• The mentality of spending paycheck-to-paycheck

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    MIGGY CASTAÑEDA

    MIGGY CASTAÑEDA

    Anyone with a paycheck relates to the idea of only having enough to handle expenses for two weeks until the next paycheck, and so the cycle goes. The thing is that it doesn’t just happen to people with a small monthly income.

    Just about anyone is susceptible to the mentality of spending within that particular timeframe, making it one of those universal money issues that some people are all too willing to relate to the spending culture of the younger generation.

    An article by Jim Forsyth for Reuters revealed that about one-third of all high-income earners in the US live paycheck to paycheck. If this is the case in a developed country like the US, it is understandable that fixed-income earners everywhere else can also be in similar plight.

    The thinking
    The root cause of anyone living paycheck to paycheck is the thinking, or at least it’s what most personal finance experts will write. It’s a contentious issue. Some will say that living paycheck to paycheck is a sign of poor financial management; others will say that it’s a mentality that works when you’ve automated every other financial aspect of your life.

    The thing is that when you’re living this way, you might not have liquid assets—like savings, or investments. The National Baseline Survey on Financial Inclusion by the Bangko Sentral ng Pilipinas (BSP) revealed that about 40 percent—or only 4 out of 10 Filipinos—have savings. That could mean the majority do not, or unable to, save.

    To simplify, the main issue stems from focusing on your everyday needs, the occasional want that’s actually outside of any probable budget that you may have already built for yourself. This form of spending is what perpetuates the cycle, and can only be broken by changing the way you think about money.

    The change
    There are probably hundreds of websites that give out advice on how to change the mindset of living paycheck to paycheck.

    It’s easy to cherry-pick advice that most suits your needs. I’ve tried it, but it did not work for my situation. That’s the kicker: handling your financial situation won’t be the same as the advice you look at, it won’t fit the same way. Some personal finance websites will tell you that it’s as easy as cutting back on your expenses and upping your savings.

    It’s a place to start, but it’s not the best solution because at some point, you will think that because you’ve done so well with restructuring your budget to make your savings larger that you blow a large amount of your savings on a reward for a job well done.

    Changing your mindset in order to stop yourself living paycheck to paycheck involves focusing on the fact that you can eventually get what you want, just not right now. Self-control and delaying gratification are two tenets that can help you change the mindset.

    This is perhaps where living paycheck to paycheck can be considered workable, because you’ve already managed to put your financial house in order with a tight but fair budget, automated bills payment and savings, that living paycheck to paycheck is less a stressor and more of a situational occurrence.

    Final thoughts
    Living paycheck to paycheck can stem from living an over-inflated lifestyle, which is a hazard in the consumerist society we live in. It’s a fact of life that simply cannot be avoided, but can be worked around.

    Managing your wants and needs, and living with the knowledge that you’re working towards your eventual financial security should be the one takeaway that you have every time you put away money to save instead of spending it on the next big ticket item on your list.

    Miggy Castañeda writes about personal finance for MoneyMax.ph. MoneyMax.ph is a financial comparison website aiming to help Filipinos save money through diligent comparisons of financial products.

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