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What It Means to Live Paycheck to Paycheck

What It Means to Live Paycheck to Paycheck

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You’ve likely heard the term or phrase “living paycheck to paycheck.” It may even describe your current financial situation, too. But many people often confuse what it means. Almost everyone lives paycheck to paycheck in some sense, but it can be helpful to really drive down and get a true understanding of the phrase and how it’s often used to describe specific financial situations.

With that in mind, living paycheck to paycheck generally describes a person’s financial situation in which their monthly income meets their monthly expenditures — and nothing more. That is, if a person spends $1,000 per month, they’re also earning $1,000 per month, or roughly that amount. They have little or no room in their monthly budget for anything else.

And if they were to miss a paycheck, they could find themselves in a dire financial situation.

Defining Paycheck to Paycheck

There isn’t necessarily a hard-and-fast definition of the phrase, and it doesn’t describe an individual or household’s income level, either. There are what many would consider to be “wealthy” people who effectively live paycheck to paycheck. It’s more about how a person’s income matches up with their lifestyle or expenditures.

But again, the main idea behind the phrase living paycheck to paycheck is that it describes a situation in which a person’s monthly income just about covers their expenses. It may actually fall short, and a person could be going into debt every month. Or, it could be a little bit more than their monthly expenses, but not enough to save, invest, or do much else with. 

And again, this isn’t really about income level. You might earn $1.2 million per year, but if you’re spending $100,000 per month, you’re still basically living paycheck to paycheck. Or, if you’re earning $12 per hour, you’re still probably living paycheck to paycheck.

It’s all about context and circumstances, and how well your financial plan is keeping you on track.

Getting Away From Paycheck to Paycheck

For many people, a steadfast financial goal is to move away from living paycheck to paycheck. Many never do. But others are able to pull it off. That doesn’t mean it’s easy, of course.

The trick, if you want to call it that, is to increase your income or reduce your expenses. Yes, that sounds easy on paper, of course, but is much more difficult in the real world. As it’s possible to cut expenses to the bone, it may be more realistic to try and find ways to increase your income. Hopefully, as you progress in your career, pay increases will come along, though there are no guarantees.

But remember, even if you’re earning more, you could also be spending more. The goal is to increase your income beyond your monthly expenses — to increase the margins, so to speak. That extra money could allow you to save or invest, and create a financial cushion, be it an emergency savings account, a retirement savings fund, or something else.

Again, not easy. But that’s usually what it takes to get away from living paycheck to paycheck.

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