Living Paycheck to Paycheck Increases Potential For Poor Financial Decisions

Living paycheck to paycheck leaves people vulnerable to financial disaster. The biggest problem is the future uncertainty that this presents should a life altering event take place. Employees think they are safe in their job and have no risk of unemployment. This mindset deceives them into managing their money in a careless manner. They do not feel the threat of financial troubles because they are use to a regular paycheck. Basically, they take this regular check for granted. As a result, they spend every cent they earn as fast as they can. It is a sense of entitlement. They think if they work hard enough, then they have a right to spend however they choose. People do have a right to spend as they wish. However, people also have a responsibility to pay for expenses that are not in their control. Things happen last minute and must be paid for. Oftentimes, living paycheck to paycheck makes people unable to meet this responsibility.

People resort to borrowing from friends and family when money is tight. This is a bad choice for anyone who cares about their relationships with others. Borrowing money from friends and family causes unnecessary stress in the relationship. Loved ones become resentful when they are not paid back, or they see the borrower making purchases with money that is owed to them. People damage relationships by borrowing money from friends and family.

Some people can’t get through the week with their paycheck. They have to get payday loans or cash advances. This method of getting through the week is not advised, as it can lead to financial hardship. The same circumstances, that led to the lack of cash flow, remain in effect week after week. Payday loans do not improve cash flow. It only creates more financial problems. Payday loan companies charge outrageous fees and interest for their services. These companies take advantage of people that cannot manage their money properly. Oftentimes, a payday loan company requires collateral on a loan. With almost impossible terms of repayment, they eventually take the property. If someone doesn’t have the money to get through the week, then how would they have the extra cash to pay on a loan a week later?

Credit cards are similar to payday loans, except credit cards are for long term use. However, when not used properly, credit cards can ruin someone financially. People use credit cards to supplement expenses or a lifestyle they cannot afford. Credit cards lead to long term debt that requires payment. If payments are not made, then interest rates go up. Eventually, credit card companies leave negative information on the borrower’s credit report. With a bad credit rating, the borrower finds it difficult to get credit in the future. Credit cards serve a valuable service when used properly, but they can destroy someone living paycheck to paycheck.

People who live this way never build up a savings account. They cannot establish a foundation for retirement or leave an inheritance for their children. Living paycheck to paycheck leaves people vulnerable to unemployment and unexpected expenses. People who manage their money wisely avoid these pitfalls. Those that choose to spend every cent suffer in the end.