Paycheck to Paycheck

How much does it take in order for you to live a comfortable lifestyle? For most, the answer to that question is simply “more.” Over the years as we begin to make more money, we continue to buy more and more stuff until we are working more in order to pay for our stuff. This is referred to as the rat race. The scary part is most of us accept this as a normal part of life! A professor once told me “when the abnormal becomes the normal, we should be worried.”

We all know that we should apply our work efforts towards saving for the future, but by no means does that mean we should become workaholics working to pay for all our stuff. We have material needs and we work in order to meet those needs, but we also need to begin working towards something worthwhile; retirement, travel, freedom, and other experiences that are important to you.  Keep these tips in mind if you want to get and stay out of the rat race!

Lifestyle Inflation

When you think back to a few years ago, how would you describe your financial situation? Most likely you were making less and spending less compared to your situation today. Over the years as you’ve received raises, have you increased your savings accordingly or has that bump in income gone to extra spending? It’s all too easy to let lifestyle inflation creep in. Instead, aim to save 15%-20% of your income so when your income rises, your savings rate will rise as well.

Keeping Up With The Joneses

Living in a first-world country, we are constantly bombarded with thousands of marketing messages every day. Retailers spend a ton a money trying to figure out ways to get money out of our pockets and into their stores. Every time you turn around someone is sporting new shoes, a new handbag, or a new SUV. It’s time to stop comparing ourselves to others and reflect upon all that we do have and be grateful for that.

                                   “But if we have food and clothing, with these we will be content.” 1 Timothy 6:8

Living Outside Your Means

We love our cars and we love our homes! Sometimes though, we can go a little overboard with the house we can afford and the vehicle that fits within our budget. Stretching yourself too thin with extra-large payments means your tying yourself down for years to come. Aim to keep your mortgage at no more than 2 times your salary and if you must finance your car put down a minimum of 20% and finance it for no longer than 4 years. Read more about important financial rules of thumb.

Missing Out On Free Money

If you are lucky enough to work for an employer who offers a retirement plan, such as a 401(k), typically they will match your contributions up to a certain percentage. For example, if you are making $60,000 a year and opt to contribute 10% of your income, your employer may match your contributions up to 50%. So as you’re putting in $6,000 they will automatically contribute $3,000! Your investment just grew by 50% and not to mention the tax savings you just earned for contributing!

Neglect Planning

The most devastating thing that can happen to one’s finances is not properly planning for a catastrophic event such as becoming disabled or other emergency. If you are injured or worse, permanently disabled, you are still going to need food, shelter, and healthcare but how will you pay for all these necessities? In addition to having an adequate amount of life insurance, it’s important to also have disability insurance and the proper estate planning documents in place such as a Will and Living Will.

It is very possible to live a balanced life involving travel, entertainment and style, all the while without sacrificing saving and planning for the future. It’s about living mindfully and taking the time to understand your budget so you know what you can and cannot afford.  Take the time to plan and you should do very well avoiding the dreaded rat race.


Disclaimer: I am a CERTIFIED FINANCIAL PLANNER TM (CFP®), but I am not your CFP® or financial advisor. The information in this article is for general informational and entertainment purposes only and does not constitute financial advice. This article does not create a financial planner-client relationship. The author is not liable for any losses or damages related to actions or failure to act related to the content in this article. If you need specific financial advice, consult with a licensed financial advisor, CFP®, or tax professional who can tailor advice regarding your specific circumstances. Additionally, sometimes I use affiliate links to support my website. This means I may earn a small commission, which is no additional cost to you, for referring and discussing products and services that I personally use, or have used and trust. Thanks for your support!