At Super-Advice we are about all things financial, but more importantly, helping people understand so they can get ahead financially.
Living paycheck to paycheck is a common financial situation where individuals find themselves with little to no savings after covering their monthly expenses. This scenario can be attributed to a variety of factors.
low income
One of the primary reasons people live paycheck to paycheck is simply because their income is not sufficient to cover their basic living expenses, plus savings.
In many cases, wages have not kept pace with the rising cost of living, making it difficult for individuals and families to set money aside for savings or investments.
High cost of living
We all know about this. The cost of living has increased significantly. This includes housing, healthcare, education, groceries, and of course fuel.
When the cost of essential goods and services exceeds or significantly consumes individuals’ incomes, it leaves little room for financial maneuvering or savings, and they’re so important in building your wealth.
Lack of financial education
A lack of financial literacy can lead to poor financial decisions such as overspending, inadequate savings, using debt the wrong way. Too many buy now pay laters.
Without a basic understanding of budgeting, saving, and investing, individuals may struggle to make informed financial decisions that could improve their situations vastly.
Debt
We don’t like debt. High levels of debt, particularly high interest debt like a credit card, can consume a significant portion of one’s income, making it incredibly challenging for them to break free from the paycheck to paycheck cycle.
Debt payments can take precedence over savings, perpetuating the cycle of living from one paycheck. To the next debt is bad
lifestyle inflation or lifestyle creep
This occurs when individuals increase their spending as their income rises rather than saving or investing the extra money. This can lead to a situation where despite earning more individuals do not improve their financial security, they do not accumulate wealth through savings.
Unexpected expenses and lack of emergency savings
We love emergency funds! Without a financial cushion, unexpected expenses such as medical emergencies, car repairs, or sudden unemployment can have a significant impact. The lack of an emergency fund forces an individual to direct all their income towards immediate needs with nothing left for savings or future planning, and they often turn to debt, which makes the problem worse.
That’s a wrap
Addressing these factors often requires both personal changes, such as learning to budget and managing spending, and broader societal shifts, such as increasing wages, and providing financial education. Recognising and understanding these reasons is the first step towards making positive changes towards financial stability and independence.
And that’s what we want!
If you need any financial help or advice please get in touch with us at Super-Advice.
