- Guest Contributor
- February 24, 2022
Living paycheck to paycheck hurts you, in ways that you may not even be aware of. It’s important to know the dangers that arise from “scraping by.” Knowing the hazards of barely making enough can help you decide when it’s time to manage your money differently, choose a different profession, or maybe even supplement your income with a side hustle. Below, we’ll discuss the problems that come with barely making enough.
1. Can’t Build Savings
You may have heard the 50/30/30 rule, which states that you should be putting 50% of your income toward essentials like rent, 30% of your income toward non-essential purchases (restaurants, movies, etc), and 20% of your income should go toward savings. Of course, saving 20% of your earnings every month isn’t realistic for everyone, but it’s still important to save something every month.
If you’re only earning what you can live on, then you’re not able to save money. Savings can be used to do things like buy a new car, buy new furniture and make other big purchases as needed. If you can’t save, this can hurt you now and into the future.
2. Can’t Build Emergency Fund
In addition to savings, it’s important to have an “emergency fund.” An emergency fund is money set aside for a disaster or a problem. Many investors recommend that everyone have at least three to six months worth of salary in their savings for their emergency fund. Even if you’re not able to save that much, it’s still important to have some money set aside for a disaster like a car accident, unexpected medical bills, and so on.
3. Harder to Focus on Future Goals
Most people feel better about themselves when they have future goals. Some people want to save to buy a house, others want to get married or buy a car. When you’re living paycheck to paycheck, it’s much harder to focus on future goals, and that can make life depressing.
4. You’re One Unfortunate Event Away from Falling Into Debt
By far, the worst part about living paycheck to paycheck is knowing that you’re just one unfortunate event away from falling into debt. Someday soon, something could happen to you. Your car’s transmission could fail, your roof could leak, or your full-time salary position could lay you off.
When this day comes, you may have no choice but to start putting your expenses on a credit card, or you may have to borrow money from a family member. It’s very disheartening to fall into debt when you’ve been working hard to make ends meet.
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About the Author: Kathryn Elwell grew up in the Midwest. She has experience in management and human resources, and has been writing on these topics and more for 12 years.
