My work colleague recently confided in me that she wanted to retire, but couldn’t afford to give up on her salary.
I was a little surprised, because I am actually in the same boat, but because she makes so much more than me, I didn’t think we could be experiencing the same problem. My colleague described our situation as “middle-class poverty” because we earn decent to great salaries, but are still living month to month.
How do I get out of this loop of paycheque-to-paycheque living?
You and your colleague are definitely not alone – many of us (regardless of salary level) live almost completely on our monthly income.
There are many different reasons for this, and we think they’re linked to preconceived notions some of us may hold.
We are going to list eight of these false beliefs and dismantle them, so if you see yourself in any of these, you can banish them from your psyche forever.
Lie: The only way to be financially independent is through earning a huge salary or running your own business.
Truth: The only way to be financially independent is to spend less than you earn and convert a significant portion of your savings to investments. Wealth is decided by expenses, not income (regardless of whether the income is via working at a job or having your own business). This is why entertainers, lottery winners and even heirs to generational wealth with billions at their disposal go bankrupt.
Your action: Focus on your expenses. It is here you will find the source of funds which you should redirect into greater savings and investments – the true way to grow wealth.
Lie: I don’t have extra income to do anything fancy like investing. That is for people who are born rich or lucky enough to have come into money.
Truth: Investors are people who are deliberate and consistent savers. If you earn an income, you have enough to begin saving. Once you persevere with saving, investing will follow.
Your action: Believe that you are in full control of your life, and not eddying about on the currents of circumstance. It is irrelevant whether your last name is Hilton or you won the lottery. There are savings and investment options out there with attainable starting sums.
Lie: I’ll have time to start saving and investing when I’m older. Right now I need to focus on survival.
Truth: It is most beneficial to start saving and investing the younger you are, owing to the mathematical magic of compounding and exponential growth, both of which use the magic bean called time. An early start date and consistent sums give greater benefit than one lump sum later.
Your action: There are over 50 mutual funds offered by local institutions and many have low starting-amount requirements. Your action is to now – this week – invest a portion of your salary into one of these products. This is a doable action. Just commit to it.
Lie: You need to be good with numbers and become an expert to become rich. Everyone else is stuck in this rat race.
Truth: We go through our lives depending on the expertise of others – our doctors, mechanics, lawyers, teachers – and financial professionals are no different. There are people out there whose entire job is to help you turn your savings into investments, which then fund your life goals.
Your action: Avoid the unfortunate consequence of this lie which makes you feel bad about yourself and promotes inaction. Find a financial adviser to help you with your financial goals.
Lie: I am scared to invest because it’s too risky. I won’t have access to my money and will lose ultimate control of it. It’s better to use a bank savings account to protect my future.
Truth: Deciding not to invest is riskier than investing because having immediate access to all of your money via a savings account often works against you, as it dissipates owing to your weak will (constantly dipping into it) and the ravages of inflation. In the end, you still lose control of your money.
Your action: Make sure you or someone you trust has calculated for you that the money you put into your bank savings account is sufficient for your retirement. If you’re in any way uncertain about the strength of this plan to see you through life’s ups and downs, you should examine all alternatives before making a decision that has long-term repercussions.
Lie: I’m going to make all the money I need with my side hustle.
Truth: Saving and investing should not be set in opposition to other ways to earn income. They co-exist. In addition, they are on different rungs of the ladder.
After you make money with your side hustle, you must be sure to invest the surplus. Remember: wealth is decided by expenses, not income.
Your action: Research, consult, strategise. The siren song of entrepreneurship has drowned many a sailor. There is a lot of advice out there that makes “being your own boss” sound easy. In reality, it requires just as much, if not more, research, expertise and risk-taking as financial investments.
Lie: #YOLO #CARPE DIEM
Truth: Fingers crossed, you’re going to live a long life.
“You only live once” and “seize the day” are positive phrases, but too often they are misappropriated as excuses to spend profligately with no plan for the future. Will you be able to seize the day in your 70s as happily as you did in your 30s?
Your action: Don’t disappoint the future you. Focus your expenses on needs and loves, and de-prioritise wants and likes.
Needs are essential items, and loves speak to our passions. Not sure if you can tell the difference? If you miss out on a need or a love, it will have a deleterious effect on the quality of your life in the long term.
Missing out on a want or a like will cause a shallow, short-term complaint.
Lie: I don’t want to concern myself with money, whatever happens, happens. The richer I am, the further away from God.
Truth: Proverbs 22:2 says, “Rich and poor have this in common: The lord is the maker of them all.”
This is a Judaeo-Christian source, but still undoubtedly a true statement across the world’s religions. God looks to the heart of a person, not the contents of their purse (whether meagre or abundant). Money should never be your ultimate goal and if your pursuit of wealth is tied to money as its own god, then yes, this lie is in fact your truth. But that’s nothing to do with the money – that’s on you.
Your action: Rich or poor, you have the responsibility to keep your morals upright and your priorities straight. Always remember that you earn money to trade it up for experiences, capacity, and assets of greater value than money itself.
If you’ve believed or acted on any of these lies, the most important favour you can do for yourself right now is to stop believing it. Stop acting based on it.
You may even find that some of these statements contradict themselves – well, that’s what lies do. Once you recognise that, you’re on your way to the truth.
This article was submitted by the Association of Female Executives of TT (AFETT).
AFETT is a non-profit organisation formed in 2002 with the goal of bringing together professional women and engaging in networking opportunities, training and business development.