Conquering the Paycheck Mentality

 “A ship in the harbor is safe, but that’s not what ships are for.” That quote has been attributed to a few people over the years, including Albert Einstein. Regardless of its originator, if you’ve spent any time on social media you’ve seen a post with this quote, most likely on a background of a ship at sea, possibly being tossed about by a storm.

The underlying point is that we need to take some risks in order to find new worlds, bring back tales of success, and overcome hardship on our way to greatness. Libraries are bursting with tales of rags to riches exploits; so is social media for that matter.

 Research has shown than nearly 75 percent of Americans have considered owning a business of their own. Most working adults have considered the option; that consideration grows as careers stall or take unexpected turns.

 But relatively few people ever make the leap from the corporate hamster wheel to self-sufficiency. The reasons given are legion: high failure rates, lack of funding, no “big idea,” lack of benefits. These are really little more than excuses that cover for the real reason: the paycheck mentality.

 The paycheck mentality is one of the greatest barriers for people to surmount when thinking about taking control of their future. In 2019 (before COVID), Charles Schwab published a study claiming that 59 percent of people were living paycheck to paycheck. This number doesn’t change significantly as one goes up the income ladder; we just spend more.

 The same study explains that 60 percent plan to be wealthy in the future. If you see a disparity in those, you’re paying attention. Do those dreams sound familiar? Steady paycheck, good benefits, solid pension plan, retire with plenty of money to travel.

 Reality Check #1: pension plans went away 50 years ago. You need to put away 30 percent of your pay – starting in your 20s – if you want a nest egg to hold you over in retirement. Two million dollars might sound like a lot, but it likely isn’t enough to pay for your lifestyle for 25 years or more.

 Reality Check #2: a steady paycheck is steady in other ways as well. It sets an upper limit to your earnings potential, unless you change companies. If you’re lucky you’ll get a three percent cost-of-living raise annually, but nothing more. Getting a raise means going somewhere else and starting over.

 Reality Check #3: a steady paycheck won’t fulfill your dreams, and that’s assuming it’s actually steady. What happens when you get laid off? Sure, you can find another job, but it takes months. In the current environment the timeframe stretches from there. If you’re over 50, the timeframe might be…never.

 A recent ProPublica study found that more than half of workers over 50 left jobs involuntarily. The majority give up looking after months or years, take early retirement benefits, and try to scrape by. 

 Sound scary? It should, because it’s real and it’s far more common than we like to admit. And it can be traced back to that need for the steady paycheck.

 A steady paycheck is just that: a small stipend to hold you over until the next one. It won’t help you build wealth, it’s not the path to your dreams, and it’s becoming less and less common.

 Yet the paycheck mentality is alive and well. We somehow believe that if we keep getting that weekly stipend, after enough years we will magically be able to retire and live in comfort. And travel.

 If you really want to accomplish your dreams, running faster on the corporate treadmill won’t get it done. Unless you’re the CEO or a major shareholder, the best you can hope for is a steady paycheck…right up till the day you’re laid off and replaced by someone cheaper. Let’s hope you’re not in your 50s when that happens.

 Long term success means creating your own future. For most people, the best path is business ownership. Is it a risk? Sure – but it’s a manageable risk.

 But wait, you say, "Don't small businesses fail at a significant rate?"

The top five reasons for small business failure:

1.   Starting With Too Much Debt

2.   No Business Plan

3.   Mismanaged Cash Flow

4.   Ineffective Leadership

5.   Failure to Adapt

Each of these is easily mitigated and addressed. Advice is available, much of it for free through local SBA chapters and Score mentors. If you’re interested in learning about business ownership possibilities, there are free options for that as well.

Small businesses are the lifeblood of the U.S. economy: they create two-thirds of net new jobs and drive U.S. innovation and competitiveness. They account for 44 percent of U.S. economic activity. They were started by people with a dream.

Perhaps it's time you took your ship out of the harbor.