Real Stories of Living Paycheck to Paycheck
It is often said that people forget bad memories and only retain the happy ones. Average CEO salary is now 177 times median employee salary for Indian companies. Put these two facts together and it is not surprising that so many people in senior management & HR don't empathize with the real cost of living crisis that a number of their employees face on a day to day basis. They might have faced similar issues in their own career but such memories fade fast.
Today I will try to share a few stories to inspire employees who are fighting in the trenches, barely making ends meet, and tired of not having anything leftover to spend on their wants.
Some of these individuals are no longer living paycheck to paycheck, and they offer tips on how you can get out of the cycle yourself.
Others are still there, but can provide clues and tips for stretching money that you might not have thought of yet.
Whether you’re looking for comfort, for tips, or for some light at the end of the tunnel, just keep reading.
But before we start, first tell yourself that you are not alone & even more importantly almost all people have been in the same position at least once in their lives.
So, how do we define living paycheck to paycheck?
These are some of common characteristics
No money for savings
Hardly enough money to cover your needs (sometimes haveing to chose which bills to pay and which to default on)
No extra money for things you want to buy
No cushion for unexpected expenses
In the words of one of the employees of a movie chain, living paycheck to paycheck means
“Being completely dependent on the next paycheck and feeling of fear that if I were to lose that paycheck, I wouldn't have money for grocery, EMI's & even school fees. It's being one emergency away from going into debt. It is stressful and creates a constant baseline of anxiety and insecurity.”
And because you can’t save money, the cycle self-perpetuates with no end in sight.
One sales executive from a payment company says, “To me, living paycheck to paycheck means having zero buffer. All money that comes in, goes out. There is no savings and any unexpected expense puts you in the negative or increases debt.”
So, what are the consequences of being stuck in this financial cycle, where debts increase, savings is stagnant, and your paycheck just cannot cover everything?
Consequences of Living Paycheck to Paycheck
So, what are the consequences of living paycheck to paycheck? What does this type of living do to your overall finances, your quality of life, and how does it affect your future?
Quick rundown of common consequences:
Less quality family time
Living with fear
Having to borrow money from family
Feeling embarrassed
Feeling like this is permanent
Scheduling life around your next payday
Having to decide on whether or not to accept assistance
Constantly juggling money
Paying extra fees
Getting caught in legal troubles
Being stuck somewhere you hate
Having to live outside of your principles
Why do So Many Live Paycheck to Paycheck
There are tons of different reasons why so many people live paycheck to paycheck.
Some are more common than others, such as if one person in a household loses a job, or not earning enough money
Others, are a bit more unique.
#1. Moving to a High Cost of Living city
“We lived in a high-priced city (Mumbai), made 80,000 Rs per month but high rent and a newborn baby just made it impossible.”
Moving to a high-cost-of-living city is a very common reason for living this lifestyle. Sumit, 24, explains how he got into this situation:
“I moved from Roorkee to Delhi in 2018 just after getting my engineering degree. I had a job but it was an entry level salary and I was living on my own for the first time in my life. That led to a lot of overspending, almost half of my salary went to my rent, I didn't know how to budget etc.”
#2. Overspending and Experiencing Lifestyle Inflation
Rupak found herself in this situation for an entirely different reasons: overspending, and lifestyle inflation.
“I spent a lot of money on e-commerce with my first son. I wanted the best things available. Somehow, my frugal habits went out the window when I became a father. In addition, ALL of my bills gradually increased overtime and I was too busy with my newborn son and job to notice.”
Sachin with a family of four, overfinanced himself into living this way. “We really just didn't know better. We felt like it was time to buy a house as EMI's were low. Then we needed a SUV with two growing kids. Then we needed a holiday after Covid. Now all of a sudden EMI's have shot up and job security is gone"
#3. Unfortunate events leading to Big Financial Setbacks
Some people find themselves living this way quite suddenly after tragedy strikes. Sanjay explains
“I had a health scare and was admitted for 2 weeks. The whole procedure cost 24 lakhs. I had to take money from family to finance.”
Ranjeet has a different story
“I was dabbling in futures & options and was heavily leveraged. I lost a bulk of my savings”
#4. Not Earning Enough from a Job
Sometimes your career suddenly stagnates or you need to take a pay cut.
How Do I Stop Living Paycheck to Paycheck?
Fortunately, many of the people are no longer living the paycheck to paycheck lifestyle.
And this part should give us hope. Let's learn the first few things that they did.
Sanjay moved to a lower cost of living area
“Well, the first thing we did was move to an apartment that cost less than half of the old one. We moved to a location further away but didn't have to compromise on space. Everything costs less here”
Rupak's First Step: Getting Back to the Basics
“The first step I took was to stop all unnecessary spending. I really had to review the basics of true wants and needs. Then, I decreased all of my bills by switching companies, negotiating lower prices, asking for discounts, cancelling services, and utilizing less energy, water, data, etc. That gave me extra money to start my debt payoff strategy.”
Pooja's First Step: Get a Higher-Paying Job
“There were multiple times I set up a spreadsheet to figure a way out. But this never worked for me until I got my new job which paid 40% more than my previous salary. With my new salary, I was able to pay everything with ease and started saving money in another account. The money was saved automatically with every paycheck. And that savings just continues to grow.”
Sachin' First Step: Face the Reality by Starting a Budget
“The first thing we did was start a budget to know where our money was being spent. Then we removed all extra spending that was not an absolute need to stay afloat (Outside food, transportation, utilities). Cut your expenses to the bare minimum. It does not have to be forever but this will free up money to save an emergency fund.”
Iknoor's First Step: Sell All Non-Essential Belongings
“The first step I took was to sell everything that was non-essential to me. I sold furniture. I sold kitchen appliances. I was able to easily make 2 lakh rupees selling my things in a short amount of time. This might be harder for some personalities, but I don't get overly attached to most things, and I was happy to have something I could do quickly to help my situation.”
Ankur's First Step: Coming Clean and Getting Help from Family
“I sat down with both of my brothers who are a lot older than me and we had a chat about my finances which is a really hard thing to do but I would urge anyone who is struggling that just talking to someone close to you can make a world of difference and lift a weight off your shoulders and you can start to make plans going forward."
Shouvnik's First Step: Having a Serious Talk with Wife
“When we came back from traveling, the first step we took was having a serious discussion about what we wanted out of life. We set long-term goals and short-term goals of what we needed to accomplish to make that dream happen.”
Rupali's First Step: Learning How to Manage Money
“Honestly, the first thing my husband and I did to start our process in escaping that paycheck to paycheck living was learn how to manage our money better. I didn't know it then, but we were actually budgeting. We had low income for a family of 4 at that time, but once we were able to track where our money needed to be spent, those rupees started stretching even more.”
How Can I Save Money if I Live Paycheck to Paycheck?
In this section, I want to include a rundown of really helpful tips from people I interviewed so that you can pick the ones that will most impact your life, as quickly as possible.
“Stop caring about what others think. This is your life you don't need to keep up with the others.”
“Side hustles! I increased my income. I had already reduced my expense by a lot, but there is only so far you can reduce your expenses. At some point, making extra money makes sense. I took on a side gig and my income increased by 30% and my problems disappeared.”
Carpool to work.
Work lots of overtime, at least until you save up an emergency fund amount
Listening to these stories of crisis and fightbacks is really uplifting. If you are in this situation remember that you can turn it around and lot of things are still in your control.