Most American's today live from paycheck to paycheck. This simply means that they have only once source of income, their paycheck, that they have to use to pay for bills and expenses, entertainment, gifts, charities, etc. If they run out of money from one paycheck, they have to wait until their other paycheck arrives. Many people are very comfortable living paycheck to paycheck, but to me, relying solely on your paycheck for income is extremely risky.

     Many people live paycheck to paycheck because the only way they know how to make money is by working for it. Unfortuantly, our school system only teaches students one main thing: That you can only make money by having a career. I just graduated from High School in June 2004, and I wasn't taught how to invest in the stock market, how to prepare my taxes, how to make my money grow, not even how to open a checking or savings account! I was taught a few things though, and they were to work for my money, and save most of it in a savings account. While you should save some money, you should also make that money grow by investing it in something.

     I was also taught that my home would be the biggest investment I ever make. Two words for that statement: Complete Bullshit! Your home is a liability! It makes absoultely no income for you, while you pay the mortgage. Your house is a living expense. Sorry to be so blunt, but it is what it is. People who live paycheck to paycheck probably believe that their house is their biggest investment. However, if their paycheck dissapeared, they won't be in their house much longer.

     Also, people who live paycheck to paycheck, are paying a large amount of taxes. They have to pay Federal, State, and FICA taxes. Depending on their income bracket, that can be a huge chunk of change! In school I was taught that you can't legally avoid taxes. That's true if you live paycheck to paycheck, but there are legal ways to not pay any taxes on money you make! If you don't believe me, read my article on Tax-Free Municipal Bonds.

     The last reason why living paycheck to paycheck is so risky is because if you don't work, you don't get a paycheck. I make money while I am sleeping, watching T.V., hanging out with my friends, etc. Even if I died, the assets I created would still be making me money. But you can only get a paycheck if you work. You don't get a paycheck while sleeping. You don't get a paycheck if you suddenly can't work.

     A lot of people say that I am crazy because I do so many different things to make money, and don't really have a career focus. I just discovered how to make my money work for me, instead of working for a paycheck.