Paycheck-to-Paycheck Mindset

[boosami]

I took a look at my spending over the recent past, and it's high in comparison to my usual. This past month I had to repair my car, pay owed taxes, get some fairly major dental work done, and replace a computer. It's not ton of money, but it all added up to several thousand dollars above normal. It's never fun using money on those sorts of things, but of course I have plenty of money in savings for exactly that purpose and it's no problem.

It got me thinking, though, about those people living paycheck to paycheck each month. Everyone knows unforeseen and irregular expenses happen. How do they rationalize their mindset that it's OK to save nothing saved for those occurances? I've never lived like that... Can anyone here speak from past experience regarding rationalizing a no-savings strategy?

[Caoineag]

My father tended to live like that. He felt he could always put it on a credit card and pay it off later. I think he also felt he didn't have enough to save so he had to pay it off later. Even at my worst, I have always had some savings for things I knew were coming up.

[boosami]

Originally Posted by Caoineag

[My father] felt he could always put it on a credit card and pay it off later.

That's what I don't get... How can you pay something off later when you don't have any any money left over each month?

[SnoopyCool]

I can speak from experience about not saving and not caring. During college I assumed I'd make big $ and could splurge because I'd be able to easily pay debt off once I landed the big job.

I never landed the big job. Luckily, nothing catastrophic happened to wipe me out financially (or otherwise). Can't imagine where I'd be now if something bad would have happened.

I basically lied to myself and ignored the good advice my parents were trying to give to me. I can remember crying one time when my 6-month car insurance bill came due and I didn't know what to do. I hadn't saved any money to cover it and so I borrowed it from a friend. Embarrassing. I lived like this pretty much through college. But in the past decade I've slowly learned to save money and spend less. Good thing, too. We have been able to float through a lay-off and start a new business because of the changed mindset. Thanks, of course, to good examples and good reading from this board.

[swaymonae]

I'm 24 and I just recently started saving late last year..

Rationalize it? No...

Maybe explain a little of what went on in my mind? Yes..

Firstly, I don't think anyone ever sat down and explained to me how important it was, talked about my options, etc. I was ill informed and I didn't care..

I'm sad to say my mother was a bad example, always in a ton of CC debt..

When you're 20, you want stuff.. lots and lots of stuff.. That's what I got, stuff.. I don't even know where any of that stuff is, now looking back..

You also still feel like you're a kid, and therefore you still have mommy & daddy to fall back on.. no need to be responsible yet.. If anything ever happens mom will take care of it..

Some people snap out of this mindset, and some don't.. if you learn to live your life this way so long, and noone ever comes along and helps you realize you need to make a change, why would you?

People are living in the moment,.. and a lot of people don't know enough to care about their financial future.

Then I think there are other people who dug a hole so deep in their younger years that they'll spend their adulthood trying fix it.. and it takes a lot of time, and within that time other things happen.. and that doesn't help..

[Caoineag]

Originally Posted by boosami

That's what I don't get... How can you pay something off later when you don't have any any money left over each month?

Think of it as reverse savings. Say you have an extra $100 per month and a bill for $600. If you had saved that money, you can pay it off and get back to saving. If you were already paying something else off, you don't have enough so you add it to the credit card and pay it off in 6 months (and something else will come up and you are back to paying off the credit card).

It costs more to pay for things in reverse, but once you get into that cycle its hard to break because you don't have the money to pay things off and save at the same time.

To be fair, I actually do this to a certain extent and its a cycle I have been working to break. Fortunately I don't pay a lot in interest or fees but it still is a bad habit that you have to break. That said, I don't live paycheck to paycheck by any means.

[boosami]

Originally Posted by Caoineag

Think of it as reverse savings. Say you have an extra $100 per month and a bill for $600. If you had saved that money, you can pay it off and get back to saving. If you were already paying something else off, you don't have enough so you add it to the credit card and pay it off in 6 months (and something else will come up and you are back to paying off the credit card).

Ah, I can see how that would get a person stuck in that type of cycle! What a mess!

[tripods68]

77% working Americans live paycheck-to-paycheck. The remaining 23% or either wealthy and/or Savers!!!!

[disneysteve]

Originally Posted by Caoineag

Think of it as reverse savings. Say you have an extra $100 per month and a bill for $600. If you had saved that money, you can pay it off and get back to saving. If you were already paying something else off, you don't have enough so you add it to the credit card and pay it off in 6 months (and something else will come up and you are back to paying off the credit card).

It costs more to pay for things in reverse, but once you get into that cycle its hard to break because you don't have the money to pay things off and save at the same time.

I have family who are exactly like this. They both work, though neither makes a ton of money. They rent because they both can't afford and don't have good enough credit to buy. And they have basically nothing in the way of savings. That doesn't stop them from enjoying themselves, though. Two years ago, they took a vacation to an all-inclusive resort in Mexico. They loved it so much that they went back this past year. My wife and I were wondering how they afforded it. Turns out the answer is exactly what you described. We saw them a while back, after the 2nd trip, and they said that as soon as they pay off that trip, they plan to go again. So they are charging and going, then paying off, then charging and going again, then paying off. They are perpetually in the hole totally by choice.

Of course, what they could do is pay off the last trip, skip a year, then save up for the next trip and go, but that just isn't how they think. I just can't comprehend that mindset.

[GREENBACK]

Originally Posted by tripods68

77% working Americans live paycheck-to-paycheck. The remaining 23% or either wealthy and/or Savers!!!!

I'm glad to be a 23 percenter albeit not on the wealthy side of the slash

[Broken Arrow]

I remember not too long ago, someone asked me if I was going to upgrade my computer. I told him that I don't want to because I can't "afford" it. He wasn't rude or anything, but he did innocently ask, "Why not? They have great financing programs and you can get one for as low as $25 a month."

To me, I can't afford it if I don't have enough cash to pay for something upfront (with certain exceptions, such as a house, and MAYBE a car). To him, he can't afford it if the monthly bill is too high, even if he will ultimately pay even more for the same items in the end.

While I'm here, I think a lot of people are also learning to live within their means. This is nice and all, but alas, this still the paycheck-to-paycheck mentality. For people who have lived beyond their means, this will most certainly seem like progress. And it is.... Unfortunately, it's not REAL financial progress. You're not really moving forward. You're just preventing yourself from slipping backwards. Like wheels spinning in place.... No, the real way to make financial progress is to live BELOW your means.

[boosami]

Originally Posted by Broken Arrow

"Why not? They have great financing programs and you can get one for as low as $25 a month."

I can imagine a friend of mine from college saying that exact thing... She once told me that she could afford spending all that she did because she was very careful to be sure she could always afford the minimum payment on her credit card on time each month. Same type of person who buys a home based on the monthly payment with no care about the adjustment term or rate... Scary stuff.

[GREENBACK]

When I was a kid living check to check had a different meaning. I lived in a low income area and People lived check to check for food, clothing and other neccesities.

The concept of saving was different and people saved more because they had no choice. When easy credit came along "check to check" took on a different meaning. When it became easy to get CC's and other loans Check to check became a new concept. You could live a new and better life through a CC. Your paycheck to paycheck thinking only applied to making a minimum payment. I think this is where paycheck to paycheck turned into egregious debt.

[tripods68]

When visited Nissan dealership last week to check out the Versa and Altima Hybrid, we were approached by a salesman. We end up talking to him about the financing on the Altima after a while and he said, "You can take this home today for only $199 a month excluding taxes." I said, we are just looking and not ready to buy. Maybe in a year half or two. He followed up by saying, "You can afford with your income". I replied "sure, we can afford it for that price, but we are still paying down our Odyssey this year and we don't like to make two car payments". He insist, "you can afford it". So i decided to talk about our family budgeting just to prove a point. Well he got bored, and finally left us alone. Thank god!!! He just became so annoying with all pressured sales tactic. DW and I left the dealership smiling a bit....

This bring up this whole point why so many American live "paycheck-to-paycheck". The pressure that we put on our society to consume and to spend like "drunkin sailor". Its no wonder why the saving rate in this country are so low compared to other industrialized countries like Japan.

[dmontngrey]

My mom lives paycheck to paycheck and has a strange "entitlement" attitude. I didn't realize this until I took most of the control over her finances. I always just took her word that she didn't have any money and couldn't afford anything. HOLY COW!!! Not only does she make enough money to pay the bills and live on, she could do GREAT if she just stopped buying crap she didn't need to buy. She also needs to learn how to shop at the grocery store. She gets paid and goes and blows a ton on groceries because she "needs food". She lives by herself and spends twice as much as DH and I do!! She also has the "I'll put it on my card and pay for it later" mentality. Thankfully they only card she has is a store card where she works - that's dangerous though. She's a gluton spender and buys things when they're a "good deal". Yeah, quite often the money's not there when the bill comes in! That's where this entitlement kicks in and she thinks someone should come to her rescue. I really don't know how she rationalizes it either. She has just been living with this mentality for so long, I don't think she understands. She sent a couple credit cards into charge off years ago. I don't think she understands credit. She also had another store card for this store years ago that went into charge off. What were they thinking giving her another one now?????

It has been a year since I have "loaned" her money and I wont do it again. I have made it very clear! No more calling me crying and saying you don't have heat - all I will do is say "that's too bad." Harsh, yes, but she needs to learn! She has property taxes to pay twice a year and should have some money aside for car repairs. I don't know who she thinks should pay for this stuff!!

[wnlbutterfly]

I have really been doing a lot of thinking about this. I believe (for our family anyway), that is it a mind-set. And for us it started with great-grandparents that literally were dirt poor. When you are that poor (and they wouldn't do welfare), you live paycheck to paycheck. It is very hard to pass on financial responsibility or planning to the next generation if you don't have any.

Then the next generation, although most with just an 8th grade graduation, went back and got GED's, went to nursing school (we have a lot of nurses in the family now). This stepped our family up a notch, but they still had that same paycheck-to-paycheck mentality.

My mom was 16 when she got married, had me, divorce divorce. GED, college, and after 15 yrs of WM and saving in stocks, she bought an H&R Block franchise. She now has three offices. Making good money, but she STILL had that same mentality, but there are improvements.

Then there is me...finished high school with honors, graduated college...we struggled too in the early years, but we are doing well and our kids will see parents that are saving money, paying off credit card debt (as well as hearing how it can be such a bad trap to get into). We will talk finances with our children, something that never happened in the previous generations.

DH grew up with grandparents and a mother that were investing since he can remember, saving and budgeting. Although it is me that is the one making the changes here. I think his family made a big impact on me to see that it CAN be done. He is more like "well, spend what you got because there is more money coming in", they never taught him where the money was coming from. But he is changing, he is very proud of what I have done with our snowball.

Anyway....I think a lot of this is passed down from families also, but we all have the capacity to make changes, learn how to do better. Some people just don't want to take the time and do it. Break the cycle!

[SnoopyCool]

Originally Posted by wnlbutterfly

He is more like "well, spend what you got because there is more money coming in"

This is exactly how I used to justify overspending. But there may not be more coming in later, as I've seen in my life with this whole lay-off we've dealt with. I am beginning to think that that mindset that I once had was somewhat entitlement driven.

[whitestripe]

when i was in high school i had a job where i earnt $107 a fortnight (five years ago) - it would be gone less than a week after i got paid so then i had a week of no money. once i finished school and got a job, the only time i actually lived 'paycheck to paycheck' was a month when my pay kept getting stuffed up by the payroll manager and they paid me less than i earnt every week for four weeks!
so i guess i was one of those people who snapped out of it very quickly. my mum, on the other hand, is completely the opposite. she has zero left in her bank a few days before pay day each week. i just dont understand it. how hard is it to have a look and see where you're going wrong? it's not like i havent tried either, she just doesnt care.

[disneysteve]

Originally Posted by whitestripe

my mum, on the other hand, is completely the opposite. she has zero left in her bank a few days before pay day each week. i just dont understand it. how hard is it to have a look and see where you're going wrong?

I agree. My wife used to work with a bunch of people who were paycheck to paycheck types. On payday, they would rush out at lunchtime to cash their checks so that they had money to buy lunch that day. My wife had direct deposit and didn't even keep track of when payday was. It never occurred to those folks that maybe if they weren't going out and buying lunch everyday, among other things, their money would last a little longer. My wife would brown bag lunch and put a 10-cent can of soda in the fridge while they were ordering out and buying a 60-cent soda from the break room vending machine. Of course, every Monday, they all came in talking about which club they went to over the weekend and what movies they saw and what shopping they did. It was pretty simple to see what the problem was. They just didn't seem to care a bit.

[dmontngrey]

Originally Posted by whitestripe

my mum, on the other hand, is completely the opposite. she has zero left in her bank a few days before pay day each week. i just dont understand it. how hard is it to have a look and see where you're going wrong?

Not only do I agree with this, but I have to add: how hard is it to be aware of your bank balance BEFORE you go shopping?? My mom just spends and spends and spends and then all of a sudden there isn't enough money for them to take out her car insurance. Just yesterday she said she cashed a check from her other bank account because she "needed gas and..." Seriously, didn't even finish her sentence about what she NEEDS. FIFTY DOLLARS later - I have no idea where that money is going. Quite the sore spot with me most days....