This is a phrase I have used for years. But what does it really mean?
I am sure most if not all of us were told that we should make “good choices” by our parents when we left the house for the evening. This is pretty universal and one I find myself using with my children. Do we give heed to this plea? Or do we brush it aside as if almost offended by the thought that someone would question our ability to make “good choices”?
The truth is we all make poor choices, some of us more than others, but none of us are free from making them.
Why do we choose to be poor? Think about that. I am referring to financially. Why do we choose to be poor financially regardless how much money we make based on our choices? There are lots of poor choices, but the worse choices we make are the ones to make us poor.
I don’t believe we can all be rich as far as money goes, too many things have to go right for it to happen to everyone. But I absolutely 100% believe we can all choose to not be poor.
Being poor in America is still miles and miles ahead of most other country’s. Most of us do not understand poverty on the grand scale, at least not from experience. We have good, clean, running water, we have fire departments and clean hospitals. We have law and order (for the most part). We typically don’t deal with plagues and starvation. We can buy food anytime of day or night. Overall our country is pretty well off. If you get sick there is likely a treatment or medicine that are readily available to you and at a moments notice.
Now those in our country that do fall into the poverty level have many ways they could get out of it. For whatever the reason they choose not to. There are the extreme situations beyond someones control that does cause poverty, but these are exceptions to the rules. In America if you want to not live in poverty you have that ability. And if you want to prosper it is also a choice. The infrastructure all but guarantees no poverty and with just a little bit of effort you won’t be poor.
So this brings me to being poor, which is different then being in poverty. Being poor is a choice.
Why do nearly 80% of Americans live paycheck to paycheck? This is an astounding number and one that is hard for me to believe, but it is the number I can find and it looks verifiable.
The answer is pretty simple, we choose to be poor because we choose to live paycheck to paycheck. This will be hard for many to comprehend but stay with me for a minute, they answers are right in front of us.
We are a want it now society and we are willing to put almost everything on credit to get what we want and not have to wait. We put furniture on credit, we buys cars on credit, we get recreation vehicles on credit, we get new phones on credit as well as computers. Plastic surgery is also put on credit as is most of our vacations. Almost everything we do we are happy to finance it.
Now lets be fair, buying a house on credit is the only way 99.9% of us will ever own a house. So we get typically a 30 year mortgage and if we are lucky we get a rate between 4%-6% and are in it for the long haul. This IMO is acceptable as there would be no homes owners if this wasn’t available. But we should pay it off as soon as we can. We know that stringing a home loan out for 30 years on a $300,000 loan will add over $100,000 to the total amount paid over a 15 year note. What could you do with $100,000? We can discuss that later.
But going into debt for me stops with a home. On a rare occasion emergency medical bills may need to be financed and I understand that as well, but again that is the exception. There are many that advocate student loan debt, I do not fall in this category. We are seeing now that student loan debt is crippling these kids (albeit self inflicted). Now I don’t feel sorry for them as no one forced them to finance an education, but society seems to say without an education you can’t make it in life. If you get student debt obtaining a degree in something that earns you enough money to pay it back I’ll give you a pass. If you get it in something with little to no chance of paying it back I have zero sympathy. I am living proof that making a good living in this country without student loans is very very doable, but that is another discussion.
So take homeownership, major medical expenses and I’ll even include sensible student debt and lets not classify them as “bad debt” and see what we have left? We have a whole lot of vehicles, ATV’s, computers, vacations, smart phones, Ipads, furniture, appliances, plastic surgery, clothes, eating out and many other things that are put on credit with the bank or on a credit card.
Why do we do this? We do it because we want those things now, and a monthly payment is so simple to appease that appetite immediately rather than waiting to be able to pay cash for it. We don’t tell our kids no, we don’t think about what if we lose our job or the economy turns for the worse, we simply believe if we can just make a monthly payment we can have everything we want and we can have it now.
This my friends is why nearly 80% of Americans live paycheck to paycheck. It’s not just the amount of money we spend, it’s that we spend money we don’t have with the promise to pay it back later. In other words we leverage future earnings for immediate satisfaction. We choose to do that so we choose to be poor. Again being poor is not living in poverty. But being poor I classify as living paycheck to paycheck.
Our Iphone we feel we need to upgrade and just make monthly installments. Our clothes we are tired of so we can put them on our Dillards card. Our car is a little older than we like and they are offering 3.9% interest so we can pay it off over 5 years. We don’t want to make dinner at home so we eat out and supersize our meal. The bike one kid had growing up is now not good enough for the next younger sibling and we say we will pay off the credit card next month for it. Johnny down the street got a motorcycle so now our kid needs one. We deserve a vacation so we can just put it on credit. The furniture and appliance store is offering 6 months same as cash and so we buy new appliances, bedroom sets and sofas. The electronic store has 70″ flat screens for the best deal of the year so we put it on our credit card. The tire shop has buy 3 get 1 free and 90 days interest free so we get a new set a year before we need them.
These are all things most people say and justify and rationalize because they want it now, and paying for it later or a little at a time is so easy. These are the pitfalls we fall into, this is why we live paycheck to paycheck, this is why we choose to be poor. Most people finance stuff and end up paying interest because they have leveraged future earning and can’t return to a zero balance.
The last group of things I want to mention before we continue are tobacco, alcohol, candy, chips, ice cream, cold cereal and soda pop. These are all things that are billion dollar industries and that we all spend thousands of dollars a year on. These are vices we have become addicted to and believe we can’t live without them. None of these things are essential to living, yet all of them take thousands from most of us every year.
So now that we have established that we choose to live paycheck to paycheck, what can we do about it? How can we not choose to be poor? How do we ensure that we have a nest egg for that rainy day?
It really is simple; effort, sacrifice and discipline. Those are the only 3 words you need to know. Unfortunately most people are not willing to sacrifice enough or be disciplined.
1st things first, NEVER carry a balance on your credit cards. This is as plain as it can be. Credit card companies are the biggest reason people live paycheck to paycheck. Making monthly payments and minimum payments all the while accruing 18%+ interest are the biggest reasons we are poor. Tear those bad boys up or be disciplined enough to pay the entire balance off every month.
2nd thing, don’t finance furniture and appliances unless you get zero percent interest and you can pay it off in a matter of a few months before interest kicks in. Even if it is zero interest for longer it should be paid off quickly. Carrying debt is a liability and ties your cash up from doing other things.
3rd thing, stop eating out other then on special occasions. And when you do eat out don’t supersize everything. Lots of money to be saved by eating at home and making your own meals.
4th thing, your current phone is good enough. That Iphone 7 makes calls, send texts, checks emails and gets you on social media. The Iphone 11 is not needed if you can’t pay cash for it.
5th thing, cut out those non essential vices….. Smokes, beer, candy, chips, cold cereal and ice cream. You would be shocked how much is spent per household on these non essential things.
6th thing, your vehicle. Yes you need a reliable one for sure but reliable doesn’t mean top of the line stereo system, leather and heated seats, navigation and lifted with tinted windows. It also doesn’t mean brand new. Suck it up and drive that old gremlin and save on that monthly payment.
And the last thing you can do and most important IMO is pay yourself. There is a great book that everyone would benefit from and should read. It’s called The Richest Man in Babylon. The principle of the book is to pay yourself 10% every paycheck and put it in savings. If you do this you will not only earn interest on it but you will have a safety net for unforeseen expenses or accidents.
Paying yourself (sacrifice) and being disciplined to do so every month is the single greatest thing you can do to not be poor. It is the exact opposite of it actually. You are choosing to build for the future rather than spend it all now or worse yet leverage money down the road for instant gratification now.
My friends we live in a country that has done more to raise people out of poverty than any other country. We have opportunities like no other country in the world. With effort, sacrifice and discipline you choose to not be poor.
Unfortunately most have little to no discipline, they don’t want to be held accountable and they are not willing to sacrifice today for a better life tomorrow. We as a country and society simply want it now and the only thing we sacrifice is our futures.
If you don’t want to live paycheck to paycheck all you have to do is start now. keep that phone an extra year, drive that car a little longer, don’t eat out every week, tell your kids no to their 5th pair of shoes, say no to video games and unneeded devices, don’t go to the movies just wait for them online, cut out extra TV channels, quit smoking, stop drinking, get rid of soda, no more candy, ice cream and cold cereal and for sure don’t buy anything on credit that you don’t absolutely have to.
These are all things that any of us can do. We can simply choose to sacrifice them and only pay cash for things we want/need and we can choose to be disciplined and stay the course. We can choose to pay ourselves and not need everything now. If we do these things we won’t be poor. We won’t live paycheck to paycheck and we won’t go into debt thus spending next months or worse yet next years paycheck today.
It really is a choice. We choose to be poor by choosing to use credit and caving to our vices that are not necessary, thus we choose to live paycheck to paycheck. So our poor choices make us poor. Isn’t that ironic?
We live in the most prosperous time of this world and country. We have more options than ever before to learn, grow, create and prosper. We simply have to choose to not be poor. No one makes all the right choices, but we can all choose to not make the poor choice. The choice really is yours. Do you want to continue to live paycheck to paycheck? If the answer is yes then by all means continue on your path. But if the answer is no, if you want freedom, and if you want to better your lives, do so by effort, discipline and sacrifice.
You will find after a few months of this course that the money you are stashing away becomes much more gratifying then that box of Cinnamon Toast Crunch, puff on a smoke, sip of a beer, bowl of ice cream, another video game or the upgrade of your phone.
And better yet is you won’t be leveraging next months earnings on today’s non essentials. Which will free you up in the future to work some of those back into your lives.
And if you are disciplined enough to pay that house off early, you will find yourself miles ahead with extra cash to enjoy some of those vices again without leveraging next months income. Paying a little extra on your house each month ends up going along way to financial freedom. Even paying an extra 10% each month on your 30 year note on a $300,000 house would save you over $50,000 over the life of the loan. Cutting out vices would let you reach that goal easily.
We reap what we sow, if you don’t like the bed you sleep in try making it differently. Just remember….. There is always a choice.