One Paycheck Away?

Financial worries are one of the biggest causes of stress and difficulty for families today. One researcher in 2013 found that the top indicator of future divorce for a couple was if they argued about money, especially early in their relationship.

Even more recently, an interview with a homeless man in San Francisco was posted online. The man has “an MBA in finance from Stanford” but has been homeless for ten months. How did this happen to him? In his words, “We’re just one paycheck away.” ²

This concept is part of the reason that finances are such a worry for those trying to support a family. When we’re living from paycheck to paycheck, missing just one of them could definitely have difficult or even disastrous consequences.

The good thing is, it doesn’t have to be this way.

What’s the solution? It sounds pretty intuitive: as soon as you get paid, save some money from your paycheck, preferably a set percentage. And when you start to earn more money, start to save more money.

Saving a percent of your income instead of an amount means that every raise or bonus you get will help you in the future, and your spending habits will not increase as much right now. It’s the principle of ‘waste not, want not’—an investment for the future of a family.

Although this is simple, it’s not an easy habit to start if we’re like most Americans. Financial advisors have noted that an increase in salary or income typically means that a family will also increase their spending to match it. If we don’t save our money right when it comes, we’ll probably end up finding another use for it, and at the end of the month, we won’t have anything to put away into savings. This behavior comes from the same part of human nature that a credit card company takes advantage of when they raise a credit limit to entice people further into debt: With more money available, why not relax a little and get the things you couldn’t pay for earlier?

It’s an attractive idea to be free financially, but that freedom doesn’t come when we’re able to spend as much as we want. Financial freedom comes when we don’t have to worry about missing that next paycheck. By learning to live with what we have now, we’re preparing our families and ourselves for the future.

—Sam Watson, Editor, Stance