Paycheck-to-Paycheck? Here’s Your Guide to Financial Freedom
Listen up, America: you have a savings problem. Nearly half of the country is living paycheck-to-paycheck, and that’s not a BS straw-man argument I just pulled out of my ass. According to the Motley Fool, 47% of Americans cannot currently handle an unexpected $500 emergency without going into debt.
Believe it or not, this is actually an improvement. Prior to the world stopping in 2020 due to the pandemic, Americans were in a much worse position when it came to saving money. According to TIME, the average savings rate for the average apple pie-loving, KFC eating American was 12.7% in March of 2020. April of 2021? That number skyrocketed to 32.7%, which is great!
However, these people didn’t make that trend a full-on habit. Savings rates crashed back down as the country opened back up, thanks to pent-up demand for going out to eat, traveling as much as possible and spending money buying that girl at the bar shots that won’t sleep with you dude just stop.
So how do we get back to the sky-high savings rates experienced during the pandemic, while also being able to enjoy life? Believe it or not, people have been doing this for hundreds of years, and you can too! Here’s the game plan.
1. Pay Yourself First
“Oh boy, another Warren Buffett quote” I hear you sigh as you swipe to get rid of this tab and never come back to this site. Look, I get it. This site is aimed at millennials and Gen Zers, and to us Buffett seems like the old guy at the shoe store that hangs out trolling for ladies, but he belongs on the Mount Rushmore of investing. Not only that, but he has some pretty decent life advice, one of which is: PAY YOURSELF FIRST. But what does that mean?
Do I Pay Off Debt? Or Do I Save Money?
The answer here is: both. I know that seems like a cop-out, but it’ll make more sense when we start chatting budgets. Just know that paying yourself first can actually involve both saving and debt paydown, and at a later point, investing.
What you need to do first is build up a small cushion. Just something that’s going to help you sleep better at night. Is that $500? $1,000? Three months salary? Only you can answer that. But…