Best advice for getting out of the paycheck to paycheck cycle

My little brother just turned 30. He’s stuck in the paycheck to paycheck cycle and sometimes can’t make ends meet. I know part of it is his spending habits and just lack of financial literacy, but he’s also drawn a bit of a crappy hand at life too.

Of course, I want to recommend Tiller to him, but he doesn’t have a computer, and we know the mobile experience isn’t the best.

I’ve got tons of my own experience and advice I can share with him, and a wealth of knowledge from working at Tiller, but I’m curious what others have drawn inspiration from.

Was there a blog, podcast, or book that helped you break the paycheck to paycheck cycle and get a handle on your spending?

When basic life stuff feels chaotic it can be hard to focus or make progress with understanding your money. Trying to get him to write everything down may not be feasible with a busy work schedule and 4 kids either.

I want to teach him to “fish” instead of continually handing him fish, so looking to compile some options for him.

:pray:

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@heather Not a blog, podcast, or book, but rather seeing or reading about the behavior of other individuals who I consider peers in some regard. For me, it was probably reading several articles which targeted people of my same generation, and even more so if the article described the efforts of folks who I consider myself similar to in some way.

This isn’t just me: there’s a Harvard Business Review article by Robert B. Cialdini called “Harnessing the Science of Persuasion.” It’s a short, 7-page read. One of the methods includes appeal to peers and their behavior; another is to have the person make a voluntary commitment which is public and active. I recommend this article. There’s a lot more to personal financial management than just math . . . it’s heavily influenced by psychology as well.

But if the peers around him don’t have healthy financial habits (or just don’t talk about them), maybe a personal financial management on-line community for people like him and in his age group might get him started in the right direction. (I bet that if it weren’t for the Tiller Money Community, there would be a lot fewer annual subscriptions.)

Hope this helps, @heather . I appreciate the advice you provide on Tiller Money Community, and hope this gets him started.

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For me, I found that hearing from others going through the same things as me and how they got out of it. I got a lot of value from listening to the Dave Ramsey podcast, which does just that. In the beginning I found value with his baby steps approach and as I have grown up (in age and financially) they have helped me to get on track and stay there. I don’t do everything he says but his advise is sound for breaking the paycheck to paycheck cycle

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Heather, two tips for him. #1 is to simply begin writing down all of his spending, in a journal. Dont worry about budget or balancing, but to begin to consciously think about what he is spending and where his money is going. Much like people do when they write food down in a journal to analyze their diet. Many times they realize where they are spending money mindlessly or where they can focus moving forward after a few weeks.

Tip #2 is the Book “I WILL TEACH YOU TO BE RICH” by Ramit Sethi. Don’t be swayed by the title, its simply the best personal finance book for young people, and anyone (i read it over and over again). So many practical tips on personal finance, banking, spending, and investing. But he is extremely simple, clear and to the point. The book is worth its weight in Bitcoin. Its about 10 years old, but the book is so relevant today. I recommend this book to anyone, but especially your brother.

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This is probably going to be an unpopular opinion, but if it helps, I wrote my dissertation specifically on the topic of how households gain and lose wealth (using a novel combination of income, spending, and wealth data from the Bureau of Labor Statistics).

Obviously, controlling spending is necessary. Setting a budget and understanding where your money goes is the key to that. However, I found in my research that household wealth outcomes are more related to income and avoiding spending ‘shocks’ (the bad hands you mentioned). Americans have a long tradition of privileging spending as the mechanism to wealth advancement (and again, you can’t argue it’s a bad idea to save money). However, avoiding the much maligned Starbuck’s coffees can only do so much compared to evaluating if there is a realistic opportunity to find a higher income in another field or location. Please understand, I don’t want to be horribly insensitive and say “Why don’t you just earn more money?” without understanding how incredibly difficult that is for anyone. However, if there is something hanging out there … if there is a community nearby with potentially higher wages, or some potential career change into an adjacent field, then I would say that is a priority to consider.

I would also like to clarify that I’m not saying to pay for an advancement in education! The ROI on that is significantly in doubt. If there is a way to gain education or credentials without cost, then it’s a consideration, but getting into loans is hardly a great idea.

I’ve found that family members without much financial literacy are quite scared of investing in the market. I recently helped my mom invest a modest amount of her savings in a zero fee SP500 index fund. It’s happened to do quite well in recent months, and I think it took someone doing the work to get her over the hump of being intimidated (but of course, I am not providing financial advice, I would suggest putting a very small amount in a fund just so he sees how it works).

Finally, I hope you say to your brother not to lose hope! 30 is far from too late for a good wealth outcome.

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This is more of a spreadsheet-type answer, but this seems like a good place to offer that type of solution.

I’ll propose that he look at his spending in terms of three major categories:

  1. fixed expenses (the mortgage, car payments, insurance, any other big-and-difficult to change expenses)
  2. must-haves but controllable (groceries, utilities, etc.)
  3. discretionary (dining out, fun things for the kids to do, fashion clothing)

If he looks at these in terms of a snapshot rather than tracking expenses, (possibly with you, if he doesn’t mind), he may be able to identify where he could make changes.

My impression is that many people often have too-large fixed expenses, so it’s difficult to make ends meet, no matter how hard they try. Others buy a less expensive house and car but tend to ignore the day-to-day.

The right size of house or discretionary spending is subjective. But he could look and see where he’d like to put his energy into controlling expenses (the big stuff or the small things).

I suggest this approach because it’s difficult to manage all aspects of finances daily, especially if you’ve got a demanding job and kids. If he can find one thing to focus on at a time, it could help him move away from the paycheck-to-paycheck mentality.

Also, let him know you’re not trying to save hundreds per month, just trying to save a small amount at the start. After he develops this discipline, he can eliminate or reduce other expenses or just not spend future raises.

Dave Ramsey saved my life! My husband and I made good money and still were paycheck to paycheck - we couldn’t understand where our money was going and why nor what to do about it. I thankfully ran across Dave Ramsey’s book, read it and got to work. I also started listening to his podcast, but I don’t know how helpful that would have been without getting the foundation of his book first. Anyway - changed my life, how we live and our financial freedom we have today. I recommend him to anyone that will listen! :slight_smile:

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I used this exact system when I started budgeting! Not only does it help with saving, but it also works the other way – knowing what I budgeted for discretionary spending meant I didn’t feel bad when I paid for a planned fun expense.

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I’m glad this made sense and glad it worked for you also.

For others who may be following along, an even simpler explanation: when fixed expenses and required expenses are under control, focus on discretionary expenses. For example, if you have $100 extra each month, then save $25 and then spend the $75 on whatever you want, whether it’s eating out, getting coffee, going to a movie, attending a concert, etc. Just don’t spend more than the $75.

So rather than worrying about all your bills, you focus on that one area of your spending.

Keep it simple – when you’re overwhelmed with the borrowing peter to pay paul, living paycheck to paycheck any system will seem too much. Been there, done that.

Ramsey and Crown Ministries both start you off simple – 1) keep a daily record of ALL expenses; 2) find a way to reduce one or more of those daily expenses.

Next steps:
1 - Save – target a month’s expenses
2 - pay down debt using the debt snowball technique
3 - save more to get to 3-6 months emergency fund

I’ve been a Budget Coach with Crown and am getting our church involved with Ramsey. Perhaps your brother could find a local church that has either Crown or Financial Peace to help him out without having to take advice from his big sis.

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I second tip #2. He actually came out with an updated edition for the 10 year release. Highly recommend. Probably the best personal finance book I’ve ever read. Gave me a solid foundation.

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Dave Ramsey has helped us get on track. I came from a lower middle class deep blue collar family (no complaints, I learned a lot from this background) where there wasn’t enough money to know what to do with anyway. Dave Ramsey’s baby steps provide a plan and a foundation to build on, are simple enough to understand, and once you get the ideas learned, can be modified to suit your situation and maturity.

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It’s already been said, but Dave Ramsey for sure. A week or two binging his Youtube videos and I think all the necessary information, sense of perspective, and source of motivation should be imparted.

The other thing, in my opinion, is earning more money. It’s the “less fair” side of the equation – and trust I’m very empathetic to it – but once the spending reduction has leveled off, it’s arguably more useful to put an equal amount of effort into trying to earn more money. It reduces those negative stresses, and provides a little more margin for error and flexibility. Not easy, and obviously still working on that myself :sweat_smile:!

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This is all super advice and helpful anecdotes.

I will definitely pass on the link to this thread (so he can parse it himself) but also a digestible summary and some recommendations.

I’m definitely open to coaching him directly, and will for a time, even if just as an accountability partner, but having some type of structure or resources we can review that have worked for others will be helpful for motivating him I think.

Like, “See it’s not just coming from me. Other people conquer this challenge too.”

@amccauley7983, which book from Dave Ramsey do you recommend? I imagine he has a few?

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The Total Money Makeover is the book to start with. Good luck!

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