Wednesday, September 15, 2010

Living Paycheck to Paycheck

When we think about our futures as USC graduates we think of BMW’s, big mansions and BIG fat paychecks. Since we are hotshots out of college, everyone and everything is at our disposal, because we just spent the last four years of our lives at a prestigious four year university. What we do not think of, however is how at risk we are of living paycheck to paycheck...

I feel I have authority to talk about this because I have experienced it first-hand. Coming across even a small amount of money makes people feel powerful, and there’s a burning itch to spend it. I can attest to the adjustments in pay, with the adjustments in purchasing power. My most recent job working at AT&T paid me more than any job I had ever had before. I will admit to some purchases that as I look back on, I regret. To be honest, it’s hard to say where my money went, because small purchases add up, and before you know it, your paycheck is gone. I stand back, kinda pissed and look around my room searching for what I have to show for a summer long of spending. I think I’ll be searching for a long time. So I’ll give up, but to answer truthfully, I have nothing to show for it.

This topic intrigued me when a friend told me about her internship at Merrill Lynch. The financial advisor she works for said that many college students who make tons of money of out of college, usually have spending habits that eventually lead to the paycheck to paycheck lifestyle. It’s very easy to adapt to making money, and of course people want to show off the fact they can purchase the latest trends.  Making more means spending more.  Hey...if we're making $100,000/year, we have to have the house, car and clothes to show for it.  Pretty soon, the bank account dwindles and we find ourselves waiting for next week's pay.

Even if one does graduate from USC, making $60,000/year, studies indicate that it takes them only a few weeks to adjust to that pay bracket. After adjusting to the money(which I presume isn't too hard), their lifestyles also change and they begin to adapt to the new wages. This is undoubtedly tied to the virtually 0% savings rate in the U.S. Many Americans are just making so much money, they don’t know what to do with it. So they spend it.  The saying that the extra cash is burning a hole in your pocket, seems to have a literal meaning nowadays.

An article in CNN stated that nearly ½ of all Americans live paycheck to paycheck. A huge reason is that people go over their budgets and indulge in small purchases that really add up. They go out to eat and slowly but surely their bank accounts dwindle. I can relate to this because at the moment of purchase, you’re not really deducting that amount in your head because it’s just easier not to and to enjoy the instant gratification of the delicious cheeseburger you are about to enjoy.

Also a part of this obsession with eating, oftentimes it’s just convenient to grab a quick bite at a fast food chain. Since we are always on the go and balancing hectic schedules, we don’t realize just how much we spend on food. There’s also the socializing aspect where we spend small sums of money (that adds up quickly) when we go out to eat with friends. To sum this all up, no matter how secure in our careers we may be, we should always be mindful and try not to let spending habits go in over our head.

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