Last Updated on February 14, 2024 by Lifevif Team and JC Franco
Saving money is hard nowadays, and many people overlook the importance of putting money away for the future and instead simply live paycheck to paycheck. But, what are the risks involved in living in this way? Sure, you have a bit of cash flow to work with each month, but what happens when you need a bit of extra money and simply don’t have any? Today, we’ll consider many of the disadvantages and risks associated with living paycheck to paycheck.
Living paycheck to paycheck can be uncomfortable, to say the least. By being aware of the below-mentioned risks and disadvantages, you can take steps towards financially securing yourself, so that you have better options and chances in your life ahead. If you are wondering if a paycheck to paycheck lifestyle is really all that scary and risky, consider the possible risks and disadvantages that come along with it.
18 reasons why living paycheck to paycheck is disadvantageous:
1. Increased stress levels.
Financial problems lead to stress, and stress can start to negatively impact your physical and mental health. This is a reality, especially for those with absolutely no safety net to fall back on.
2. Not financially prepared for emergencies.
If you are living paycheck to paycheck and suddenly your car breaks down, or your child falls ill, how will you afford to pay for the repair or care that is required? Without having some extra cash flow each month, you’re unprepared for any emergencies that might crop up.
3. Possible mounting credit card debt.
When people find themselves with an unexpected expense and live paycheck to paycheck, they often fall back on their credit cards to cover additional expenses. While it can be handy to have a credit card to assist with this, it simply means that in the months to follow, your credit card installments are going to be higher, which means that the months are going to be tighter financially.
4. Loaning money from family/friends can complicate your relationships.
If you find yourself in a tricky financial spot and have no extra money or savings to use, you might turn to family or friends for a temporary loan. This can help you out, but if you are unable to pay back the loan as quickly as expected, it could cause hard feelings and essentially complicate your interpersonal relationships.
5. No opportunity to spoil yourself or someone else.
If you’re used to just making ends meet each month with your paycheck, you will probably find birthday and celebration months quite difficult to afford. You can probably forget about spoiling yourself or someone else.
6. Depression could set in.
Living on a tight financial budget is doable, but can lead to feelings of bleakness and even depression. You may feel as if you are simply going through the motions and feeling more and more depressed as the days go on. When depression sets in, it’s not great for your emotional or mental health.
7. Social life suffers in the face of a lack of funds.
When you live paycheck to paycheck, there’s probably no extra money to have dinner with friends or go on a weekend away with your family. You might start to feel as if your life becomes all about working from month to month, just to get through the next month.
8. Rarely enough money to cover an unexpected expense.
Sometimes, an extra expense crops up that isn’t an emergency but is costly nonetheless. Think of your child coming home with a permission slip and the cost of a field trip… or concert that is suddenly advertised, and all your friends want you to go. Paycheck to paycheck living doesn’t allow for much life enjoyment or spontaneity.
9. There’s no spare money to save for the future or retirement.
Living paycheck to paycheck leaves no room for saving money for your retirement or future. It might not be a worry while you’re young, but as you get older, it becomes harder to start saving for retirement.
10. Possible damaged credit score.
If you have a particularly difficult financial month, you might find that you are unable to pay a bill or two, and that can only lead to a damaged credit score.
11. If you get retrenched or lose your job, you’re in hot water.
If you live paycheck to paycheck, it means that you aren’t able to carry yourself if you lose your job or get retrenched. Leaving your current job means that you are immediately in financial trouble.
12. Self-esteem and sense of self-worth take a knock.
Working just to get through the month, month after month, can become tiring, and this can take a knock on your self-esteem or sense of self-worth. When in a comfortable financial position, it’s easier to feel good about yourself and feel motivated for life.
13. Increased anxiety to deal with.
When money is tight, there’s general anxiety to deal with. Everything seems to cost money, and when there’s no extra money to pay for luxuries or comforts that aren’t strictly budgeted for, anxiety levels are going to rise.
14. Financial imbalance can cause issues in your relationship/marriage.
If you are living paycheck to paycheck and your partner has to pick up the slack and ends up paying for social obligations and unexpected expenses alone, chances are that feelings of resentment are going to rise. Resentment can be a real relationship killer, and if you don’t get your finances more comfortable as soon as possible, you might find that your relationship experiences issues and may even come to an end.
15. You miss out on potential opportunities.
Unfortunately, opportunities to get ahead in life or make money are reserved for those who have enough money to shell some out in an instant. Living paycheck to paycheck may limit your opportunities greatly. For example, a friend might come across a great investment opportunity that you just cannot afford, or there could be a sale on a brilliant course you want to take that could propel your career, but even at the sale price, you cannot afford it.
16. Inability to leave your current job on a whim if you need to or want to.
If you are living from paycheck to paycheck and suddenly something goes wrong in the workplace, and you want to leave, you don’t really have the financial means to do so. Finding a new job will take time and effort (which is hard when you are working all day anyway), and if you simply leave your current job, you will suffer financially. Having savings or extra cash flow each month will help you to at least afford to live while looking for a new job.
17. Life dissatisfaction sets in.
For some, the idea of living paycheck to paycheck seems like an easy thing to do, until the reality of being unable to afford anything really sets in. Along with that feeling comes general life dissatisfaction. This feeling, if not dealt with, can lead to depression.
18. No room for life improvement.
When living paycheck to paycheck, there’s probably no leeway for looking for a better home, studying to boost your career, or learning a new skill in life. This can become quite a boring and unfulfilling way to live.
In short
If you are grappling with the idea of cutting back on expenses, so that you have more cash flow and can actually save money each month, or living paycheck to paycheck, consider the above-mentioned points before deciding for yourself.
This article was co-authored by our team of in-house and freelance writers, and reviewed by our editors, who share their experiences and knowledge about the "Seven F's of Life".
JC Franco
JC Franco is a New York-based editor for Lifevif. He mainly focuses on content about faith, spirituality, personal growth, finance, and sports. He graduated from Mercyhurst University with a Bachelor’s degree in Business, majoring in Marketing. He is a certified tennis instructor who teaches in the New York City Metropolitan area. In terms of finance, he has passed the Level I exam of the CFA program.