Take the CEO Challenge!

The CEO challenge is perfect for those who are in "the loop." The loop is another term for living a paycheck-to-paycheck lifestyle. The loop can affect all income levels and is not just for the underemployed. In fact, living paycheck-to-paycheck is on the rise for high earners. Entering the loop seems harmless at first. You decide to reward yourself with a new television, couch, or car to accommodate your new bonus or pay increase.

You soon realize the payments on your new car, rent, and furniture have all been increased to match your new lifestyle. You may, in fact, have paid more than you can afford and have gotten carried away. Instead of saving your newfound income, you have spent it. You have gotten accustomed to your new lifestyle and cannot leave it. Before you know it, you have entered the loop.

The common mistake with living a paycheck-to-paycheck lifestyle is that eventually, your income will outweigh all the purchases you are making! The reality is, you are purchasing far more expensive items than before, and that means even more significant debt. Once you run up your credit card bill, it can be nearly impossible to get yourself out. However, it can be done with a severe change to your spending. Here's how you do it:

1. Cut

You know you spend too much. The only way to see the seriousness of your spending is to shock the system. You need to start with a financial detox for one month. During this month, you will focus solely on four things:

  1. Living (Mortgage/Rent, Water, Gas, Gym)

  2. Bills (credit card, health, insurance)

  3. Food (grocery store)

  4. Transportation (car, bus, ridesharing)

Get rid of your nights out, your alcohol, your Target trips, and shopping of any kind. See how much money you need to cover your necessary expenses. The goal of this month is to realize what your living expenses in comparison to what you believe your living expenses are.

time = 1 month 

2. Evaluate

You will likely be excited by this challenge, feeling great, and saving money at first. However, after the month, you might get sick of it. You might want to slip back to your old ways but you can't. After a month, you have entered the evaluation period. Here are things to look for:

  1. What are you missing? Is there one event or activity you find yourself always thinking about?

  2. Are there things you thought you would miss but don't?

The goal of the evaluation period is finding out what is important to you. You might realize that your priority list isn't what you thought it was and you can live off a lot less than initially believed. At the end of this period, you will make a list of the top 3 most important things you would like to integrate back into your life. Next is the operating phase. 

time = 1 month

3. Operate

The final month of this challenge you will be integrating things you initially took out and will start operating at your new normal. The operation phase is when you get to notice the overall lifestyle change. You have now lived long enough on a tight budget to see the things you genuinely miss and the things you don't. Things to look for:

  1. How do you feel after integrating something you missed?

  2. Are you excited to have it back or sad that you will be spending more money?

  3. Do you like your new operation?

time = 1 month

For those who are desperate to get back on track, try this three-month challenge. You won't be disappointed.

budgetingElizabeth Thompson