Payday should be just like any other day. If there is a spending decision to be made, the outcome should not be any different based on whether you recently received a paycheck or benefits payment that is not contingent on lack of assets.

A key factor in the path to financial independence is earning much more money than your expenses. The idea of orienting your discretionary purchases and bill payments around when you get paid is antithetical to this principle. The timing of when your paycheck comes should be a mere triviality.

There is a mindset toward spending money as quickly as it comes in. I am not sure where it comes from, but it seems to be clustered in families, social circles, people of certain age brackets or socioeconomic status, et cetera. Platitudes about needing to enjoy life and the certainty of one’s continued destitution are common. There is an idea that one should consume resources quickly, before they are seized, stolen or become worthless. This is evolutionarily and historically appropriate, but inappropriate for modern financial life in developed states like the United States, European Union, and People’s Republic of China.

There is a justified, populist backlash against “experts” chastising the public for their financial situations. For instance, when MarketWatch recently declared that Americans should have twice their annual salary saved by Age 35, the derision on social media was widespread.

Many people are in financially untenable situations through no fault of their own. They are not feckless or even necessarily financially illiterate, and are often work full time or even more than full time. This has been explored in great depth, such as on the Bad With Money podcast. For example, the cost of housing in the United States has become quite high relative to incomes, contributing to penury and inequality.

Many people inherit financially unfortunate circumstances. Although people are lucky to be born in the United States, the inequities of being born into education, wealth, et cetera are profound. It is not fair that some young adults have to work and pay rent at a young age while others get to live rent-free with family. It is not fair that children of financially independent parents enjoy financial security, better nutrition, more time with their parents, and greater opportunity, without justification based in human rights or merit.

Separating what you can change from what you cannot change is important. I think it can be done in a “judgement-free” way, but this is difficult even one evaluating oneself, and nigh impossible for an outsider. One can look at examples of those who have succeeded despite bad situations, although others have not been so fortunate and/or diligent.

Regardless, the mathematics remain the same. To become financially independent, one must somehow increase earnings, save a high proportion of income, and invest it in reliably profitable avenues—most commonly, equities or real estate. Along the way, getting paid has to completely lose its day-to-day, practical significance. For example, if your expenses are $2,500 per month and your net income is $2,700 per month, getting paid matters (assuming you have a low amount of liquid net worth). However, if your net income increases to $5,000 per month, getting paid might continue to matter if your expenses rise to $4,800 per month, but will quickly not matter if you keep your expenses at their prior level, due to accumulation of savings. Toward this end, a useful psychological “trick” is to automatically contribute a large portion of pay to your 401(k) and savings/investing accounts.

There are definitely exceptions to the principle that payday should be just like any other day. For example, if you are a recipient of Supplemental Security Income (SSI), you have to maintain assets of less than $2,000 to continue receiving benefits. Similar means tests apply to other benefits such as subsidized housing. Such recipients are in an ironic situation, as they move away from financial independence by accumulating assets, and consequently should keep their expenses close to their income. For everyone else, having low overhead is key. Hence, payday should be just like any other day.

About Author:

I am an Education Ph.D. candidate (Instructional Design & Technology track) and technology instructor at University of Central Florida, Age 27. I have been keenly interested in personal finance for many years and want to improve the financial knowledge and behavior of others.

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