all of them as time goes on.
So, let me know in the comments, which one's you've tried and what's working the best.
0. Stop All Retirement Investing (Until Step 4)2. Starter Emergency Fund of $10003. Eliminate Debts Smallest To Largest (a.k.a The Debt Snowball)4. Full Emergency Fund of 3-6+ Months’ Expenses5. Invest A Minimum of 15% Income Into Retirement Accounts (and increase savings rate to 50%+ if possible)6. College Funding (if applicable)7. Pay Off The Home Mortgage8. Build Wealth, Serve, Be Ridiculously Generous And Go FI (Financial Independence)!