Living Paycheck to Paycheck? 4 Money Traps Keeping You Stuck and How to Break Them | 614

0:00You make too much money to rely on credit. I'm just telling you the truth. And a lot of people are actually behind, right? So they're like playing catch-ups and they're waiting for that next paycheck to come to catch up to what's the current disaster that's happening. Your credit card is not a budget. And the next thing you want to do after you separate your accounts is set up a paycheck plan. Right. And so instead of paycheck to paycheck, you're a paycheck ahead. And every one of our clients is able to get here.

0:24Do you make your money but still feel like you're living paycheck to paycheck? Rude. Does it feel like your money doesn't last until your next paycheck? Yeah. So guys, today we're going to talk about common paycheck to paycheck traps, how to recognize them and how to break the cycle of living paycheck to paycheck. So what is paycheck to paycheck, Vanessa? It's a great question. We're glad you asked. And we're going to tell you that it's really this sort of behavior, mindset, whatever, of basing all of your decisions when it comes to money around your paychecks. Yeah. Yeah. And a lot of people are, they make a lot of money.

0:59They make really good money, but then they're still in this feast or famine situation where like half the month they can have groceries, but not the other half because all their bills are coming out on this half. And it just creates a really big problem for people. And we're just trying to show them a different way. Yeah. And so when we're talking about basing your money decisions on each paycheck, can I, can we go get groceries? Am I paying this bill? Are we going to be able to get the stuff that the kids need this paycheck or whatever. And it's based on the paycheck. You're just always in the cycle of waiting for the next paycheck, waiting for the next paycheck, or just deciding money things around the paycheck.

1:32And we don't want that for you. And so that's that. But also, like we said, if you're in the intro, if you're realizing that I have no money, my money doesn't last until the next paycheck, that's stressful. Nobody wants that in their life. And you want to break free from that. Yeah. And a lot of people are actually behind, right? So they're like playing catch-ups and they're waiting for that next paycheck to come to catch up to what's the current disaster that's happening. And weirdly, that pattern continues to repeat, Vanessa, right? The current disaster, now we have every paycheck, we have a new disaster or a new emergency that we don't know how we're going to fund.

2:06And so that's not cool. We don't want that. We want you to not be stressed out about that. Yeah, we want you to break free from that. We want you to stop stressing about your money. We hear it all the time. I'm living paycheck to paycheck. How do I get out of this cycle? I'm stressing all the time. So we are here to hopefully help that. Yeah. And here's the other thing. This, like the paycheck to paycheck cycle, see if this sounds familiar. It really makes you tunnel vision when it comes to your money, your goals, your life. You're thinking this next two weeks or this next week or whatever. You're thinking everything is in that like narrow focus that zoomed in.

2:37And we want you to zoom out and think all of this money I'm making, praise God, I got a raise. I am now no longer making the piddly amount that I was making in my 20s. So now that I'm zooming out, I'm thinking when you take, I feel like people take this job. They get a job and they're like, oh, I got to increase salary or whatever. We want to make that count. We want to say, oh, look at how much money I make. What can I do zoom out? What are my big life goals? What are the things I really want to be doing with my money rather than what is happening because I'm just on this survival mode? So you want to zoom out to the bigger picture.

3:07What big things do I want to accomplish that require money? And we want to zoom out at first the month view and then even bigger after that. Yeah. When she's talking about the tunnel vision is you are literally the next step. I can't do that because I'm waiting for this. And it just, it really creates a big problem. So when Shana's talking about, let's zoom out the lens, have the bigger picture and not just think about that very next step or when that paycheck is coming, because it doesn't actually matter when the paycheck is coming. That's what we want you to get to that point. It's just dropping in your account.

3:37It's paying bills. It's funding your groceries. That is the life that we want for you. But right now what we're hearing is I can't because my paycheck isn't until so and so date because all you're doing is you're focused on just that next step. and it's such a small-minded way of thinking. And we want you to, like Shada said, think bigger. Okay, here are some common mistakes. For the most part, we're talking to you and we're not in our 20s anymore. We're making pretty good money, hopefully. I know, let's see if we can get lighting, enough lighting to make it seem like we are. We're making good money, probably to the peak of our money.

4:07We're on our way. Money-making abilities, right? They say you make your most money in your 50s. So we're all getting closer to that. So this is what we're talking about for people who are making more money. What are the common mistakes you're making? It's not necessarily, really, if you're living paycheck to paycheck because you're 20, like we can understand that. Like you don't have a lot of money to spread around and you really do have a harder time maybe going away from it. But also know that this podcast is going to help you because it doesn't actually matter where you are. We're just speaking to most of our people who are in their 30s, 40s, and 50s.

4:37They make decent money, but it's not lasting them through the month because they're not organized. One of the common mistakes they make is everything is in one account. You don't need everything to be in one account. You think you do because that's the regular thing that you did. Vanessa says when you were 16 or 18 or whatever, when you set up your first account, you just got one account. And so everything started coming and going in out of that account. That is very unorganized. It's very chaotic in there. It's chaotic to figure out what's happening in there. So that's the first mistake is everything is one account.

5:03And I think we've had people come to us and say, I'm not doing that. I'm not switching accounts. I'm not opening multiple accounts. And we're like, actually, if you separate your money, it is way easier to follow and understand it's organized that way. You think you have everything in one cozy, nice little account and you can monitor all of it. But the problem is that there's so much happening in that account and you cannot monitor what's happening. And when you're going to look at the money, right, you have no idea what it's for. So when you see money in the account, is this for a bill or can I buy groceries with this or is this for a baseball or is this for what you actually have no idea.

5:37Yeah. So that's number one problem. And then another mistake that we just alluded to, which is a sign, it was a sign that you're living paycheck to paycheck, but a mistake that you're also making is not thinking monthly. You're thinking paycheckly. That's not a thing, but that's what you're thinking, paycheckly. But we want you to think monthly, okay? Zoom out and think, what can my money do in a month, right? And when you do that, it not only helps you see what's possible, but I think it motivates you, right? Because a lot, you know, when we're going to tell you to do a 90 day review and that is going to motivate you too.

6:11But when you zoom out and see what's actually possible in a month for your money to do between paying off debt or saving extra money or adding, boosting up your grocery budget or whatever it is, you're, that's when you're like, oh, if this, so I am making good money and this is where I can see it all could go and do things that I'm proud of and I want it to do. Then when you look at that monthly view, that's just better. So when Shane is talking about not thinking monthly, this is where that feast or famine comes into play because you're like, oh, I have money now because my bills come out later.

6:40So you usually take all the money and you blow it. That's usually what happens. Instead of allocating it specifically for like certain spending, you always use the same amount of money for groceries. You always have the same amount for spending money. Now we're just like, we've been in that famine mode at the beginning of the month, right? Maybe because you had a car payment, you had your mortgage payment, maybe most of your debt payments were coming out. So now in the second half of the month, you actually feel like you have breathing room. So you don't just spend a little bit of money, you spend all of it.

7:09And because we're not thinking monthly, we're thinking still, what can each paycheck do for me instead of going, what can all of my money do for me? Another mistake that is made is lifestyle inflation. And so as your income increases, so does your lifestyle, which is not necessarily wrong. But what we want, remember we say about being bougie on a budget, we want it to be on purpose, right? But what happens is, oh, we got more money. So now I'm, I can go get a new car or I can go do this, or I can go do that. And that keeps you in that paycheck to paycheck, instead of being able to take any of that extra and get you ahead or get you, like we said, zoomed out to bigger things with your money.

7:44You're just literally letting, as your income increase, your expenses, your bills, everything can increase at the same time. We want it to be like intentional lifestyle inflation or lifestyle creep, but not just this whole, Oh, I got a raise six months ago, but I actually did not do anything with that money. it's still going out as fast as it's getting in, right? So we want it to be very, like we have, I have a client, she changed her 401k amounts, she paid off a debt. Now she has extra money. And so we actually said, and she got a pay raise. So that extra money is going directly to her new car fund.

8:13It's literally, it's not even there. Whereas before, because she had debt and she's paid off, gosh, thousands of dollars. And she's been working with us for five months and I love her. She's so excited. She's literally, if I can do it, anyone can do it. But she's so intentional now with where her money is going. and it took her a minute to get there. The first month was a hot mess. Second month was almost, but it took going through that and seeing how it's not working. Like us showing her, this is why what you're doing isn't working. For us coming and doing that, she goes, oh, it made sense. So we really want to back away from that lifestyle creep and really be intentional when you have extra money.

8:48But here's another thing we know that you're doing. It's a mistake that high earners make is relying on credit. Okay, here's the truth. You make too much money to rely on credit. I'm just telling you the truth. But because it's like that one bank account. It's just a system that you set up when you started making money or whatever. And you just keep, you kept it going. And now it's sometimes, in many cases with our clients, it's spiraled out of control. When you have$5 ,000 credit card to pay off every month, no, that's not okay. And you're always a month behind. We don't love that for you. We don't love it for us.

9:20We don't love it for you. We don't love it for anybody. You're a month behind. And then you're also just not using a budget. Your credit card is not a budget. How many times have we said that? Yeah, you're not budgeting at all. And even$5 ,000, that sounds like a lot. But in some cases, we have clients racking up$20 ,000 a month on a credit card because that's their quote unquote normal monthly expenses. And they're just saying, I just rack it up and then I pay it off at the end of the month. I'm like, that's not a budget. That's literally just hoping your paycheck is enough to pay everything off.

9:48Or hey, my paycheck is this amount. So I'm only going to spend up until this amount, not allocating exactly where everything is really supposed to be going. So that's not budgeting. And honestly, I have a client right now, a used credit card. She actually had about, I think, six revolving credit cards each month. Oh my gosh. Yep. Revolving. Yep. 100%. I was using, trying to figure out which one. It was literally, they were using six different credit cards throughout the month to get quote unquote points. And just because that's, that's what their life was until I explained a different way and showed them how much more they can be making an interest on their money in a bank.

10:21And now they're making more money. And just simplify your life. Oh yes. That's a key too, is I think people think I'm getting ahead by getting credit card points. And I feel like it's like a closed fisted situation where no, if you just let go of all of it and you can see a different, a whole different way of life. Not only are you simplifying your finances, you're also going to be making more money when you set up your savings buckets, like we teach you and you're making more money. It reminds me of how I try to fill every single minute of our lives. I don't know if you've ever noticed I do that for you as well as myself as, oh, we're going to be driving for 10 minutes, what can we get done in that time?

10:56And it's no, actually, you could just enjoy the drive. And it's like with your money, maybe you think that you're, you want to take advantage of every opportunity to get this point or get this money. Or like we've said before, you could take your, that energy and put it to literally anything else. Like Vanessa said, you're going to be making money if you put it in a bank and make that money, but you don't need to be having a part-time job trying to figure out how to take advantage of points and all of that. Just let it be. Yeah. And so when I explained to her how money market accounts work and how we found the right bank, that there's no cap on a balance.

11:30Yeah, minimum. Minimum balance, excuse me. And how many times you can take it in and out. God forbid if you needed to have the money. And she's making 5.3, I think, percent. And I'm like, okay, so you're making 5.3 % of interest in all your money. But if you were, quote unquote, using your credit card, you'd be making 3%. Yeah. So who's actually, you're winning. and she has never seen this amount of money in her bank. Yeah, that's super. She is so excited. Her husband is loving it. And that is the big difference. You can be playing someone else's game, which is credit or play your own game. And like how much better, it's like Vanessa talks about paying off her mortgage and people were like, but you could be making interest.

12:06Let me tell you how it feels when I own my home. You can't replace that with your little interest things or whatever. And your points and your credit card, you can't replace the feeling of knowing you have$100 ,000 or$50 ,000 stacking up in the bank, making money that's yours, that you're controlling, that's just a better feeling. That's what we want for you. We always talk about being your own bank. This is how you start that process. It's time to enter your coaching era because making good money should feel like making good money. Yeah. Imagine six months of private coaching where we'll tell you exactly what to do.

12:38No guesswork, no confusion, and absolutely no judgment. It's a done-for-you system that actually works. You don't know what you don't know, and that's not your fault. And that's why we're here. Financial coaching with us looks like two coaching sessions a month, personalized recaps, and after-hour support, you can text and email. So you're never stuck wondering what to do next. Together, we're going to build your budget, set up your system, and tackle any challenges that come up along the way, which, by the way, they always do. If what you're doing isn't working, and you're tired of trying to figure it out on your own, sign up for financial coaching at budgetbesties.com forward slash coaching before all of our spots fill up and we will help you go further faster.

13:19Six months from now, you'll wish you started today. I'm laughing. Don't worry. I don't think we were supposed to be like tangenting on debt, but we did. You love us. Please love us anyway. Okay. So I think we got the point across about don't rely on credit and it's not a budget. That's really the big thing. Okay. So how to recognize it? We're just going to bullet through this since we've been talking forever. Everybody is shocked. Okay. We literally taught how to coach yesterday. I told him, I was like, you have to stop us from talking if you want to say something because we'll keep doing it. Okay.

13:48So I just put fingers over our mouth to make us stop so that we could get pretty good. We could get 30 minute call guys only lasted 45 minutes. I think we did a really good. So great. He should have just hung up on us. Anyway, he was really great. Okay. Point being, we're going to bullet lightning around this. Okay. How to recognize if you're waiting to pay a bill until payday, that means you're living paycheck to paycheck. Red flag, right? The next one is if you are having to split bills, how many of our clients, Shane, are splitting bills throughout the month because they can't afford to pay it in full one time?

14:16If you don't know if you have money or how much money you have for groceries, you're probably living paycheck to paycheck. Yep. And if you're consistently looking at the bank account to find money or to see if there's money there to spend, that's also a problem. Yeah. And then the last way maybe that you can recognize if you're in this paycheck to paychecks pattern is you spend every dollar before the next paycheck drops. So instead of being like, oh, look, there's money. I'm going to go do something else with my hands. You're like, oh, there's a hundred dollars left until in paycheck drops tomorrow.

14:46I must find a way to spend this. That has to be gone. So all of those are symptoms that you're in the paycheck to paycheck pattern. I love how we're using the word symptoms. I know. I feel like we could be one of those pharmaceutical ads, you might be. Oh, we can turn it into financial. Yeah. I also feel like it was, I don't know if you remember that. Here's your sign. Comedian Bill, somebody. So if you're not watching us on YouTube and you're on the podcast, you should go over. Here's your sign that you're living paycheck. Okay. So what do you do? Okay, guys, we ranted for a long time. The cool thing is you already know what we're going to say about what to do instead.

15:19How to break the paycheck to paycheck. Yes. Where's our super pans? Come on. Y 'all can say this with us. First step is 90 day review. Okay. Go back and see what's going on with your money. See where, especially if you're using credit cards to like get all of those statements out, print them out, look at it, highlight the different categories of types of spending or bills or whatever's coming out and just look at your money, see what's happening with it. Yeah. The second one is set big goals. So the reason you are spending all this money is because you don't have big goals. You don't have big things that you're looking forward to doing.

15:50So you're just being tempted about in the moment stuff and just spending all your money instead of going, I'm going to say no to this because I want to say yes to this big trip to Greece. Hello. I want to say yes to this new house we're going to buy. I want to say no to things. I don't know. So that's what you want to do is say no. And it's not even like I have to say no. It's I want to say no because I have a better yes. The other thing is I think people avoid it. Like they're not, they're just letting it happen because they're avoiding money because they don't want to think about it. It's stressful.

16:16It's annoying. It seems like a chore or it seems too difficult, too complicated. So they're avoiding it. But if you set a big goal that gets you excited to not avoid it, to pay attention to it on purpose and think about your life and start dreaming again, and that's going to give you the fuel to stick to a budget. And if you have a goal that you're not excited about, it's the wrong goal. Yeah. Oh, yeah. Literally, if it's not motivating you or driving you, then it's not the right one. So go pick another one. Go back to the drawing board. And we want you to just take ownership of your finances.

16:42A lot of times people are just avoiding it, but we don't want you to do that. We want you to be intentional, to look at it, to take charge and to have these big goals. And then when you have those goals, after you've done the 90-day review, you can create a budget. I know you're really shocked. They're shocked. This is a budgeting podcast. I can't believe that I talked about building a budget. Yep. So creating a budget, guys, we have it into five simple categories. It is your income, your debts, your bills, spending and saving. That's it. We have it all in one sheet. You can go to budgetbesties.com forward slash budget template to get that for free to fill it out.

17:13Create that budget. it. See what your money can do for you in a whole month. In a whole month. Okay. The next thing you're going to do is separate your accounts. And so the first thing, part of that is separating bills from spending, right? You're going to get more sophisticated as you go, but set up the bills account. Put all your bills coming out of there and get your spending going somewhere else. And remember, it's very important. Do not use that bills debit card, right? That is going to really be the game changer. It is a game changer. And when we say take it out of your wallet, we really mean because we've had people who don't do that and then they have no money for bills.

17:43Yeah. And this is why, like, you're so used to just spending money. When you see money in there, you want to spend it, but you're forgetting that it already has people's names on it. It already has your utility company or your AT &T company or your garbage. Like, it has so many other things that it has to do. And instead, you see it, you spend it. So just take that out of your wallet. Yeah. And then the next thing you want to do after you separate your accounts is set up a paycheck plan. This is basically saying, OK, when my paychecks come, now what is the plan? And the idea is to do the same thing with your paycheck every single time.

18:12Right. So you want to set up a plan to where you always have the same amount for groceries. You always have the same amount for spending money. You always have the same amount for going on to eat or whatever your spending accounts or your spending categories are. We want to do the same thing all the time. We want it to become habitual. And so you're going to have all the income come in the bills and then you're automatically transferring to spending and savings based on the budget. Right. On each payday. and then you're breaking that cycle of paycheck to paycheck because there's money always being funded.

18:37You don't have to wonder. You don't have to try to figure out where it's coming from, how much I have. It's all there and it's very easy. And like Vanessa said, all your bills are paid automatically. So you're not thinking, oh, if this paycheck drops, then I'm going to, you're going to get eventually a paycheck ahead. That's what we want you to do. And that is going to be the game changer. It is. Yeah. And so instead of paycheck to paycheck, you're a paycheck ahead. And every one of our clients is able to get here. It may take a little little while, but they're all able to get there. And what do we mean by that?

19:02We mean like right now in July is when we're recording this. And I have clients who just got who get paid. I know you did have some on the 19th of July and then some that got paid on the 26th. And those are all set up for August budget. That means when August first hits, they've had a week of money being in the account ready to pay bills and they're ahead. It's like a game changer. It is. And it's really shocking for them to see that it's possible until we show them. And like Shana said, we have not had one client in five years that said, oh, I can't do this or this isn't working for me. Getting a paycheck ahead is the way to go.

19:34And you just have to allow yourself the grace to get there. Like it doesn't happen overnight, but like I said, allow some grace. But when you get there, guys, you're going to love it. Yeah. And then when we talked about lifestyle inflation before, we weren't saying that if you make more money, you shouldn't get to have more things. That's not the point. But you're going to set up your savings buckets in that budget to do it on purpose, to do it intentionally. So we talk about being bougie on a budget and how bougie is different for everybody. So if you want to now, OK, now I make more money. I want to travel more.

20:02Right. Then you set up a savings bucket and you're doing it on purpose. Right. Instead of the lifestyle inflation of silliness, which can be spending at the mall or I know nobody has a mall anymore on Amazon is what I should have said or going out to eat. You're going to be like, no, we do these things because we're super fancy and we save for them. And that's how we're lifestyle inflated. Yeah. Like we said, it's more of intentional. So you are intentionally setting up saving buckets to intentionally put your money in a spot to intentionally spend it later. Yes, girl. We want you to have that lifestyle creep, but in a correct way, the way we say it.