Living Paycheck to Paycheck? Stop Playing By The Old Rules Of Money..

Are you one of the millions of Americans struggling week to week? Struggling to pay monthly bills, or surprise expenses? Struggling to accumulate wealth? Struggling to enjoy life because of the stress this financial burden brings?

If so, there’s a reason for this; the rules have changed.  Drastically.

What rules you ask? The rules of money.

[Most of us have been programmed since birth we need to go deep in debt for a college education, get a good paying job, invest in a 401k and put money into our savings accounts.  This school of thought may have worked even as recently as the 90s,  however, you may have noticed; this isn’t the 90’s..

Finding a good paying job, with regular merit increases (that keep pace with or exceed inflation), benefits, security, pension, and a gold watch after 45 years for the average Joe are briskly becoming a relic of the past.  Such careers do still exist, however you might have a better chance of locating Sasquatch than landing one.

Industry age economic schools of thought, such as squirreling away money into a savings account for the long term, being dependent on a paycheck from an employer, and solely trading hours for money (paycheck), is to say the least, not the best allocation of your most precious resource, time.  The caveat being of course, if you’re one of the few who absolutely love your job and make a decent buck.

This day in age, savers are losers.  Tying up money in a savings account that generates .01% in interest isn’t even enough to keep pace with inflation, which has been at .08%  the last couple of years, so essentially, .07% of your savings has literally EVAPORATED. (See table 1a.)

Bear in mind the inflation rate does fluctuate, and as recently as the early 2007 has been has high as 4.1%!  Obviously you need a secure, liquid place to keep money for bills and the like, I’m just advocating keeping a nominal amount (3 months living expenses) and putting the rest to work for you somewhere else. (Rental Property, REITs, CDs to name a few)

(1a.)

 Interest    Inflation  
Column1Column2Column3Column1Column2Column3
YearRateSavingsYearRateSavings
10.011000110.089992
20.011000220.089984
30.011000330.089976
40.011000440.089968
50.011000550.089960
60.011000660.089952
70.011000770.089944
80.011000880.089936
90.011000990.089928
100.0110010100.089920

As you can see in the table above, if you follow convention and place $10,000 in a standard savings account, you will actually lose $90 over a period of 10 years. ($10,010-$9,920= $90) Let’s pretend inflation didn’t exist. Over 10 years, you still would have only made $10!  Your money only made $1 per year. (Excluding taxes of course)

 

If you pair the above with stagnant, and often decreasing wages, and let’s not forget the cyclical market declines and crashes, you can see how it’s near impossible for many people to get ahead.  In fact, according to Bankrate.com, 1/3 of Americans live paycheck to paycheck. 1/3!  That’s alot of people following antiquated, detrimental financial advice.

emptypockets

So why give the best years of your life to a corporation, facing downsizes, pay cuts, heavy taxes and often inflexible schedules, when there are much better ways to be financially solvent, and live life on your terms?

The “American Dream” isn’t dead, how we’ve been taught to achieve it however, is.

 

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