May 10, 2016
When You Earn Over $100,000 and Still Live Paycheck to Paycheck
It may sound unbelievable, but even when you earn six figures you can be living paycheck to paycheck. How does this happen and how can you keep it from happening to you? In 2015, the number of six-figure earners living paycheck to paycheck was a whopping 25% according to a survey by SunTrust. Thirty percent of those surveyed blamed lack of financial discipline, another 68% blamed eating out as the main reasons behind their constant spending. Therefore, we continually see simple lifestyle habits and everyday expenses that exacerbate the problem, not low earnings or flashy lifestyles.
How can you get control when you earn more than $100,000 and still live paycheck to paycheck?
First, you have to acknowledge that earning $100,000 doesn’t automatically make you wealthy. There is a perception that $100,000 is the gateway to being rich, but you will still live paycheck to paycheck if you don’t budget or keep track of your spending.
Second, be willing to make some lifestyle trade-offs. Is your rent or mortgage more than 35% of your income? Are you paying for the convenience of being close to work? Perhaps it’s time to downsize or take on a roommate to help manage your housing costs.
Third, make savings a priority. People earning more than $100,000 are often not saving enough in proportion to their income. They are also more comfortable increasing their debt loads due to their higher income. Remember, you still have to pay back your debt, so keeping it under 30% utilization is ideal no matter what your income.
Fourth, don’t allow your job title or income to spend for you. If there is an unspoken expectation that leads you to believe there is a certain type of apartment you should have, or a certain type of car, or certain types of clothes if you earn six figures, erase those myths. Especially if you have children and everyone in your neighborhood sends their kids to the same pricey private school. You should focus on making financial choices that are practical for your finances and your future, not your neighbors.
Assessing the issues that are keeping you living paycheck to paycheck is a vital part of the process. Also, honestly considering how your lifestyle choices can be adjusted to help lighten the load is critical as well. Lastly, committing a portion of your reduced expenses to increasing your savings and building your wealth for the future will be the best thing you can ever buy for yourself.