Unfortunately, many Americans live paycheck to paycheck. However, many people find that they get raises at their job and still live paycheck to paycheck. Some people report that they live paycheck to paycheck even while making over 6 figures.
There are several reasons that could factor into this, with the primary being lifestyle inflation. When people get a raise, they often raise the cost of their lifestyle to go along with it. While there is nothing inherently wrong with doing this, it can prevent people from reaching some of their longer-term financial goals.
There are ways that you can raise your cost of lifestyle a bit while still saving and investing more down the road, but it will require a good budgeting method, which is often the part that gets neglected when you get a raise. There are many options you can choose as your method, including the 50/30/20 strategy, and you must pick a budgeting method and stick with it. This will help you understand exactly where your money is going after a raise and what you need to do to accomplish your financial goals.
Another mistake people make when they get a raise is that they allow bad debt to fester, while they actually may have the ability to pay off their debt instead. One wise thing to do would be to focus on credit card payments and any other debt with high-interest rates. If you can do this, you can actually eliminate these monthly payments that are forcing you to live paycheck to paycheck.
Regardless of how much money you make, you may be susceptible to living paycheck to paycheck when you don’t necessarily have to be doing so. It is important to catch the mistakes you are making and adjust accordingly. Oftentimes, these steps aren’t even as hard as they may seem.