Embrace Living Paycheck-To-Paycheck To One Day Be Free

Living paycheck-to-paycheck is an unpleasant financial experience. Not only does it mean needing to spend everything you have to make ends meet, it may also create an ongoing feeling of despair.

You might even have to get into debt to pay your bills. And if you aren't careful with debt usage, it may become a habit that eventually grows large enough to take you under.

Living paycheck-to-paycheck can result from either self-inflicted wounds, such as buying too many things you don't need, or unfortunate circumstances like job loss or unexpected medical expenses.

Regardless of the cause, it's crucial to acknowledge our situation and take control of what we can. Although it might feel embarrassing or even shameful to be in a difficult financial place, embrace these feelings and use them as motivation to move forward.

My First Experience Living Paycheck-To-Paycheck

Once I graduated from college in 1999, I no longer had the support of The Bank Of Mom & Dad.

Securing a job in Manhattan for $40,000 a year, even back then, didn't stretch very far. To cut costs, I shared a studio apartment with my high school friend and took advantage of the free cafeteria food if I worked after 7 pm. The studio cost $1,800 a month total, plus utilities.

Faced with the challenges of work, I made a strategic decision to max out my 401(k), which had an employee contribution limit of $10,500 at the time. It was my main hope for eventual financial freedom.

With $29,500 in gross income remaining, money was consistently tight that first year. However, I maintained hope that my career would progress, bringing in more income. By the second year, my base salary increased to $55,000, bringing much-needed relief.

Below was my budget in 1999-2000 while living at 45 Wall Street, New York, New York. At the time, it was all work and maximum frugality in order to one day be free. This was when my desire to FIRE by 40 began.

Living paycheck-to-paycheck on $40,000 a year living in Manhattan, New York City 1999- 2000 Financial Samurai budget

My Second Experience Living Paycheck-To-Paycheck

The second time I found myself living paycheck-to-paycheck was in 2012, following my departure from my finance job. After a ~80% decline in total income, I had to carefully manage my budget, relying on almost all my passive income for basic living expenses.

After a year-and-a-half of early retirement, I opted to undertake some consulting work at Empower (previously Personal Capital) from 2013-2015. This consulting income provided a welcomed buffer, offering respite from the paycheck-to-paycheck lifestyle.

In hindsight, I may have retired about five years too soon, but my severance package acted as the impetus for taking a leap of faith. It was then or never! Had early retirement not worked out, I would have gone back to work by age 37.

As long as my passive income covered my living expenses, I invested nearly all of my part-time consulting earnings in stocks and a fixer-upper in 2014. Thanks to a robust recovery in both the stock and real estate markets, I managed to break free from the paycheck-to-paycheck lifestyle within a couple of years.

Latest Experience Living Paycheck-To-Paycheck

Today, I find myself back in the paycheck-to-paycheck cycle because I sacrificed a significant portion of my passive income to purchase a forever home in October 2023. This self-inflicted decision has left me with over a $100,000 annual deficit between my passive income and desired household expenses. Any large expense or surprise capital call will compromise my family given our lack of liquidity.

In response, my wife and I have committed to adopting a more frugal lifestyle for the next 24 months to rebuild our savings. The journey has been challenging, with several unexpected expenses. Despite these financial setbacks, I'm confident we will persevere.

My ultimate goal is to generate an additional $150,000 in gross passive income by 2029. While the goal may seem daunting, I remain optimistic. A continued bull market, a fortuitous exit from a venture capital investment, new income opportunities, and a shift towards higher-yielding assets could make this goal attainable. Then again, another recession could make this goal impossible.

Actions To Take To Stop Living Paycheck-To-Paycheck

To give ourselves a greater than 65% chance of reaching this capital accumulation target in five years, we've embraced the paycheck-to-paycheck lifestyle. This entails meticulous budgeting, expense reduction, and boosting income.

I've lived this life twice before, and I will do so again until the financial strain stops. If you want to achieve FIRE, then adopting this type of financial focus will help you get there quicker.

The following outlines our plan to break free from a financial whirlpool we find ourselves in and eventually regain financial freedom after 3-5 years. We are on this quest based on following this first rule of FIRE.

If you're navigating the paycheck-to-paycheck scenario, perhaps you'll find these strategies motivating.

1) Embrace an ultra-frugal way of life

Upon purchasing our new house, my wife and I committed to a bare-bones approach to expenses. This primarily involved cutting back on dining out, avoiding food delivery, and refraining from buying new clothes. Eating less should also help us lose some weight too. I'm even buying cheap gas to save as I wrote in my post on eliminating sneaky expenses that add up.

To exemplify our frugality, I had been contemplating purchasing a new $105 Nike fitness jacket to replace my three-year-old, stained, and fraying one. However, due to our spending moratorium, I opted to continue wearing the old jacket until the zipper eventually broke. Now, I'm having it repaired by a tailor for $28.

While spending $105 may not lead to financial hardship, frugality is a mindset to embrace. Every expense counts. This extends to practices such as turning off electrical devices when not in use, minimizing water consumption, and appreciating the possessions we already own. The latter has been particularly rewarding, considering I still have unused items purchased from years ago.

Potential annual savings: $18,000

2) Apply to public schools

I decided to apply to two public schools in our neighborhood to see if we could save $42,000 a year in private grade school tuition for our son. We couldn't get into our top choice, so public school for our son isn't going to work this year.

For now, I value being able to speak a second language well versus the cost of 10 years of private grade school tuition. Therefore, this is the path we're going to take for our children. We will make changes if there comes a point where the school or foreign language no longer seems worth it.

In the meantime, I am increasing my effort in being a teacher to our children. Perhaps the more I teach, the less they will need to learn and the quicker they can graduate school. My wife, for example, graduated from college in 3.5 years. I'm also open to homeschooling once we attempt to do long travel.

Potential annual savings: $42,000 – $84,000

3) Drive our car for another five years

Originally, I had planned to replace our car in the second half of 2025, once it reached the ten-year mark. Typically, there are noticeable improvements in technology, safety, and performance features every ten years.

However, due to our current paycheck-to-paycheck situation, buying a new car in 2025 is no longer appropriate. Instead, I've adjusted my plan to target a new car purchase in 2029, coinciding with my goal of returning to financial independence.

Currently, my car has 51,000 miles on it, and with an average annual driving distance of 6,200 miles, it is projected to have around 82,000 miles by 2029 when it is 15 years old. Having recently replaced several expensive parts in 2023 and 2024, I hope that the next 31,000 miles won't incur significant maintenance costs.

Considering I drove two of my previous cars (Land Rover Discovery II and Toyota Corolla FX16) to 135,000 – 150,000 miles, reaching 82,000 miles shouldn't be an issue.

My Future Care Will Depend On My Future Income

The choice of car in 2029 will also depend on the financial progress I make given I will follow my 1/10th rule for car buying. Currently, rather than opting for a luxury car, I am considering the Honda CR-V EX model, priced at around $34,000 new or $25,000 used. My primary focus is on a safe and reliable vehicle that won't incur frequent high repair costs.

Driving a more affordable car not only reduces stress about potential damages but also helps curb the desire for more luxurious items that often accompanies wealth growth. However, safety is still my #1 priority when transporting my family.

Potential total savings: $40,000 – $60,000

4) Reduce partaking in expensive social gatherings

As part of adapting to the paycheck-to-paycheck lifestyle, I recognize the need to cut back on expenses in the entertainment department. You must make some sacrifices to achieve financial independence.

Take, for instance, an upcoming dad's night out plan involving a steak dinner before the Warriors game. The steak dinner is estimated to cost around $150 per person, and the Warriors ticket adds another $300 to the expense. Additionally, transportation is expected to be around $60 for a round-trip.

While I appreciate a good steak and an exciting NBA basketball game, it's not financially responsible to spend $500+ on such an evening activity when my liquidity is low. Instead, I'll opt for a simple home-cooked meal while watching the game on TV. I can catch up with the dads at the next birthday party or playdate.

Not Much Fear Of Missing Out Thankfully.

Fortunately, I don't experience a significant fear of missing out (FOMO) when it comes to activities, as I've already enjoyed many of the things I wanted to do during my 12 years of fake early retirement. Having indulged in numerous steak dinners, especially during my corporate card days in finance, and having got to plenty of Warriors games already, I don't mind passing up on this particular event to save.

However, I do grapple with investing FOMO, likely stemming from my 13 years in equities and witnessing poverty during my upbringing. There's a constant fear that if I don't consistently invest a significant portion of my income, I also find our family struggling.

As a result, I almost always have a preference to investing in real estate or stocks versus spending lots of money on a brief period of entertainment.

Potential annual savings: $5,000 – $10,000

5) Say no to any further type of debt

My decision to purchase my home with cash reflects my personal aversion to taking on debt at this stage in life. As I've become more risk-averse, particularly with family responsibilities, avoiding fees, financial complexities, and dealing with higher interest rates in the current economic climate has become a priority.

For those living paycheck-to-paycheck, it's crucial to not only cease accumulating additional debt through credit cards and other financial instruments but to also take proactive steps to pay down existing debts.

Prioritize paying off your highest-interest debts to save the most on interest expenses. Alternatively, if you prefer quicker wins, focus on paying off your lowest debt balances first.

I don't plan to buy anything for the entire year. In fact, I plan to donate or sell items to declutter and raise money.

6) Find part-time consulting work

Now that we've tackled expense reduction, let's shift our focus to boosting income. Increasing income is the main way we can break out of the paycheck-to-paycheck cycle. I aim to secure a part-time consulting role in 2024 given my Provider's Clock is now ticking loudly.

Additionally, I've received offers to serve as a brand ambassador or speaker for various companies. However, I'll only consider opportunities that align synergistically with my values.

In parallel, my wife is exploring potential consulting opportunities. She already handles a significant portion of childcare and Financial Samurai-related work. With more available time once our daughter starts school full-time, any supplementary income becomes beneficial in our current financial situation.

Estimated annual income potential: $20,000 – $200,000

7) Find tenants for my old home

While I wasn't initially inclined to handle another physical rental property, my investment strategy for west side San Francisco real estate has led me down this route.

The imminent opening of a new school and a substantial $4 billion hospital renovation project is poised to introduce over 1,400 new jobs by 2030 in the area. Moreover, there is a prevailing demographic shift towards the west side, fueled by the prevalence of remote work and improved affordability compared to downtown.

Anticipated annual income after all expenses: $35,000 – $45,000

8) Write more books

I find joy in writing books, as the journey from conceptualization to the final product is highly satisfying. The tangible experience of holding a book I've authored, smelling its pages, and engaging in playful activities like “find daddy's book” with my kids at the bookstore is priceless.

Another motivating factor for my book-writing endeavors is to exemplify to my children the importance of academics. I hope that by witnessing my commitment to reading, writing, editing, and producing, they will develop a similar dedication to their own academic pursuits.

Typically, authors receive 1/4th of their book advance upon signing, another 1/4th after submitting the manuscript, followed by 1/4th upon publication, and the final 1/4th after the first anniversary of publication. I am set to submit my final manuscript in 1H2024 for my second book with Portfolio Penguin.

Projected annual gross income: $35,000 – $55,000

9) Monetize Financial Samurai better

The enduring success of Financial Samurai since 2009 is rooted in maintaining an 80% focus on enjoyment and a 20% focus on the business side of website management. Whenever the balance tilts more towards business, the writing loses its appeal and starts feeling like labor.

Take, for instance, the Financial Samurai podcast, available on platforms like Apple and Spotify. It intentionally excludes advertisers, and a 45-minute episode demands about two hours of production time. To sustain this effort, I must either secure sponsors, record less often, or shorten the episodes.

In my writing, I like delving into problems and offering solutions mainly through storytelling. In contrast, many professional bloggers prioritize a business-centric approach to boost Google rankings and generate affiliate income by writing product review posts.

While this strategy may be lucrative, it compromises the enjoyable aspect of writing. However, given my family's current financial situation, I acknowledge the need to shift my 80% fun / 20% business ratio closer to 60% fun / 40% business over the next one-to-three years.

One dilemma is interacting with readers who find ads annoying on free content, yet are unwilling to pay a subscription fee or purchase my books, like How To Engineer Your Layoff or Buy This Not That. This realization has prompted me to be more self-focused and prioritize my family's financial well-being. Goodness knows being an author usually doesn't pay well.

Annual additional gross income potential: $12,000 – $36,000

Embrace The Reality Of Living Paycheck-To-Paycheck

Living paycheck-to-paycheck can undoubtedly be stressful. But with some behavioral changes, things will hopefully get better. I see our family's self-inflicted financial constraints as an opportunity to cut expenses and boost income over the next three years.

It's like pressing a giant reset button as we go on a new financial independence journey.

Impulse buying without considering consequences is a thing of the past. Each expenditure will now face meticulous scrutiny, and if it doesn't hold significant value, we won't proceed with the purchase.

I've also decided to be more intentional about how I spend my time, avoiding casual assistance without compensation. The current circumstances demand a focused approach to earning, ensuring the well-being of my family.

With discipline and time, I am confident we will break free from the paycheck-to-paycheck cycle. The ultimate goal is that by 2029, not only will we have a paid off forever home, we'll also have enough passive investment income to cover our desired living expenses once more. During this time, I hope to instill in our children a frugal mindset and a strong work ethic.

To those facing a similar situation, perhaps a silent recession with your finances, stay resilient and use this challenging period as an opportunity to reshape your behavior for long-term financial success.

Even if you are flush with cash each money, you may want to adopt some of my recommendations to one to be free. With dedicated efforts and time, better financial conditions await!

Reader Questions And Suggestions

Have you ever found yourself living paycheck-to-paycheck? If so, when was this and how did you get out of it? What are some other tips you have for helping people get out of a difficult financial situation?

If you want to better track your net worth and spending, check out Empower, the best free wealth management tool today. I've used Empower since 2012 to track everything to tremendous benefit.

For more nuanced personal finance content, join 60,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. 

103 thoughts on “Embrace Living Paycheck-To-Paycheck To One Day Be Free”

  1. Aramando Diego

    I was focusing on the content of your blog that has wide readership and therefore influence on people’s well-being (or not) depending on its contents. In a 1×1 setting, I would be a great listener to a friend/stranger’s opinions and offer my perspective softly or move on. Its only when these blogs/opinions have a large network effect (or blast radius) like yours does, that I would be direct as I was earlier, with the goal of helping other readers.

    I am close to 50 and have a severely disabled quadriplegic child with CP. My wife and I have full time caregiving responsibilities and one of the reasons we opted for lower paying careers is to focus on our child’s health and needs. We can walk away from work any day or if our employer chooses to kick us to the curbside. It wouldn’t affect us, though my wife enjoys her part time work and may miss that if she is out of work.

    So yes, I can (and do) spend most of my time with my child. Being way over qualified for my job’s challenges/responsibilities given the career compromise I mentioned earlier is a strategic advantage that helps me complete my work in 30%-50% of the time that my peers need (Inverse Peter Principle, I guess).

    Recognizing underlying market and economic currents while drowning out the noise of so called market/economic experts is what helped me build my NW.

    I strongly believe that the next decade will provide average to above market returns for US equities, so $400k in passive income (at 4%) on $10 million is a low return sub optimal scenario. If the market returns 9% over the next decade, that would double the $10 million. That’s my basis for staying invested.

    I think after building a $5-$7 million portfolio, continuing to stay invested in the market until the very end would be the best path, since you can possibly withstand any downturns.

  2. Aramando Diego

    Totally flawed blog-post, did you sleep through the Finance courses at Berkeley? The danger of such blog-posts is that it mis-leads the less financially savvy reader into completely misconstruing standard definitions of financial terms and come up with an alternative reality that is not useful or required.

    For e.g. All contributions to retirement plans, payment toward principal of a mortgage are converting one asset into another (cash to equities, bonds or real estate) and should not be computed into paycheck to paycheck (P2P) computations. Wealth building for the future is a luxury that most Americans do not have and please dont paint yourself with the P2P brush and mis-guide your readers.
    Case in point: One could buy gold/crypto/paintings/equities with every dime of their monthly savings and say they are living P2P.

    Your buffer is the 401k, real estate principal and other savings on a monthly basis that easily keep you well above the P2P water mark.

    An honest feed-back to help you make your blog-posts better in intellectual quality for the readers.

    1. I was a mediocre student at Haas business school. Got a B average, which enabled me to get tuition reimbursement. I’ve always believed paycheck to paycheck is a cash flow situation, similar to analyzing a cash flow statement. Cash flow is entirely different from balance sheet, as you know being an MBA graduate yourself I’m assuming.

      I have a philosophy of treating all investments as expenses, which helps spendy people investment more.

      Tapping one’s 401(K) early or selling real estate and pay commissions to fill a cash flow deficit are suboptimal moves. That’s how people get further in trouble.

      Tell me about yourself and how you’ve been able to boost your wealth and stay out of a P2P situation. I’m always eager to learn from others and understand other people’s financial journeys.

      I clearly have much to learn, and I think it’s great if you can share your wisdom with me and others.

      1. Aramando Diego

        Thanks and let me begin by saying that I did not mean to offend you by my earlier comments (and I do not think that you did take it that way either).

        Yes, I did get an MBA (full ride) in Finance at a solid East Coast B-school in a previous life, in addition to 2 Engg Masters degrees.

        The cash flow statement of an individual who invests $$ in real estate principal (not interest on a mortgage) or 401K from her income is similar to the cash flow of a Corp that invests $$ in Treasuries (Apple) or Bitcoin (Michael Saylor at MSTR).

        For Corps, this line entry shows up after operating expenses, interest, taxes, depreciation/amortization. This would be accrued income and cash available for investing post net expenses.

        If you would like to model your or an individual’s cash flow statement like a Corporation’s, then you should put those cash flows outside your operating expenses. Your current method artificially and unnecessarily bloats operating expenses to give it the mirage of being in the red, when it is actually in the black.

        As far as my situation goes, I recognized early in 2009 that Mr. Bernanke’s ZIRP inflationary policies were extremely favorable to wealth building (owning assets like real estate and equities) and not so great for wage earners. I converted my brokerage to a margin account and invested every $ that I could save in US equities every month and margined up as well.

        Ms. Yellen and Mr. Powell continued with ZIRP and so did my month-in-month-out, year-in-year-out investment in US equities. Eventually like Warren Buffett said in his Annual 2023 Letter, most of mine (and his) net worth are in US equities.

        As an immigrant, I also truly believe in American exceptionalism and the system that makes and keeps it as the best free-market capital system in the world.

        For context, living in Boston with my family and averaging 250K (not high by any means) in annual income in the last 15 years, I was able to hit an 8 figure net worth through consistent investing and following the famous Charlie Munger’s saying:
        “Strive to buy wonderful businesses (or stocks) a fair prices rather than fair businesses at wonderful prices.”

        Hope this is helpful!

        1. Don’t worry. I get insults and aggressive comments all the time. I would just try to comment how you’d speak to someone in real life. Unless, this is how you speak to strangers in real life, then it is what it is.

          Getting to a $10+ million net worth with only a $250K income is impressive. How old are you and until what age do you plan to work? $10 mil in investable assets can easily generate $400K in passive income now.

          My current struggle is providing it up for my young children and my wife who does not have a job. Do you have kids? If so, how do get right with spending time working for more money versus spending more time raising your kids? I feel with a 10+ million dollar net worth, more time, and she spent with our children.

  3. Sam, in response to your Feb. 18 newsletter: I hope you continue to share both your highs and your lows. That’s a big part of what makes Financial Samurai so worthwhile. Instagram and YouTube are full of people claiming that they’re “crushing it,” and if you follow them, you will too. But it’s never that simple.

    Selfishly speaking, I’d love to see you convert Financial Samurai to a subscription model. Of course you’d lose a lot of casual (or stingy) readers, but the end result would be a smaller cohort of like-minded people who could really benefit from sharing ideas and strategies with you and each other. Another option would be a “premium” membership level that would come with specific benefits – e.g., a monthly Zoom call with you and premium members. You should be monetizing the valuable info you provide via Financial Samurai.

    Oh, and good to see you’ve enabled notifications of follow-up comments! Great way to keep readers engaged.

  4. I am going to share our recent experiences. My husband and I have been diligently saving for retirement since we were in our early 20’s, right out of college. We have a significant amount of savings, both in retirement and taxable accounts and are now in our mid 40’s. We have two kids, one is 17 and the other is 14. We have also been saving for college as well. Our intent was to retire at 55, or in 10 years.

    We have struggled over the past 10 years or so with our now 17 year old’s mental health. Last year, we made a very difficult decision, in fact, it was the hardest decision of my life, to send our 17 year old to a residential treatment facility and then to a therapeutic boarding school. The residential treatment facility was covered by insurance, but the therapeutic boarding school is NOT covered.

    By the time she comes home, we will have spent the money intended to be used from 55 to 59 and before tapping into our retirement accounts. This has caused us to be spending far more money than we are currently bringing in and will impact our retirement. That being said, I would do it again, in a heartbeat!

    I have not looked at ANY of our accounts or updated our retirement spreadsheet and I won’t until we are finished paying for all of this. I am so very glad that we are both savers and while we are in the red every month, I feel like we are still ahead of the game as far as retirement goes. We no longer have an emergency account, because we are literally draining it to pay for her continued treatment.

    Sorry, this is a roundabout way to say, that I completely understand how you feel like you are living paycheck to paycheck and still have a high net worth.

    1. Hi Kristy,

      I am so glad you were able to afford help for your daughter, and the help has helped her! Spending money on the well-being of our children and family members is the most worthwhile way to spend money I can think of.

      Thank you for sharing your story, and I wish you and your family the best.

      Sam

  5. Hi Sam. While I understand the point of the article and your intentions, I do somewhat identify with the commenters here that strongly challenge you. The first sentence reads, “Living paycheck-to-paycheck is an unpleasant financial experience. Not only does it mean needing to spend everything you have to make ends meet, it may also create an ongoing feeling of despair.” This IMO sets the tone that you are in financial distress. Given your situation as explained, I’m sure many would love to have your “paycheck to paycheck” problem. Perhaps the biggest disconnect is budgeting for 401ks, 529s, etc.. So at the core of the disconnect with some readers is the definition of “paycheck to paycheck”. You can negative cash flow at any income level, that’s obvious. But you can get yourself out of just about any jam in 24 hours very easily. That is not what paycheck to paycheck is in my mind. I save/invest 100% of excess income every month, does that make me paycheck to paycheck? When my car breaks down, I simply swipe my credit card to have it fixed with zero loss to lifestyle, and I may just save a little less that month. A true paycheck to paycheck person/family has to make a real sacrifice such as a payment plan for a utility bill, the kids not being able to go to the movies, putting off a home repair, etc., etc.. I could go on but you get the point. As a person living in the midwest, your expenses seem nuts to me, but respect that you do it from a place of keen awareness and the ability to turn up your income just about whenever you want with your skills. People are different, lifestyles are different, that’s ok. I do encourage you to keep doing what you are doing here on this blog and be yourself in the city you want to live. I would have zero desire to live (just as you would not like to live in the suburbs in the midwest) where you live and pay the prices you do for things but I like reading about how to decide to live and raise your family, different perspectives are interesting. Please don’t stress yourself out about your situation, you have large assets to draw from in a time of need, the only thing your kids care about is you being around. Please also stay positive of your very strong skill set and ability to make more money pretty much for the rest of your life.

    1. Correct. Living paycheck is an unpleasant and uncomfortable financial experience as I write in the beginning paragraphs of my article. And that is how I’m feeling now. I can’t help the way I feel, but I’m sharing it.

      I wish I could get myself out of my jam within 24 hours, or even within 3 months. Alas, it’s going to take longer.

      I agree. Sacrifices need to be made to get out of the paycheck to paycheck cycle. Always have to take action, otherwise it’s hard to break the cycle.

      I hope people will embrace whatever situation they are in and make the most of it. It’s hard, but it doesn’t have to be forever.

      Fight on!

  6. I don’t like the term “living paycheck to paycheck” used when someone has substancial assets to turn to. Someone barely scraping buy probably doesn’t have a house to sell or other assets to offload to improve their situation quickly. They are probably already working 2 or even 3 jobs to make ends meet. A billinaire can then use the same term because they overleveraged and bought an expensive mansion and yacht and now they are in the negative cash flow wise month to month.

    As you noted Sam in your article it was self inflicted. You can relatively easily reverse it where someone who truly lives by the seat of their pants is much harder. I feel like your articles are geared mostly to the 1% and not the everyday person. Which is fine if that’s your target audience. I don’t disasgree with most of the article other than the title which doesn’t fit someone with 5+ million in assets.

    1. I like your feedback of using a billionaire as an example to compare my situation. I need to calibrate further as I’ve never come close to considering myself like a billionaire.

      2 to 3 jobs is exactly what I discuss in: Don’t Let Pride Get In The Way Of Taking Care Of Your Family

      To get out of my paycheck to paycheck situation, I plan to take on a consulting job, teach tennis/pickleball, write another book, look for business partners on FS, write regularly on FS, and still record podcasts.

      This is the one last year of hustle! If this mindset and determination to improve my mindset is geared toward the 1%, then so be it. But I wouldn’t underestimate the 99% who are willing to do the same to improve their finances.

      1. The point of using billionaire is that it can really scale up to any income level. You can call the US goverment the ultimate living paycheck to paycheck with the amount of debt it has. We just wouldn’t use that term, because its typically implied that the meaning is for someone with low income. So when its used for someone with large means, it clouds the point your trying to make because people won’t feel sympathic to your cause. Like someone else pointed on in your comments, as better term to describe what you’re experiencing at your income level would have made more sense.

        For instance myself who I consider middle class living in NY, not a low cost area like SF… I just did renovations on my house and now have 2 kids to save for future college. I still want to contribute to my own retirement accounts and my wife isn’t working now. I’m technically in the red each month on a single income, but I wouldn’t say I’m living pay check to paycheck. I could easily adjust my expenses and go back to black. So I wouldn’t say I’m lving paycheck to paycheck, I have options that other people in worse situation wouldn’t have.

        I understand you’re trying to live in a certain location, maintain a specific lifestyle and wouldn’t move to make the numbers work. At the end of the day its your blog and you can call it whatever you want.

        1. “ For instance myself who I consider middle class living in NY, not a low cost area like SF… I just did renovations on my house and now have 2 kids to save for future college. I still want to contribute to my own retirement accounts and my wife isn’t working now. I’m technically in the red each month on a single income, but I wouldn’t say I’m living pay check to paycheck.

          Jim, I encourage you to recognize your situation, which is that you are indeed living paycheck to paycheck. Step one of getting out of financial difficulty is recognizing you are in one. The longer you deny your situation, the longer you will wait to make a change.

          Saying you can easily adjust your expenses but not doing so, while you have college tuition for two to say four and your retirement, is a risky proposition. I would cut spending and grow income.

          But here’s the thing, I have no judgment. You and everybody are free to make the choices they want and live by them. This is what I’ve done. Nobody else can live our lives if we are happy with our situation, then excellent. If we feel enough discomfort, we will make the changes necessary.

  7. I applaud you Sam! You have strong boundaries regarding your professional and personal life. Having clarity on what you desire is the most important thing in living a life that is satisfying and rewarding.
    I hope that you achieve your goals in a fun and satisfying way. You deserve to flourish and so does your family.
    I prefer the story telling aspect of researching information. The human touch is important. Anyone can copy and paste facts into a post but it takes genius and confidence to write what your heart truly wants to say, so Bravo! I very much enjoy your free weekly financial emails as this is part of my financial learning journey. And I appreciate being able to read more and indepth on your blog too. Yes the ads are annoying at first, however this is how you make your living and that is commendable, so I just focus on your writing and the messages they convey. I am here to improve my financial life and you are a very good, open and gracious teacher. Thank you

  8. Buddhist Slacker

    I’m sorry people are unsympathetic about you living paycheck to paycheck. But frankly, if you do nothing to stop the bleeding you WILL eventually be living paycheck to paycheck hahaha. This has happened to formerly wealthy people and I think it’s a great lesson for everyone.

    Personally, I have depleted my emergency fund on some unexpected things which I know other people will not see as an emergency lol. Steps I am taking to rebuild are:
    -cutting back on my food budget in terms of both time and money,
    -deciding not to remodel and add that new closet
    -deleting the Amazon app, also because I am pissed about all the overcharging being done on Amazon when you can literally find the same exact thing on temu for 1/10 the price
    – being very strategic about my work wardrobe and only buying one piece that will result in my having an entirely new outfit with the existing pieces that I was not wearing before because I was missing a matching top or whatever
    -decluttering and minimizing so I don’t need to create extra closet space or storage space and also to reduce the stress and work of maintaining and organizing all the stuff
    – deciding to put off all remodeling projects until I retire and I can DIY them and actually have fun with them. This also freed me of a lot of stress of trying to figure out how to remodel. Now I’m just collecting screenshots of ideas which is not stressful.
    -throwing away old shoes instead of repairing them at the recommendation of my shoe repair person lol. I just threw away a couple pairs and I don’t plan to buy anymore to replace them. I have enough shoes.

    All this has also saved me time which I hope will allow me to work on my book.

  9. I always appreciate your posts and insights. Thank you for being so open and honest about what it takes to pursue the ever-evolving American Dream. I also come from an immigrant background (Colombian); my mother raised me on her own, is a savvy entrepreneur, and often worked three jobs to accumulate savings. It took me a while to understand why she lived so frugally, and throughout my 40s and now into my 50s, my husband and I have lived a debt-free lifestyle in a big city. This is after spending most of my 20s and 30s in debt (SMH.). I wish more people had the practical financial education you share. I will certainly be introducing my (now 9 year-old) son to your blog and books as he gets older so he can learn the benefits of financial independence.

  10. Really enjoyed this article!! It was very real and great point that seemed very relatable. Used as a guard to live my minimally

  11. Dennis Earle

    A couple of thoughts:

    1. No one wants to hear the financial struggles of someone who has multiple properties; first world problems!

    2. In the immortal words of Chris Rock, “only women and children are loved unconditionally. Men are expected to fend for themselves.”

  12. Sorry you feel you have to still work at a job you dislike despite having a $6+ million net worth.

    I’m the past, I’ve found this is a classical case for someone who actually does not truly feel financially independent. If they did, they would leave that job and pursue something they enjoy with their remaining life.

    There is a difference between saying you are FI and being FI. It’s like one blogger who continues to make his wife work 12 years after he retired.

    1. well i didn’t say i “dislike” my job, i don’t. i also don’t love it as i said i don’t “really like” it. somewhere in between dislike and love which is where most are i think. to your point i would quit in a heartbeat if i had something productive i loved to do and hopefully i’ll find it. but with no kids in the nest and a wife who works full time and enjoys it, i dont really feel like putzing around the house or working on projects. i am starting a new volunteer effort so if that works well maybe i will quit.

        1. I play golf four times a week and soccer once a week as well as do Peleton 4-5 times a week. I also fly fish in the spring-fall. Feeling good and healthy and being active actually probably the most important thing for my mental health, even more than the money=security things.

          I am active in various social groups, in charities, and starting to volunteer more. As you might be able to tell, hardly seems necessary to quit my job, even though the content of what I do isn’t my passion. Everything else about it fits me well.

          1. That’s good to hear. I would urge you to find some thing you’re passionate about anyway. You don’t want to look back and regret not having spent your time doing something you really enjoy, especially if you have a $6 million net worth.

            I’ve met too many people who suffer from the one more year syndrome, and then wish they had tried something new or more exciting when they are older.

            But if you are in the Bay Area, with so much wealth, I can understand if $6 million doesn’t feel like enough. If you and your wife keep working and saving, how long do you think it’ll take you guys to get to $10 million? at what age will you be?

            Based on my survey, $10 million is the ideal amount of people feel comfortable retiring.

            1. If I work to 65 we should get to 10 mil (I’m 59). But will the ideal amount be 15 mil by then? LOL. Kinda the way it feels. You have documented the “one more year syndrome” but it can be self-fulfilling because everyone (financial analysists, bloggers, retirement folks, media) keeps moving the bar up seemingly overnight!

              And I agree that at 6m I don’t feel like I am real wealthy living in NVA, but with projected expenses of 250k a year and no debt the math works for a fun retirement for me/wife. Healthcare costs worry me but I’m only a few years from medicare which will at least provide a base.

              I am very passionate about life in general overall – golf is my main addiction. Everyday I wake up I feel blessed. I live with a smile on my face! I think working at something you are passionate at is great but not always achievable – so you have to make a choice. I’ve seen alot of sub-optimal lives in people we have chased the “grass is greener” also. As you often say, just look around the world and see the pain and suffering. If I have a 6m NW, rather healthy, great family, vibrant faith, and still feel something is missing, that’s a first-world problem.

              1. Maybe! Inflation is a tough bugger.

                What is it that you do for work again?

                I used to play a lot of golf from 2012-2013 and got down to a 9.8 handicap. But I could never overcome my chipping problems and would chunk the hell out of the ball at least 50% of the time. So I just putted from off the green.

                Haven’t played in three years. Probably back to a 18 handicap.

                1. LOL, definitely once you get down to a 10 or so, it is the short game that must take to to the next level – 5-7. I move in the 5-7 handicap range. Been lucky to play many of the greatest courses in the world and regular trips to Scotland/Ireland. Even more lucky cause my son got the bug so we can do that for life. I am a part owner of an engineering company. We have mandatory retirement at 65 (k-1’s, restricted stock). Make about 500-600k a year. Of all the wealth building options I definitely think building your own business most lucrative. But it has its challenges and can wear you out!

  13. Reading through the post, the comments, and your blog for many years, it appears that “paycheck to paycheck” for you represents a certain level of fear and elevated stress around your financial situation. More practically, it seems to represent a situation where at the end of the month, so to speak, you haven’t saved any money.

    While you state that passive income must equal expenses for you to truly be FI, you have fudged it somewhat (going extra conservative) by including contributions to investments in your “expenses” category, such as contributions to college funds, IRAs, private equity funds, etc. I think that is where you lose the traditional “paycheck to paycheck” aka poorer folks. Even in your early career budget, you included 401k contribution in expenses. I get that that is your “process” to FI, but it is a choice. Most would not and then have a larger “leftover” which is directed, if desired, to investments/savings. Just understand that for you, it seems, that is non-negotiable (budget-wise), but comes off a bit arbitrary.

    But I am like you. Building wealth has been critical to our identity as a father and successful person. It seems to me that for you, money primarily = security, more than status or lifestyle. I identify with this. That is what money has primarily meant to me…I get more joy out of watching my investment accounts grow, and owner distribution checks from my business deposited into my checking account then I do spending it. I really enjoy researching investments and growing money. There is nothing wrong with that unless it throws other areas of your life off-balance, as with any preoccupation (or addiction). I fairly long ago reached FI for myself with 6+M in investable assets and no debt, but I stay in a job I don’t really like because it isn’t really demanding and I don’t want to stop seeing the money come in and growing, don’t want to have to have a budget for my wife and I, worry about healthcare costs, don’t want to have to put too much thought into scope of next cruise, etc…but I try to remind myself those are first-world problems, given my general wealth and spending habits. I will never be truly “paycheck to paycheck.”

  14. Sam
    I just want to apologize if others have been cruel and quick to criticize.
    I live what you do – you honesty and openness ifs refreshing and inspiring.
    For every critic- know that there are at least 5 of us who are helped and are thankful for all you do.

    Take care-
    Life isn’t always easy but sharing the journey makes it meaningful

    Amy

  15. After reading your 2/18 post and then this post, I think you received some reasonable feedback. Yes, it can feel like a gut punch because some feedback was over the top. However, as an Internet personality, you must have a thick skin. I enjoy reading your more personal stories and I try to assess them from the perspective you intend. Often, there are nuggets I use to help me in my journey. Your version of living paycheck to paycheck IS different from someone without a strong net worth. Your personal story did nothing to denigrate those with different circumstances. Typically people in those circumstances are not followers of FS. Most of your readers are in a similar financial condition as you (or want to be). If they are taking umbrage at your word choices that is on them and not you. BUT, next time you post a personal story, try to look at it from the perspective of a very poor person as well as one that is very wealthy. That may help you with your word choices and phrasing. You are providing a great service…most of it is free…and it is ultimately the reader’s responsibility to discern what is useful to them on their financial journey.

  16. This may be folly, but perhaps, I can provide a different analogy that might clarify what people are feeling about the “paycheck to paycheck” label. When COVID first hit and everyone was stuck in their homes, Ellen did an interview in her MANSION and said she felt like she was in prison. Meanwhile, a huge chunk of the population were stuck in small homes or apartments with children etc. She got a lot of heat for that. I’m sure she actually felt like she was in prison given her lifestyle, but if she looked at her situation in perspective, she would see she had it better than almost everyone else. By percentage, you are one of the wealthiest people in the country, so I think that is why people can be a bit miffed by the label.

    Btw, lack of perspective can happen at any level. For instance, someone in a poor foreign country might look at someone that would be considered low income in the US and feel intense feelings of envy because they have food and hot water etc.

    That’s what popped up into my head anyway while reading the comments. I appreciate the sharing of your personal situations even though my net worth is FAR below yours. It takes bravery to put yourself out there, and we have all benefited from your bravery.

  17. Sam,
    I am very pleased with your approach to teaching personal finance and sharing your personal experiences. It’s so educational. Please do not stop.

  18. Great article Sam,

    I will share my personal situation and when I had negative cash flow like you describe. That was in 2022 when the market correction or crash happened. I was cash flow negative and every month my net worth was declining. On paper I suffered a huge loss during 2022 and had the lowest taxable income year of my life. The number was so low that I made more money at 14 years old. It was sad to submit financial documents for that year because I only had $300 of taxable income in 2022.

    I made major adjustments to my spending and also adjusted my investment strategy to generate more cash flow and I can report that because of my efforts in 2022 and continuing to shift money towards future investment growth my income is back to normal and I have tons of free cash flow again. I see the same thing happening for you in the future as well. We are at our most creative and innovative when we are up against new obstacles or challenges and when you have to make things work that is when new creativity and new ways of doing things hits us.

    My ideas of adjusting my investment strategies to generate more consistent income and also doing more in depth study of proper investing is going to keep paying off for the rest of my life. Because of 2022 I know that I can generate income in down markets and up markets. I think we all enjoy up markets more, but it is when we have to change course a bit that we learn the most and grow the most.

    Thank you Sam as always for sharing your story. I think all of us benefit from your experiences even if some of the comments disagree with your use of paycheck to paycheck. I think all of us can understand being cash flow negative (essentially living paycheck to paycheck) and what that feels like in our daily lives. It creates anxiety and fear and wondering if things are going to work out and what I have found is if I stay the course and do my best things definitely work out better and any fears that I have in those moments end up not materializing.

    Congrats on the forever home and making a decision that will definitely benefit you and your family long term.

  19. I’ve read through many of the comments and the theme tends to be that Sam doesn’t really know what it means to truly live paycheck-to-paycheck. I think that’s a little unfair despite the fact that Sam “could liquidate some of his vast assets” and fix the problem.

    I think that criticism misses a more subtle dilemma which is that Sam built a meticulous financial structure and due to an oversight (?) now sees decades of planning at risk. Yes, he could merely “sell off” some assets, but simply converting assets to cash as a short term fix has significant downside risk.

    Sam may be playing a different game than most of us, but I recall an article in which he warns all of us that once you “win the game” your job is to not screw it up. Just for some context, I grew up in a paycheck-to-paycheck home as a kid. My single mom was frequently under-employed, or outright unemployed living on welfare.

    It wasn’t until I worked my way through college (zero family assistance) that I eventually started to build wealth. I’m almost retirement age now and I’m in a very good position after selling my tech company. However, I believe that

    Sam’s willingness to share his current situation should serve as an example that we’re all vulnerable to life circumstances and he’s sharing his life lesson for all of us to consider.

    1. Fascinating how many readers here focus on their own meaning of paycheck-to-paycheck and discredit Sam’s definition based on cash flow.

      Cash flow and balance sheet are different. It’s why companies produce cash flow statements and balance sheet statements.

      It seems like some readers will only allow for people to have cash flow deficits and balance sheet deficits to be called, living paycheck-to-paycheck, which is a cash flow problem.

      Maybe these people are simply uneducated about how Financial analysis works.

    2. Yes. Thanks for sharing your circumstances and highlighting that Sam is doing a lot to share his personal experiences, challenges, and vulnerabilities. Not many people are able to do that because one it’s hard and two they’re too scared of being attacked, which clearly is visible in some of the comments.

      Sam is the “Man in the Arena.” Every one should read that if they haven’t before or recently.

      Keep fighting Sam. Don’t let the trolls and critics get you down. Hurt people hurt people and are too cowardly to face and share their own demons.

    3. Thanks Todd. And I appreciate you sharing your story as well. Congrats for selling your company. Sounds like your retirement is all set! It’ll be interesting to see how long you stay retired after retiring. I found that, especially if you’re an entrepreneur, the edge to produce something always remains.

      1. I’ve definitely considered the “vast unknown of retirement”. I’ve been self employed since 1993, so it’s a tough habit to break! I’m sure I’ll end end in some type of low-stress consulting or coaching role helping younger entrepreneurs to keep busy. Keep up the good work Sam, your voice is unique and valuable despite the occasional darts people throw at you.

  20. I agree that controlling expense and boosting income is the way to go. And most people do, I think. But the battle is in the execution of the plan. It requires discipline, consistency and strong will. That’s where most fail.

  21. Most of your articles are way over my head, but this one caught my attention when you said “you” are living paycheck to paycheck after purchasing a new home.

    Someone who is truly living paycheck to paycheck has daily stresses, anxiety and most likely some form of depression and is constantly worrying how they are going to feed themselves or their children or provide a safe home environment. Someone who lives in a multi million house paid for in all cash, has their kids in private school and who decides to forgo a Warriors game and steak dinner with the guys is not living paycheck to paycheck by any means, regardless how you spin it. Your example of living paycheck to paycheck when you first got out of college is also not an example of living paycheck to paycheck since you caused your own income shortage by maximizing your 401 contribution.

    You might have taken a hard look at your budget to reduce expenses, but let’s be honest, if something catastrophic happened to you or someone in your family you have the funds to immediately make sure you and your family are safe – that’s not living paycheck to paycheck.

    I think a more appropriate title for this article would have been, how does a multimillionaire go on a budget!

    I have never personally lived paycheck to paycheck, but I had a family member who did for many, many years and let me tell you, the emotional stress she was under as well as her depression and who was at one point suicidal was hard to watch. Myself and my other sister were so caught up emotionally with her and always trying to support her whether it was financially or emotionally was extremely exhausting. When you start researching the definition of Baker Act and calling local facilities then you know everyone has hit rock bottom and something had to change. Thankfully my sister’s situation has changed and she is happy and is no longer living paycheck to paycheck.

    After my experience with my sister, I know your current situation is not anywhere close to my definition of what it means to live paycheck to paycheck and most likely never will be. I hope you can reconsider your choice of words describing your current situation out of respect to all those who are currently living paycheck to paycheck and who are most likely dealing with some form of depression as a consequence of their situation.

    1. “I have never personally lived paycheck to paycheck, but I had a family member who did for many, many years and let me tell you, the emotional stress she was under as well as her depression and who was at one point suicidal was hard to watch.”

      Sorry to hear about this. I am not on suicidal watch yet and didn’t realize that one must get to that dark place to be considered living paycheck to paycheck.

      I now feel bad for sharing the financial constraint I feel as a father in this post. I was hoping my feelings count as well, given I can’t help how I feel. But as a man, I know we are taught to be strong and not show weakness. I don’t want to discount how others who have worse than me are doing.

      Your feedback reminds me of a podcast episode I recorded a long time ago called: Men Of McLean: Why Men Suffer In Silence.

      A question for you: was it not possible to help your family member financially so should could stop living paycheck to paycheck and feel less weight on her shoulder?

      After I get a few more already written personal posts out, I will write less personal posts and more neutral or business posts going forward. I’m tired of being being judging and feeling invalidated. But I also appreciate your feedback in order for me to become a better person.

      Related: Inflation And Greed: The Biggest Wealth Destroyers For Families

      1. I can’t speak for the readership in total, but your personal touch on these articles is absolutely why I keep coming back. I’m a California resident too so a lot of your financial numbers seem very reasonable to me. I can absolutely relate to having a 90th percentile income and yet feeling strapped. I could (probably) move to the Midwest and get those lower costs of living, but there’s nothing quite like living on/near the West Coast. Like you, I could probably stop saving to free up additional cash, but that’s never going to happen. I hope it helps to see us readers say “Keep Doing What You’re Doing.”

    2. People are allowed to feel how they feel.

      You and your sister not pulling your family member out of her depression is truly selfish. If what you’re saying is true, all you had to do was give her money and take care of her financially to make her stop feeling suicidal.

      Instead, you let her continue to struggle every month when money could have easily solved the situation, according to your definition of living paycheck to paycheck.

      I wouldn’t be able to live with myself if I didn’t do everything possible to help my family member get back on track. Shame on you for your lack of helping and then trying to explain away your guilt by marginalizing how Sam is feeling.

      No wonder why you were of not help to your family member. You lack the emotional intelligence and caring a normal human has to help. If she dies, that’s on YOU.

    3. Sorry to hear that and glad your sister is doing better. Sam is not comparing himself to people like her. You’re lashing out because you have painful memories about your sister.

    4. My other sister and I did help my sister both emotionally and financially as I stated in my comments, but even with our support, her financial situation obviously trigger a level of depression that we were not prepared to handle and so we sought medical care for her. I’m sorry if my comments came across as judging and making you feel invalidated, that was not my intentions. I was sharing my story and I hope you will continue to share your personal financial stories since that’s why we follow you. We are not always going to agree with your opinions, but I stand behind my initial comment that I don’t believe your personal financial situation qualifies you for saying you are living paycheck to paycheck. Thank you for your reply.

    5. I feel bad for your relative and you for not being magnanimous enough to help her financially to prevent her from feeling so terrible.

      Let’s be honest, this is a failure on your part and your family for not helping her. My family would rally around a family member who was financially suffering and ensure that they would never get to that level of despair.

      So for you to say Sam is not allowed to feel financial strain and offer solutions due to your inability to help your family member is truly bogus.

      Your family member needs that extra $100 or $1,000 more than you!

  22. Sam…. Long time reader… isn’t it a little disingenuous to label this article “living paycheck to paycheck”?

    Your net worth just doesn’t allow that phrase, you are temporarily in a negative cash flow situation.

    1. Don’t think so. Paycheck to paycheck is primarily a cash flow strain situation followed by a psychological burden where one feels like it’s hard to get ahead. How would you describe it?

      Also, is there anything in this post that is misleading or you do not understand? If so, I can clarify it for you here, and make edits to make it clearer.

      What I am noticing from the comments here is that there is not of a lot of empathy for people who are living paycheck to paycheck. Few people have offered to share their own situation and nobody has shared any strategies for how to get out of a tight money situation.

      I wonder why this is? Maybe this is a bullish indicator that most people are doing well and making excellent economic choices. Or maybe it’s best not to share one’s financial difficulties publicly because there will be a little support.

      Please share your situation. Have you always been flush with cash live in quite well? If so, how did you make that happen? Thanks

      1. My situation is not relevant. There are other comments on this thread with my sentiment. The fact that I made the comment means I have tremendous empathy for those truly living paycheck to paycheck. As much as you want to spin this term, the reality is that you have excess wealth (perhaps stored in real estate) that you could convert to cash if you needed it.

        1. Got it. I totally understand if you don’t want to share your situation as people can be pretty harsh on the Internet. But if you change your mind, know that you’re in a safe place. It’s always nice to help others too.

          At the end of the day, everybody has their own lives to live and financial decisions to make.

          My hope is that the more the community can share their situation, the more we can normalize problems, and the better we can help people solve their financial issues over.

        2. Fascinating to observe the lack of Empathy, Kindness, and Support, especially from a long time reader.

          If you’re a long time reader, and I’ve never pay for anything, why are you upset? You should focus on fixing your own personal problems instead.

        3. I think you’re too hung up on the title. There’s nothing in the article that is offensive to those with very little means. Sam is really forthcoming with his OWN situation, mistakes, flaws, and challenges on the blog-which very few people do these days. Most people just want to flaunt about how well they’re doing (and often embellish/exaggerate) and never talk about their weaknesses and struggles-because it takes GUTS and humility to put yourself out there. He’s not comparing himself to those who have very little. He’s talking about his own challenges yet so many people decide to be judgmental instead of listening and being supportive.

        4. Greg, you’re fooling yourself if you have any empathy. You’re a coward for not sharing your situation because you don’t want to face the criticism that you’re giving Sam.

          Stop being a prick.

  23. What was the “fortuitous exit from a venture capital investment” you are referring to? Why fortuitous?

    1. Financial Samurai

      Fortuitous, in this context, means a profitable exit. The passage you highlight talks about suppositions that may come true to help me regain my financial independence.

      Personally, I have venture capital investments in companies like Ripple, which has been a multi-bagger so far. But there is no exit yet, and not sure of one in the near future.

  24. This sounds like absolute hell to me. I skipped the steaks and ball games in my twenties and thirties so I could indulge myself in my forties and beyond. Choosing this lifestyle when you don’t have to seems crazy to me. Spend some Financial Samurai money , eat a steak and go to the ball game. It doesn’t matter what arbitrary definition of FI you came up with. It’s arbitrary. You already won, enjoy it.

    1. If you had the time of your life between 11-46 years old like I feel I did, it wouldn’t be that crazy to cut down the spending on steak dinners and pricey sporting events.

      Everything gets old after a while, so the marginal joy no longer covers the marginal cost.

      There’s nothing wrong with enjoying a simple meal with someone and then watching TV. You can pause, fast forward, rewind, go to the bathroom, and have zero commute. Not bad!

      1. I’d be curious if Financial Sydney honestly feels the same way. She’s been taking care of two kids plus her work on your blog. Does she really want to start over?

        1. Hi Bill. I don’t see this as starting over at all. An adjustment, yes. But starting over, no. I feel happy and fortunate to be in our new home and believe these feelings will continue to grow more and more as each week and month goes by as we continue to settle in. I believe we’ll grow deep roots here and that brings me a wonderful sense of peace and gratitude. I also mentioned on one of our podcast episodes that Sam and I always go into big decisions together as a team. We wouldn’t have made a lifestyle change this big if one of us wasn’t fully onboard.

          Of course if I suddenly had to take on a 60+ hour/week full-time job in addition to what I’m doing now in order to make this work that would be different. I had my share of working years like that (without kids) and know I’d constantly feel overcapacity and stressed if I had to do that now with 2 kids and my existing work.

          But I think it’s reasonable for me to handle some additional part-time work and maintain a good work/life balance. And I think some consulting for Sam would be a positive change as well.

          Plus, Sam and I are both pretty frugal and low maintenance by nature. So, being more mindful of our spending and making some sacrifices is not foreign or frustrating to either of us at all.

    2. Living frugally and cutting costs by not going to eat steak dinners and ball games sounds like “absolute hell”? If that’s the case, you have never experienced hardship.

      1. Jost,

        I think your missing my point. I struggled, scrimped and saved for many years. I never ever want to go back to those days! In this instance I failed to see why Sam would purposely put himself in this situation when he doesn’t have to. My comments have more to say about my fear and insecurities than what Sam and Sydney have chosen to do.

  25. Sam, I love you man. But saying “paycheck to paycheck” is a little like saying “all lives matter”, it’s missing the point. You have a cash flow deficit due to your asset rebalance , for sure, but most Americans are one shock away from exhausting all of their immediate liquidity. That is paycheck to paycheck. All of your advice applies, but your label, maybe that’s for clicks, it doesn’t totally fit. Still, we should all aspire to have a positive savings rate, that is what you have always advocated. I just think there is a more precise term for what you are experiencing.

      1. Of course your experience matters, perhaps I was being too rude there. I apologize. Let me try to reframe to be more constructive. My definition of paycheck to paycheck is how fast you run into a liquidity event (no savings or liquid assets) should you lose your paycheck. If it’s 1 pay cycle, you are absolutely “paycheck to paycheck”. If you have 6 months of savings, you are sitting on 12 paychecks of buffer.

        I think the psychology of being 1 paycheck away from crisis creates a huge mental burden on people in that situation. It also leads to crazy sub-optimal financial decisions. Perhaps you take that used car dealer financing because you have to get to work. Perhaps you buy the work truck because you rationalize that you need it to hold down your hourly job. Maybe you take the payday advance. People that are liquidity buffered are not forced into these sub-optimal decisions in the same ways that someone living paycheck to paycheck is. Dave Ramsey’s business exists because of this broken mentality. Most importantly and most underrated is the stress of not knowing where your electrical bill will come in at, or how you will pay for it if your child gets sick. “Paycheck to paycheck” isn’t just an economic condition, it’s a psychological battle.

        For anyone that wants to run an experiment on empathy, take half your monthly burn and set it aside. That’s your “paycheck to paycheck” condition. Put the rest of your cash in a short term CD in your child’s name. Why your child’s name? Because it will hurt when you have to tap into it. How long can you live with that level of stress? It sucks!

        1. Financial Samurai

          “My definition of paycheck to paycheck is how fast you run into a liquidity event (no savings or liquid assets) should you lose your paycheck. If it’s 1 pay cycle, you are absolutely “paycheck to paycheck”. If you have 6 months of savings, you are sitting on 12 paychecks of buffer.”

          This is a good definition. There is a mental burden if living paycheck-to-paycheck, which I now feel again, just like how I felt in 1999 and then in 2012. Things are right, and any big surprise expense or capital call will put us at risk b/c the vast majority of our assets are illiquid and both my wife and I don’t have steady cash flow from jobs.

          I address this feeling in the first two paragraphs of this post, and have shared my increased stress and anxiety in Blew Up My Passive Income post.

          The psychological battle is real and now I must fight the squeeze in my way to make sure I provide for my family.

          Have you never experienced living paycheck-to-paycheck where everything was tight? What’s your current situation?

        2. Strong reply here. Economic hardship—true paycheck to paycheck is psychological anguish. I think the phrase itself gets used to describe a number of scenarios by all kinds of people. Some people are experiencing that anguish. Some are merely running a deficit with the means to plug it, or backfill with other assets liquid or liquidated.

          What Sam is describing is not having enough income to cover the expenses—some of which might be the buckets of savings he regularly deposits. I know I count my savings as an “expense” in that way.

          I don’t think this post is meant to minimize the suffering caused by true financial hardship. By using the phrase “paycheck-to-paycheck” the post may come off to some as being out of touch with an economic reality so many (too many) Americans face. In Sam’s defense, he knows his readership is sophisticated enough to discern the difference and that even though many of us are among the top 10, 5, and 1 percent of Americans for net worth and/or income it doesn’t mean we don’t see the poverty in our society.

          1. Agreed: “not having enough income to cover the expenses” He explains himself very well in the article and is not trying to say he’s in poverty by any means.

            1. Absolutely. We know Sam’s heart. If my initial comment was too brash, my apologies. He has always been humble and he does this to help people.

      2. If you can run down your savings or investments to make ends meet then you aren’t living paycheck to paycheck…

    1. Or are we participating in the poverty Olympics or some thing? We’re only certain people with a certain amount of income or net worth or background are allowed to say they are living paycheck to paycheck?

      If you are running a cash flow deficit and can’t save money, as a result, that’s paycheck to paycheck.

  26. I see how easy “lifestyle creep” can become entrenched. I wonder how your buddies and family will feel about the change. Lifestyle and social circles are intertwined and sometimes not easy to change. Once you start eating steak dinners, switching to beans is not easy.

    1. I think they’ll be OK. So many ways to enjoy things for free or cheap.

      I also have to lead by example for my wife and kids so they develop frugal habits and a strong work ethic.

      How about you? Ever had major spending changes?

      1. “Ever had major spending changes?”

        Yes, right after each house I have purchased, LOL!
        My partner and I are butting heads over retailer Buy Now Pay Later “schemes” instead of cutting back spending. I prefer Save Now, Buy Later but it is not as much fun.

        1. Financial Samurai

          There you go! I’m feeling the exact same way you did with my latest house purchase. I think it’s going to take at least a year to feel more normal.

          I hope your partner doesn’t go the BNPL route! If we cannot pay for something in cash, let’s not buy it, especially after buying a house!

  27. Hi Sam. Good article. I know it will be awhile before you get a new car, but I wanted to let you know something. There is a paint defect with some Honda cars. It is mostly with the white ones. The paint comes off in big chunks down to the primer. We bought a ‘14 Odyssey in ‘17 and didn’t know about the paint defect. Honda does not take responsibility to fix. We found out about it when we went through the car wash and came out with a few areas of paint missing. I thought it was the car wash, but googled when we got home and there was a whole bunch of information about it on the internet in various places. Please be sure to research if you decide to buy a Honda, I am not sure if they have fixed the problem yet. It had something to do with the primer and the pearl finish on the car. I wish we had known about this before we bought our van.

    1. Financial Samurai

      Got it! I had a 1997 Honda Civic in white which had paint on the hood coming off. I loved that car!

      Given I will be in ultra-frugal mode, I won’t be paying for a car wash. I’ve actually hand-washed my cars for the past 25 years. A car wash is like $40 – $100 here!

      1. Wow, Sam, that is a lot for a car wash, they are not that much here, maybe $20. We had been visiting our family over the Christmas holidays and trying to get road salt, etc. off the van. We usually wash at home also. We live in an area of the country where we have to turn off the outside faucets to our house in the winter.

  28. Another great article and solid foundational advice on tightening the belt and short-term vs long-term mindset. I’ve never considered myself living paycheck-to-paycheck because my poverty mindset didn’t let my spending creep up anywhere near as fast as my pay did once I started working out of college. During college, I was fortunate to receive a lot of financial aid and subsidized the rest with a part-time job.

    I must say, though, while I usually dismiss a lot of the hate you get for your perspectives and transparency about your own situation, this one did have me cringe quite a bit while reading it. I totally get the message you’re trying to send. But trying to frame yourself as living paycheck-to-paycheck by its commonly understood definition, or somehow trying to expand that, just seems unnecessary.

    1. Financial Samurai

      Sounds good Viktor. That’s great you’ve been able to maintain your expenses to grow your savings.

      Whether you are in a self-inflicted situation or an unfortunate decision that causes you to live paycheck-to-paycheck, the key is to recognize the situation and take action.

      I think it’s important to speak openly about difficult financial situation instead of keep it hush hush. If we can normalize difficult situations, like being in deep debt, getting a divorce, etc, and then offer some suggestions, that helps people feel recognized and gives people hope.

      A great example is normalizing gay marriage. 30+ years ago, fewer people felt comfortable talking about their sexuality. More people were against gay marriage, even though every person should have the right to love and be with whomever they choose, and have the same legal rights and benefits as others.

      Because more people stood up and talked about it, gay marriage is becoming more and more accepted and celebrated. To me, that’s wonderful. But it takes people to have the courage to discuss topics to make a change.

      What’s your situation Viktor? If you have any concerns or inquiries, feel free to share. I promise I won’t judge and am here to help.

      1. It does sound like your financial situation is causing you some mental and personal strain. I’m not trying to diminish that by any means. I am also not suggesting that you should bottle it up. I fully appreciate the therapeutic and constructive value of writing things down and discussing them as you work through it.

        However, with 60+% of working people not having $1000 in the bank for an emergency, the article just feels a bit tone deaf to me. It’s not about some sort of poverty Olympics or judgement. Just giving you my perspective on it as a long-time reader. And while it won’t make your problems any less real to you, it might give you some perspective on your challenges as well. To put it bluntly – worrying whether my millions will last as many decades as I’d hope is different from worrying whether I’ll be able to pay for housing, electricity/water and ANY food next month.

        It’s true, you’ll get a lot of hate on the internet for bad faith reasons and because people just want to troll. I would humbly suggest that the feedback you’re getting here from people reading your stuff the day it comes out (before it hits Reddit or CNBC with the hate) might carry some signal to consider. It does seem like with a few of these types of articles recently, you’ve been a bit dismissive of this line of feedback.

        Finances-wise, I think you might actually consider our situation to be paycheck to paycheck. Do you consider selling stocks to be passive income on par with dividends? We do, but I suspect you would disagree as it seems like you’re considering shifting your equity investments to higher yield producing options. We look to maximize overall returns. While not unanimous, I believe that finance and accounting theory would suggest that excessively high dividend yields (eg those greater than your traditional 4% SWR, which I know you have thoughts on…) will generally underperform on a total return basis.

        Other than that, I think your line of thinking and consideration is sound and worthwhile for others to replicate in similar situations. I think your message would be more effective if there was more nuance to your paycheck to paycheck framing.

        1. Got it. Sorry for being tone deaf regarding sharing my situation. And I guess once you hit a certain net worth, you probably shouldn’t feel any type of anxiety or stress about money anymore. Or at least not share any difficult thoughts you’re feeling. I’m just not sure what the net worth level is and how to actually always feel calm. What do you think that net worth level is and how have you been able to always feel at peace?

          Maybe it’s the way I approach things in an analytical way given my background. Because if you have a company with a large balance sheet of assets, but is in a cash flow negative situation, it will trade at a discount usually. And if that negative cash flow situation is not rectified eventually, the companies share price will continue to get discounted.

          After I get through publishing, some already written posts, I’m going to stop sharing my personal situation and publish more review posts instead. Thanks for your feedback and sorry again for offending you.

          1. As to be expected from a written, online interaction, it seems like you might be misreading the feedback.

            I didn’t say you shouldn’t feel financial stress above a certain net worth. I feel it all the time despite the fact that I know I’m relatively well off.

            None of this type of feedback to the post is suggesting you should stop posting things you’d consider more personal. It’s your blog, we’re all here because you made it worthwhile for us to be here.

            Nobody questioned your need or approach to rectifying your negative cash flow situation. And definitely nobody suggested, or even mentioned, that you shouldn’t feel stress or express it because you’re a man and / father.

            The feedback is simply about how people perceive your article given some of the language choices you are making.

            1. Got it. Thanks for the clarification. What do you think would be the downside to how people perceive my article and the language choices I’ve made?

              I honestly think I need to throttle sharing my personal struggles and stay more silent in the future. Writing neutral posts will also help boost revenue and minimize emotional fatigue.

              1. I think the biggest thing is that they might not pay attention to the substance after getting triggered by some of the language. As many pointed out, long-time readers won’t have an issue because they know the bigger picture (as I do, and was not personally offended).

                To the extent you’re looking to build your audience, it’s just something to be mindful of. Especially if you are interested in expanding into new types of audiences (e.g. not sure what portion of your readership falls into the group that’s currently paycheck to paycheck AND without an asset base but looking to FIRE…).

                I also don’t like seeing the hater articles on my feeds that do cling onto some tiny part of your posts without looking at the whole story.

                I wrote a guest post on another blog and got a little bit of that kind of feedback (https://www.caniretireyet.com/do-fire-principles-still-work-today/). It sucked. So I can only imagine the magnitude you experience… Sorry if my comments came across that way

                1. Thanks for sharing.

                  I noticed this comment in your guest post about your situation:

                  “He does not represent 99% of the population. No kids; that in itself disqualifies this essay as credible. Number crunching is fine but let’s stick to real life. Not everyone works on Wall St. and is childless. Retiring at 35+- is a crap shoot. What about health care? What if you get divorced? what if goals change? Etc. etc.
                  I must admit I read the beginning and skimmed the rest..just wanted to burst out laughing at the naivety.”

                  I’m assuming reading it doesn’t make you feel good, so I am surprised you wouldn’t have been more supportive with your initial comment here. The magnitude here is many times over given this is a much larger site.

                  But I understand it’s hard to tell how someone is feeling or the situation their in without walking in their shoes, so no problem!

                  I’ll take the feedback for what it is and be more careful with my public writing.

                2. Yup, that’s the one (plus a few others in other places where it got shared…). I’m sorry if it came across that way. I did rewrite it several times hoping to avoid that and be constructive.

                3. Vikctor,

                  I see where your commenter is coming from. And I also see how you can’t quite fully grasp the difficulty of financial independence with kids since you don’t have any.

                  Having kids changes a person and makes parents much more worried about the future. You can have all the money you want, but kids take up energy, time, and worry.

                  You’ll never know what it’s like until you have them, so I would suggest cutting parents and Sam some slack.

                  No kids is easy-to-medium difficulty mode.

                4. Man, the internet can be an amazing place sometimes…

                  Here I was explaining that my feedback was meant to highlight that some people can get hung up on a specific word and miss / ignore the rest of the content…

                  Julliard here, with all due respect, appears to have been put off by something I said early in my article – perhaps that my wife and I decided not to have kids.

                  That initial response appears to have led her to miss the rest of the article – eg the fact that we ultimately changed our mind but decided to wait until we were financially independent to become parents (which we are now…), the facts I presented about Gen Z / Millennials (who were the primary subjects of the article) waiting longer to have kids on average (if at all) or the fact that I never actually implied that getting to FIRE is easy, with or without kids. I simply presented some ballpark numbers about what might be required for people to make their own conclusions given their individual circumstances.

  29. Living paycheck to paycheck is a mindset. I did it when I was making $21k a year and still do it now making ten times that amount.

    Of course today I save a much larger amount and % of income (over $100k) than when I started.

    Wherever I was on this financial timeline, the keys have been delaying certain gratification (driving old cars) and saving up front and spending the rest.

    What I’ve sacrificed in worldly pleasures I’ve made up with in security, peace of mind and learning to enjoy the simple things in life. I also know that if I am laid off and take a 50% salary cut I could easily survive by saving less up front.

    1. Financial Samurai

      I agree. Adopt the paycheck-to-paycheck mindset if you want to get out of debt, boost your net worth, and eventually get to financial freedom.

    2. Yeah, good way to put it on it being a mindset. I think that’s quite poignant for the PF community.

  30. I think it’s interesting how you’ve framed living paycheck to paycheck. By saving/investing as much as possible, you are still living paycheck-to-paycheck, but you are also almost guaranteeing that you won’t be doing so down the road. For most people, this isn’t done and that insures that it becomes a forced lifestyle in the end. How much choice people really have in all this is where the arguments begin.

    1. Actions definitely have consequences. It’s important to get into the mindset of intense saving, investing, and frugality if you want to achieve financial freedom.

      We cannot be too proud to work. When I drove for Uber and gave over 500 rides, it’s sometimes felt embarrassing picking up passengers I knew from my banking days, or in the startup world. But I had to do what was needed to survive and support my family.

      There is no shame in providing.

      How did you overcoming living paycheck-to-paycheck?

      1. I didn’t. Still do, but the % that goes toward investing is much higher now. Pay yourself first is an idea that is very powerful, but misunderstood by many as I know too many people who seem to view it as permission for consumption, which is the exact opposite of what it means.

  31. I like how you’ve really embraced your situation as a new challenge and a way to reset your expenditures. I like the thrill of spending like everyone else but I also like the challenge and rewards of figuring out new ways to be frugal and see how I can save, DIY things, and fine cheaper ways to do/consume things.

    Sounds like there will also be some great teaching moments thrown in for your kids over the next five years. Look forward to hearing about them and your new journey!

    1. Financial Samurai

      I’m looking forward to setting a good example for our kiddos by saving money and working harder so they know dad isn’t just preaching, but also doing.

      We only deserve what we have earned.

Leave a Comment

Your email address will not be published. Required fields are marked *