From the time we’re children, we’re taught to go to school, get good grades, get a good job with good benefits, and retire in 40 years with a gold watch and a pension. There may have been a time when that plan actually worked, but those days are long gone. Times have changed, and that old approach doesn’t work in today’s layoff-weary world. Even the most qualified, dedicated employees are “let go” when it suits their employers. Massive companies we thought would never fall and forever remain titans of industry, have failed epically and are now little more than a bitter memory. There’s really no such thing any more as a safe, reliable job. The regular paycheck that employees receive could dry up in a moment.
The old mentality still persists, however. As a society, we still believe that if we get a degree and start at the bottom of an organization, we can work our way up the corporate ladder and secure better and better jobs and more financial security.
The need for diversified income
Let’s consider for a moment the application of investment principles to earned income. Conventional wisdom says that it’s important to diversify your investments. It’s wise to spread your money among stocks, bonds, mutual funds, precious metals, savings accounts, etc. Doesn’t it make sense to diversify your income in the same way and for the same reasons?
Because you have only one stream of income, you have to make lifestyle choices that are dependent on the continuation of that income. Working for one company is analogous to investing all of your savings into one stock. If you were to invest all of your life savings into one company that ended up failing, you might lose everything. You’d be putting all your eggs in one basket. The same concept applies to your income. If you look to one company as the sole source of your income, you’re putting yourself–and your family–at considerable risk.
Nevertheless, most people today still subscribe to the outdated notion that they can create financial stability by working a single job and bringing home a good salary. Believing that their regular paycheck will always be there, month after month, people allow themselves to be lulled into a false sense of security.
We’ve coined a term for people who suffer from this mentality: paycheckaholics.
A paycheckaholic is someone who is completely dependent on the next financial “fix”: a regular paycheck. His paycheck represents the entirety of his income—100 percent. The paycheckaholic needs that next check in order to pay the bills and, often, to satisfy some kind of emotional need.
This dependence on one stream of income has a profound impact on the lifestyle options available to the paycheckaholic. For paycheckaholics, their salary–and therefore their employer–dictates where they live, what house they own, how long their commute is, what kind of car they drive, where their children attend school, the groceries they buy, etc. Paycheckaholics are not in control of their financial future; they’re living the modern-day equivalent of indentured servitude.
In order to keep a certain job, paycheckaholics must live within a certain distance of that job; that constrains them to a commute of some kind. In addition, in order to be reasonable, the commute must be within a certain range, usually within about an hour of the job location. What kind of car paycheckaholics drive may also be limited by their income and other demands upon it.
In order to have a reasonable commute, paycheckaholics must limit their choice of neighborhood and home. Their options might be either to live close to work and pay a high rent or live further out and pay more for their commute. And within an affordable neighborhood, paycheckaholics might have to settle for a smaller or older home than they’d really like.
While people always want to provide the very best for their families, paycheckaholics have some hard decisions to make. If they are already contributing to public school education through taxes, it may be difficult for paycheckaholics to rationalize the tuition of a better, private school. When purchasing groceries, they may have to choose cheaper but less-than-healthy options in order to stick to a lean budget rather than the most beneficial food choices for their families.
Types of paycheckaholics
There are different ways in which a person can be a paycheckaholic:
The Financial Paycheckaholic
These people are living paycheck to paycheck. Before the next paycheck comes in, these individuals have already allocated nearly every dollar of it. If they miss a paycheck, they may have difficulty meeting their regular financial obligations.
The Emotional Paycheckaholic
These people associate the steady, regular flow of income with security. They may even have a very comfortable income. Perhaps they see the paycheck as a kind of guarantee that they’ll always be able to pay the bills. Perhaps, for these people, the need for security really isn’t about money at all. It doesn’t matter how much money they have; they feel as if they’re always lacking. This is a tough belief system to overcome, but it can be done.
The Psychological Paycheckaholic
This group suffers from low self-esteem or low self-confidence. They’re locked into a limiting belief that they’re unable to do anything but work for someone else. They may be afraid of failure in an area outside of their comfort zone. They have most difficulty breaking out of their thinking pattern because they don’t believe they have the power to change their own circumstances.
The Occupational Paycheckaholic
Individuals in this category may know their current occupation well, but can’t see a way to leverage that knowledge to create additional streams of income. For those willing to work and grow, this can be overcome with learning and the guts to try something new.
Of course, these forms of dependence aren’t mutually exclusive. A person may fall into multiple categories. These are the most common types of paycheck addiction, but there may also be other types. (Tell us in the comments!)
Are you a paycheckaholic?
How do you know if you are a paycheckaholic? Ask yourself these questions:
- Am I living paycheck to paycheck?
- Have I already spent most of my next paycheck?
- What would happen if I missed a paycheck?
- Do I have an emergency fund?
- Do my credit cards carry the same balance from month to month?
- Was it my job (location or pay) that dictated my choice of housing or neighborhood?
- Was my choice of school for my children based on my income or proximity to the school?
If you said yes to some or most of these questions, or could identify with one or more of the types of paycheckaholics described above, you might yourself be a paycheckaholic. And it may be time for you to consider alternative streams of income.
Break your paycheck addiction
The good news is that you’re in the right place. We’re here to help. Paycheckaholics Anonymous is the place to challenge yourself to do more, be more, and have more.
So, how about it? Are you ready to take the next step? To boldly go where perhaps no one in your family or close circle has gone before—into the world of business ownership, of entrepreneurialism. Remember, the success you want lies outside of your comfort zone.
A single blog post can’t fix the issue. We are going to explore this topic and all its many facets in depth in the coming weeks and months. However, the first step is admitting that you have a problem and committing to do something about it. If you’ve made it that far, you’re well on your way to breaking your paycheck addiction and experiencing more freedom in your life.