People Who Don’t Do This One Thing With Their Income Live Paycheck To Paycheck No Matter How Much Money They Make
It's a simple thing that literally anyone can do.
Geber86 / Shutterstock No matter how big or small your paycheck is, financial stress can creep up on everyone if you don't have the right habits. Many high earners still find themselves living paycheck to paycheck because they fail to make the right moves with their money.
Financial experts swear by one strategy that separates those who have lasting wealth from those who are just getting by, and it's not cutting out your daily Starbucks coffee. One expert shared that regardless of earnings and before spending one sent of your pay, there's one specific savings move that will set you apart from your peers and ensure financial stability and growth.
Financially successful people use the three-account system so they never live paycheck to paycheck.
Regardless of how much money you make or how good you are at budgeting. Fred Harrington, CEO of Proxy Coupons, said what's most important is the first thing you do when your paycheck hits your bank account.
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He explained, "I see so many young people earning decent money but still living paycheck to paycheck. Income isn’t the main difference between those who build wealth and those who don't. Instead, it’s having a system that works automatically, without willpower or constant decision-making."
Harrington's strategy involves splitting a big portion of the money into three separate accounts: a long-term investing account, a short-term goals account, and an emergency fund. Each one serves a specific purpose, and Fred suggests giving them a clever name to make it more fun and engaging.
This three-account system changes your brain's natural tendencies towards money.
The long-term investing account, or the "Future Me" fund, gets 20% of your salary and is designed to help build your wealth in the long run. Transferring into this account should feel like a bill, something that is non-negotiable and unavoidable. Harrington said, "Most people invest what's left over, but successful people invest first and spend what's left."
The "Life Happens" account, for your short-term goals, receives 15% from your paycheck for any large, upcoming purchases, such as taking a trip, moving, or even a new laptop. This money is being put away with the intention of being spent; however, it should be spent mindfully. Harrington said, "This account prevents you from raiding your long-term savings when you want something specific." The money can be spent guilt-free because your finances are secured in other accounts.
Finally, your "Oh Snap!" emergency fund gets 10% and exists only in case of real emergencies. This is your financial safety net for if you lose your job, your car breaks down, or if you acquire medical bills. "Do not use this for impulse purchases or last-minute holidays," Harrington warned, "It's your financial safety net that lets you sleep peacefully at night."
The remaining 55% of your paycheck can then go towards your regular expenses like rent, groceries, gas, and day-to-day spending.
According to psychology, physically separating the money is far more effective than mentally allocating it.
The reasoning behind this has been backed up by behavioral economics. Harrington explained, "When all your money sits in one account, your brain sees the total and thinks it's all available to spend. Physical separation removes temptation and makes good financial habits automatic."
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Harrington emphasized that the percentages he suggested are only a guideline and can be adjusted based on other factors such as location or living situation. For example, if you live at home, feel free to put more into your long-term investing account. He said, "The key is having the system, not perfect numbers."
Aside from setting your finances up for success, this approach helps your brain shift how it thinks about money. Learning good money strategies at a young age can save you years of stress and anxiety. Harrison confirmed, "When you start your career with solid money habits, you avoid the debt spiral that traps so many people. You're not spending your thirties digging out of credit card holes or your forties panicking about retirement. Financial wellness in your twenties creates a ripple effect that improves every decade that follows."
Kayla Asbach is a writer currently working on her bachelor's degree at the University of Central Florida. She covers relationships, psychology, self-help, pop culture, and human interest topics.
