Why Small Business Owners and Creatives Struggle with Living Paycheck to Paycheck
Hi Friends, Today, I’d like to discuss 9 reasons people live paycheck to paycheck and offer a few solutions. (If you prefer to watch the video, please check it out here…)
Hi, my name is Lucas and I love to help business owners and creatives improve their finances. In my 20s and 30s I was completely oblivious as to why I was living paycheck to paycheck But, as I started to improve my finances through the Big Split and began helping clients do the same, I noticed several habits that keep us in financial prison. So let’s take a closer look.
#1 and #2: A Poor Flow Of Money
The first 2 reasons we live paycheck to paycheck have to do with the flow of our money and are often overlooked because they are quite subtle.
#1: Giving our money to everyone else first
Ever wonder why there’s no money left over once you pay your bills? Because we have trained ourselves to give it to everyone else first and we put our goals last. We get the money, we spend the money and there’s nothing left for us to keep. But when we change the order..
Get the money, KEEP some money, and then Spend, the cash flow improves. It’s called Paying yourself first. Whether you would like to save for a house, investments, or be free of your debt, put money towards your goals FIRST. If you’d like to learn how to, check out this video..
#2: Paying Taxes First
Now do the same thing with your taxes. As an employee or freelancer, we give our money to the government first But as business owners, we improve the flow of our money by paying taxes last.
Plus, when we’re taxed through a proper business entity, we can take advantage the tax incentives and pay less of them. Check out this video to learn more and be sure to consult with a tax pro who’s familiar with your local laws.
By the way, I teach how to do both, plus everything else we’re going to talk about in today’s video inside of The Big Split Program. If you’d like to radically improve your finances with me, in less than a week, comment the big split and i’ll send you some info.
#3: Avoiding Our Financial Problems
Dale Carnegie once said, “Inaction breeds doubt and fear” - because we don’t know how to fix our finances, we do nothing, the fear grows and we prolong the paycheck to paycheck cycle.
The solution? 1st, Recognize that avoiding your finances is doing more harm than good. 2nd, Educate yourself - Books, youtube videos and a good course or money coach can help you improve rapidly. And 3rd, take action.
There’s 2 exercises I teach in The Big Split that can help - First, we do a financial house cleaning where we close, consolidate and simplify our bank accounts, credit cards and bill paying - it cuts through the avoidance get’s you organized - check out my youtube tutorial here
The 2nd is to practice regular financial check ins. Autopay may be convenient but when our finances are out of sight and out of mind, we lose track of our spending. The solution? Log in to your bank accounts and credit cards once a week to make payments and check balances.
It takes less than 5 minutes and is much easier than budgeting.
As I mentioned in the previous step, when we have no connection to our finances, things tend to get out of control and that leads us to the next 2 reasons most people stay stuck. Not fully understanding how to use credit cards and having no accountability for our spending.
#4 Being A Slave To Credit Cards
When we use credit cards to buy things that we can’t afford, we trap ourselves. When we make 1 payment per month like they suggest, we trap ourselves. And when we use multiple credit cards, thinking its good for our credit, we trap ourselves.
They more cards we have and the slower we are to pay, the longer we stay living paycheck to paycheck. But when we get them working for us, we don’t have to pay fees and we can be rewarded for our spending. Learn how to harness the power of credit cards in this video..
#5: No Accountability For Our Spending
And when it comes to having no accountability for our spending, there’s a simple solution… Put all of your purchases on 1 credit card, log in once a week and make multiple payments to your card. I log in each Sunday, and I set up 3-4 payments for the week.
They want you to pay once a month, but when we pay more often, we avoid interest, fees AND we don’t screw ourselves with a huge monthly payment. PLUS, by logging in each week we stay on top of our spending with a financial check in.
#6 Buying Too Many Liabilities And Not Enough Assets
We trap ourselves in the paycheck to paycheck cycle because we buy too many liabilities and not enough assets. As Robert Kiyosaki says, “An asset is something that puts money into your pocket, a Liability takes money out of your pocket.”
There’s tons of traditional assets like rental real estate, owning businesses and creating intellectual property but I’d like to offer a simple exercise you can use on the daily to buy less liabilities.
Every time you’re about to spend money, ask yourself… “Will this put money into my pocket or will it take money out of my pocket”. You can still buy the thing but by running our purchases through this filter, we yank ourselves out of mindlessly consuming.
Remember, more income producing assets you buy, the faster you break out of the paycheck to paycheck cycle.
#7: What We Learned About Money Growing Up
The 7th reason we trap ourselves in the rat race is unique to each person because it has to do with what we learned about money growing up. You see, Every time we witnessed parents arguing about money, a little seed was planted.
When a grand parent told us to save every penny, another seeds was planted. When we see how other people handle money (show cheesy ballers) or overhear that money makes us evil or greedy, more seeds get planted.
If we’re lucky, we may have a role model teach us how to do money in a better way, but unfortunately, that’s not the norm for most so all of those financial seeds grow into weeds, and become, what I call, financial blocks.
If you’d like to break through your financial blocks, I show you how to identify and remove them in this special 4 part series. And because Doing internal, financial work can be quite nuanced, check out Peter Crone’s Financial Freedom Workshop and Ken Honda’s Money EQ Course on Mindvalley. Both have helped me let go of my financial constraints at a deep level. (Links in the description).
#8: Thinking More Money Will Fix Our Financial Problems
Another subtle thing keeping us trapped is thinking that all of our financial problems will be fixed by making more money but we’re ignoring the other half of the equation - the thoughts and habits that created the problems in the first place.
As my mentor Travis Eliot often says, it’s like climbing a mountain but never exploring the caves underneath. We know deep down that poor spending habits and no plan for our money is making things worse but we take the easy route and tell ourselves that we need more money.
All that does is kick the can down the road and prolong our financial imprisonment. The solution? Recognize that you’re financial bucket is full of holes (no plan, shittty spending, etc) And learn how to plug your financial leaks.
When we do, our accounts grow, our confidence builds and when more money comes in, we don’t leak any of it. I cover financial leaks in this video but if you want to hop on a free 1 on 1 call with me, I’ll help you identify yours. comment “free call” and I’ll send you a calendar link.
#9: Not Having A Plan For Our Money
One of the biggest reasons we live paycheck to paycheck? Not having a plan for our money. It’s kinda like riding a bike with no seat. It can be done but it’s incredibly uncomfortable.
From overspending and poor credit scores to turning down social invites because we’re broke, Every financial problem (on screen large (no savings, debt, financial stress, living paycheck to paycheck, have to borrow on credit cards ) can be avoided by having a simple plan.
Now, technically traditional budgeting is a plan but let’s be honest.. If you enjoyed policing yourself and tracking every dollar, on a weekly basis, you wouldn’t be here listening to me. No offense to budgeting but it’s so tedious and boring that none of my clients want to stick with it.
That’s why I created The Big Split. It’s a simple plan for your money and it goes like this… As soon as you get paid, split it up and transfer it to your responsibilities FIRST, BEFORE the shitty spending habits klick in and it gets wasted on stupid shit.
If you’re smart enough to know that a budget can help and wise enough to know that you’re not going to stick to one, create a simple plan for your money or feel free to use mine. By the way, the fact that you’re still here means the world to me. Thank you for your time and energy.
Lesson Recap:
If you would like to break out of the paycheck to paycheck cycle, Pay yourself first and taxes last. Stop avoiding your finances and take action. Stop being a slave to credit cards and banks. Create more accountability for your spending. Buy more assets and less liabilities. Remove your financial blocks. Plug your financial leaks and Create a simple plan for your money.
And there you have it.. 9 reasons small business owners and creative professionals trap themselves in the paycheck to paycheck cycle. When you’re ready to dive at a deeper level and take action, check out my full tutorials on YouTube.
Today’s lesson is a tiny fraction of what I share in the Big Split program so if you’d like to transform your finances in 1 week, click here to schedule a free 60 minute call with me.
Thank you for your time and energy. I’ll see you in the next one.
Lucas Z.