Wednesday, April 9, 2014

3 Factors: Understanding The Paycheck-to-paycheck Syndrome

The average white-collar worker dons well-fitted clothes, designer bags and a million-dollar smile.

They look happy on the outside.

But very few are aware of the fact that behind the front that they put up, they deal with the 'white-collar syndrome' on an ongoing basis - and that is, living from paycheck-to-paycheck

One can argue that he/she may not be earning enough to make ends meet. However, for every manual worker who complains about making ends meet, there will be a white-collar worker in the city complaining about the same problem. 

So, if earning more money is viewed as the solution, then why are high income earners also living from paycheck-to-paycheck?

The Lifestyle Ladder

Sure, everyone loves the $10 lattes, eating out at fancy restaurants, the designer clothes and the liberty of 'retail therapy'. In fact, there's nothing wrong with rewarding ourselves with the finer things in life, but if we decide to splurge on ourselves every other day, then be prepared to live from paycheck-to-paycheck.

The white-collar syndrome gets worse when one decides to scale the lifestyle ladder. Over time, the satisfaction gained from the items we have diminishes, and we start to climb the lifestyle ladder in search of novelty - more exclusive brands, more thrill and excitement.

The cold hard truth is that the lifestyle ladder does not have an end, but everyone wants to try it out for themselves.   

False Confidence 

We've seen high flying executives with the european cars and the upscale houses. Most of the time, these purchases are made on borrowed money from the banks and other creditors. The importance and rank of a white-collar worker in the workplace may give him/her a sense of false confidence - believing that the constant stream of paychecks will never end.

With this false confidence in place, they take on loans with exorbitant interest rates, expecting their next paycheck to keep things in balance. However, when the paychecks stop coming, everything falls apart like perfectly lined-up dominoes. 

Credit & The Allure of Minimum Payments

The banks know about our tendency to scale the lifestyle ladder and the false confidence that urge us to take on ambitious purchases.

With easily available loans and credit that are extended to us, we are attracted by the allure of minimum payments.

In short, it's a well-packaged trap.

It is also surprising that very smart and educated individuals fall prey to this trap, while the debt snowball grows in the background.

"For every $1 in principal, the banks expect to earn $2 in interest" - from the independent documentary, Maxed Out.

So, if you want to stop living from paycheck-to-paycheck; reward yourself, but refrain from scaling the lifestyle conscious and know that the constant stream of paychecks may not last forever...and avoid credit or if you're already in debt, never, ever, make the minimum payments on your debts.

It's a trap. Get out.

Share to Facebook Share to Twitter Email This Pin This