The Automatic Poorhouse

Posted by Guest Author

This is a guest post written by Amanda Grossman. Amanda writes for Frugal Confessions, a blog at the Houston Chronicle.

Living Paycheck to Paycheck

I live paycheck to paycheck. Throughout the month I negotiate with myself over needs versus wants, pushing certain purchases into the next month’s budget, neglecting car maintenance for the umpteenth month in a row, foregoing that new pair of sneakers I’ve been trying to squeeze into my budget since December.

By the end of the month, my household budget is as tightly rung as a wet washcloth, and the last week is usually a marathon of negligence to make it through until the next pay period.

The Automatic Millionaire

It’s not that I need to live this way—it’s self-inflicted. Each month no sooner does my paycheck get automatically deposited into my checking account then it gets automatically divvied up into the following: student loans, rent/utilities, car insurance, cell phone bill, 401(K), savings, IRA and spillover account.

I am doing everything David Bach penned in The Automatic Millionaire, which leaves me with a meager amount of leftover cash that I use for groceries, gas, one or two date nights, a few chai teas, and any other unexpected expenses that may creep up.

Essentially, I’ve automated my way into the poorhouse, or at least it would seem so on the surface. I haven’t even looked at a $10 bill in over two years because every single penny is spoken for, automatically.

The Motivation

What motivates me to keep living with this paycheck to paycheck mentality is the larger rewards I am going to reap (hopefully, I should say) on some future date. By socking away every last cent I possibly can now, my money should be worth more in the future.

One day, it should even start working for me and reaping a significant, or at least noticeable, amount of compound interest (not likely to be anytime soon with my current online savings account interest rate of 1.49%).

When is the End?

I guess the question I’ve been asking myself lately though is: when is the end? Each morning I wake up, commute to work, put in my 8 hours, commute home, spend some time in a money-sink apartment (especially considering how much time I actually get to spend there in waking hours), and prepare to do it all over again. I get paid, I automate intangible amounts of money that I have never seen nor touched into accounts, and I repeat. I have essentially put myself on a gerbil wheel, and am spinning, spinning, and spinning.

This strategy seems to be quite successful for people wanting to become millionaires, which I have to admit is good motivation in and of itself. But if you’ve ever noticed, many self-made millionaires have never really learned when to stop, or even how to stop.

It’s like an addiction—earning and saving, earning more and saving more, competing with others to increase the size of your bank account, even though you are well beyond the point of needing to care that much. Rather than being short on money, they become short on life: families suffer, relationships suffer, and fun is always pushed to the side.

Am I headed down the same path? Once I reach this millionaire status, will I continue to wear the same clothes for ten years, use coupons for ketchup, and attend museums only on their free days? It’s very possible. I know myself quite well.

Learning to Enjoy Money

I am sure a lot of people have worse financial problems than the possibility of becoming a millionaire one day and not knowing how to fully enjoy your money and life. But this is my problem.

So here’s how I am attempting to deal with it: for the next month, I will put $10 of actual cash into my wallet, and see where I go from there. I might be tempted to stare at it, smell it, and feel its crisp edges the first week.

Hopefully by mid-month, I will do some spontaneous spending, such as stop in and buy a cupcake at the local Sugarbaby’s Cupcake Boutique, or pop into a salon for a quick manicure on the way home from work. Who knows where this $10 will take me, but the thought leaves me slightly excited.

If nothing else, I will remember what a ten dollar bill looks like. Just to prove I am not kidding, I actually had to google who was on the face of the ten dollar bill at the Bureau of Engraving and Printing.

Just in case you needed to be reintroduced as well, it’s Alexander Hamilton, first Secretary of Treasury of the United States. And if you thought it was Benjamin Franklin, he’s on the new 100 dollar bill.






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Comments to The Automatic Poorhouse

  1. Good for you! It is important to remember that money isn’t just an end in itself. It can also be the means of some forms of enjoyment. While money can’t buy happiness, there is nothing wrong with letting it buy you a little extra enjoyment every now and then.

    Miranda

  2. Go nuts, put a $20 in your wallet! That would be some guy named Jackson on that one. ATMs spit those out like crazy.

    Just as most need help spending less, I really believe there are some people that need help spending more. You can’t take the money with you when you die. Like you said, “many self-made millionaires have never really learned when to stop.”

    I totally understand wanting to retire early and being rich down the road…but I think it’s important to enjoy your money in your youth too.

    Carpe diem.

    Howard

  3. We followed that process for many many years. Now at 55 with what we thought was a sizable amount (about $1m) it was cut in half within two months with the economic downturn.

    Oh, well what to do?

    Leo

  4. Bless you! I completely relate to you and you described our situation beautifully…you are (obviously) not alone and your frugality will pay off…you already know that you’re not in debt and you’re not living in denial and fear, which is unfortunately the way so many others live. It matters to have integrity and to live a good life, we just don’t live a live of immediate gratification. It’s delayed. Sigh…

    Gina

  5. I loved your article. I used to be like that … watched every single penny and spent hours on my checkbook if it didn’t tally to the exact penny. After my ex-husband basically ‘stole’ my life savings with one fell swoop… I realized that I needed to develop a healthy balance with spending. I decided that every once in a while, its ok to treat yourself. Thanks for sharing. Helen

    Helen

  6. Hello everyone!

    Thank you for all of your comments–I am the author of this article. I think it’s good for me to keep a more balanced approach to money, and writing this article is my first step.

    Amanda Grossman

  7. better spend it now, obama is going to collapse the market again soon, all that being frugal to save and invest will be down the drain

    http://commons.chron.com/frugal_confessions

  8. I see a lot of people doing this, and while it’s better than simply blowing all your money on junk, I (personally) see a 3rd option which I’m now looking to implement, and that’s the idea of mini-retirements, as promoted by Tim Ferriss of the four hour work week fame.

    Why work for 40 years so you can sit on your ass for the next 20 doing nothing? Why not take a break every 5-10 years and live in another country for a few months? Return to the workforce energised and refreshed?

    The idea was new to me when I read the book (quite recently) and I’m currently looking at where I could go in the next few years for a short sabbatical. It may not be optimised for the wealthiest retirement, but I believe I can get more out of life with this strategy!

    MassiveGrowth

  9. I hate living pay check to pay check. I am hoping hanging around smart finance bloggers, I can change.

    Journey

  10. i’m in exactly the same position as you. I worry that i’m not enjoying my life now as much as i could/should, and i sometimes wonder, what if i got hit by a car tomrrow, or got diagnosed wtih some terminal illness, would i then kick myself for deferring so much for the future? Wouldn’t you feel cheated if, as you lay there on the street dying (sorry, but it could happen), you thought of all that cash stsockpiled in your investment accounts and now all of it would go unused, unenjoyed…

    fern

  11. I read a great quote somewhere that I try to live my life by.

    “Live every day like it’s your last…..but save as though it isn’t”

    ted

  12. I think you’re a little insane. I too automate my savings to the point where I’m saving away about 40% of my income. However I still make sure I’m not neglecting the enjoyment of my life currently. I make sure there’s room in the budget for drinks with friends, a few dinners out, or something I want here or there. It’s all about making the most of what you have, not scrimping every penny.

    Billy

  13. Interesting articles.

    For me personally I find that saving more and being conscious of how I spend my money has actually lead me to re-evaluate my priorities and receive more enjoyment now. The less discretionary money I have the more I seek out ways to derive joy out non-consumptive activities. I spend more time with my girlfriend and family, legitimately interacting, more time reading, and not paying money to be distracted from the people and activities that are really important in my life. I also earmark money from my savings for things that I feel are truly worth spending money on. For me, that’s traveling, twice a year. If you’ve found a way to be happy while not spending money (more than your living expenses) I think you’re ahead of the game, not behind it.

    Tom

  14. This is the idea that I have had trouble toying with in the past. Is the self inflicted financial stress worthwhile? By the time you become a millionaire you will have long since decided that you need to have five million or even ten. There can be no limit to the amount of money you want to acquire. Once you get close to your million it will not seem like so much. I don’t doubt that you are being financially responsible, it is important to be able to find a way to balance living a more rewarding life, with a few more treats for yourself, and a financially responsible one.

    @networthcanada.org


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