The more I learn about personal finance, the more shocking I find the recent data. According to CNBC, there are now 61% of Americans living paycheck to paycheck. They report that this was up from 51% a year ago.
Surging inflation notwithstanding, the best way to overcome the paycheck to paycheck treadmill is still establishing a personal budget. If you’re familiar with the seven Baby Steps, the budget should be Step 0.
Live on Less than You Earn
The budget is a personal spending program that you set up. (Or call me, I can help!) The budget takes into account your income and all your expenses. It tells your money where to go instead of wondering where it went. Spending our money on paper (or a spreadsheet) on purpose is what it’s all about.
I always compare the personal budget to MyFitnessPal. When people who document all the food that they eat, they are usually surprised by how much they eat. The discipline of winning with your money flexes the same mental muscles as winning with your nutritional challenges.
Invest and Grow the Difference
This is the main area where my personal finance philosophy differs from Dave Ramsey’s. Dave Ramsey owns and runs a ginormous and successful business with hundreds (maybe thousands) of employees. As a result, he needs many streams of income. One of those streams is in the SmartVestor Pro network. Actually, Ramsey Solutions has a huge network of ELPs, or Endorsed Local Providers. Ramsey Solutions probably receives a “finder’s fee” for these referrals.
Part of my brand is educating individuals how to save paying the 1% per year. I advocate a diversified investing program. Instead of paying through the nose for help looking for a needle in a haystack, buy the whole haystack. Broad market investment like VTSAX is buying that haystack. And investing in a mutual like this costs just 0.04%. That’s 25 times less expensive than a traditional money manager!
But don’t save money in the bank. Your emergency fund and sinking fund are not investments. One is insurance against a rainy day. The other is for short-term savings for things like property taxes, annual auto/home insurance premiums, Christmas clubs, etc.. It is impossible to save your way to wealth with bank interest rates.
Avoid Credit Card Debt
Use credit cards as cash. If this isn’t possibile – either due to lack of discipline or a lack of understanding (and a good budget!) – consider the plasectomy made famous by Dave Ramsey. Cut up the cards, and spend cash only.
While it may be true that cash is king, you should consider the drawbacks of flashing greenbacks. For starters, there is a safety concern. Depending on where you live, there may have been an uptick in crime in the past couple years. So you may want to reconsider carrying cash. If money is stolen (or lost), there is no replacing it. If a credit/debit card is lost or stolen, a phone call is all it takes to freeze it or prevent charges and get a replacement card.
Conclusion
Not surprisingly, my 3 best ways to avoid becoming a statistic are the 3 cornerstones of my brand. I’m sure I will be writing more posts about other dangers especially given the stagflation and pending recession.
As Always…
Thanks for reading! I hope this information provides food for thought. Remember that I am not a certified financial planner, a certified public accountant, a licensed real estate agent, etc. My content is for educational purposes. I am a math educator who happens to have a finance degree. Like they say, never take financial advice from a math teacher! (Do they really say that?)
But spend less than you earn, invest the difference, and stay out of credit card debt!
I would so appreciate your sharing my content with anyone you feel could benefit. And if you would like a free exploratory conversation or just want to shoot the breeze about personal finances, call me and leave a message or send a text to 570-731-0425.