How Living Paycheck to Paycheck Set Me Free
Welcome to issue #23 of The Davem Dish. Every two weeks I share what actually works in investing based on my 20 years of wins, losses and expensive lessons. You’ll also get my thoughts on solopreneurship and life in general because the same principles apply — keep it simple, stay consistent and focus on what matters.
Most people hear “paycheck to paycheck” and assume it means something is broken. Not enough income, too many bills, no future. And sometimes that’s true. But there’s another version of paycheck to paycheck that looks identical from the outside and means the exact opposite thing on the inside.
Two people can have the same balance in their checking account at the end of the month. One of them spent the month funding a lifestyle. The other spent the month funding a future. The only difference is where the money went before it ever showed up.
I spent seventeen years in that second category, and almost nobody knew.
A few months before I took a buyout and left my 17-year corporate career, a senior manager named Darren set up a call with me out of the blue. He wasn’t my boss and I hadn’t asked him for anything, but he’d heard through the grapevine that I was leaving and he wanted to help. He had connections in the industry and he was genuinely trying to do me a favor. I remember him saying something like, “Take a few weeks off, clear your head, but I’m sure you want to bank the buyout and get back to work soon.” He was just trying to be nice and assumed he was reading the situation correctly. I nodded, said something noncommittal, and let the conversation move on.
What I didn’t tell Darren was that I wasn’t planning to bank the buyout. I was planning to build a coaching and consulting business and figure out what came next without a corporate safety net. I also didn’t tell him that I could have walked away from the company a year earlier if I’d wanted to, or that the decision to leave wasn’t really about the buyout at all. It was about something I’d started doing in 2006 that he had no idea about, because I barely ever talked about it.
The part that most personal finance writers never admit is willpower doesn’t scale. Any time money sat in my checking account, I spent it. Any time I moved it to a savings account that I could still get to in two clicks, I spent that too — usually on a trip or something I’d convinced myself I needed. A new bike, another pair of skis, football tickets. Things I didn’t in fact need at all. If I’d tried to build wealth through sheer discipline, I would have failed the same way almost everyone else fails — quietly, gradually, and without ever really noticing.
The only reason I’m writing this instead of still sitting in a windowless office, creating reports that nobody reads is that I took the decision away from myself in 2006 and then spent the next seventeen years not touching it.
I started contributing to my investment accounts at around 10% of my pre-tax income. It came out before the money ever hit my checking account, which meant I never saw it, never had to decide about it, and never got to feel the small emotional pull of “I could use this for something else this month.” The contribution was invisible to me by design. I lived on what was left, and what was left was always less than I wanted it to be. The last week of the month was often tight. Sometimes I carried a credit card balance for an unexpected expense or a trip I wanted to take. I was not living some monastic life of deprivation — I was living a pretty normal young adult life, just with a smaller paycheck than my pay stub said I had.
The debt got handled differently than most people would expect, and I think this is where a lot of the traditional advice gets the sequencing wrong.
I didn’t try to kill credit card balances with my bi-weekly paychecks, because my paychecks already had a job. Their job was to fund the automation and cover living expenses. The debt got paid down with my annual bonus.
Lump sum bonuses feel like windfalls, and most people blow windfalls because they feel like free money. I used mine to clear whatever had accumulated on the card over the year. The system was simple: recurring income funds the automation, lump-sum income kills the debt. Trying to do both with the same dollars is how most people end up doing neither.
If you don’t have a bonus, find the lump sum somewhere else. A side job, a tax refund, selling something, an extra shift — whatever recurring-plus-lump-sum structure you can build. The key is treating them as psychologically different kinds of money, because they are.
Around 2009, I ramped my savings rate up from 10% toward 20%. I could tell a story about how smart I was for timing the market but that would be a lie. I wasn’t being greedy while others were fearful. I wasn’t backing up the truck because I saw an opportunity. My rent was low at the time, I’d gotten a promotion, and I suddenly had more room in my monthly budget. I bumped the contribution because I could.
In retrospect I was dollar-cost-averaging into the bottom of one of the worst markets in a generation and then riding the long bull market that followed, but none of that was strategy. That was the system catching the bottom while I was just trying to stash a little more because my life had gotten slightly cheaper. The automation didn’t need my market instincts. It just needed me to not turn it off.
Everyone frames “pay yourself first” as a productivity hack or a budgeting trick, something you do because it’s a little more efficient than the alternative. That’s not what it is.
It’s a recognition that willpower is a finite and unreliable resource, and that the version of you who makes good decisions on a Sunday morning while reading an investing article is not the same version of you who’s tired on a Thursday night and wants to book a trip or go out with friends. The system exists to protect the first version of you from the second version of you. That’s the whole game.
Once you see it that way, the question stops being “am I disciplined enough to invest?” and becomes “have I built a structure that doesn’t require me to be disciplined in the first place?”
By the time the buyout conversation came around, I was forty-one years old and had enough money to technically retire. None of my colleagues had a clue. I wasn’t a high earner. I was an individual contributor at a stodgy utility company. I didn’t talk about investing at work. I didn’t brag about winning trades or my growing account balance. From the outside I looked exactly like the person Darren thought I was — a mid-career employee who was about to need help landing softly.
From the inside I was already free and I just hadn’t told anyone yet.
The buyout didn’t make me free. Automated savings and investing did.
What the freedom actually bought me wasn’t sitting on a beach somewhere. It was the ability to say no to the next corporate job, to take time off without panicking, to help build a business from nothing, and eventually to launch Davem Advisors and start teaching this stuff to other people. That’s what was actually compounding underneath the portfolio the whole time. Not just money — optionality. The ability, at some future date I couldn’t have predicted, to make a decision based on what I wanted instead of what I needed.
If you take one thing from this story, don’t take the savings mechanics or the contribution percentages or the bonus rule. This isn’t a tactics guide.
Build something that doesn’t need the Thursday-night version of you to show up. Pay yourself first in an account that’s hard to raid, and then go live your life on what’s left. It will feel tight. That’s the point.
And one day, maybe a decade or two from now, someone at your job is going to pull you aside and try to help you land your next gig. You’re going to realize in the middle of the conversation that you don’t actually need their help.
You just don’t have to tell them yet.
Cheers,
Andrew
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The content provided are personal opinions and presented for educational purposes only, as of the date published or indicated. Davem Advisors LLC is not a bank, licensed securities dealer, broker or investment advisor. Displayed returns are unaudited. Nothing stated constitutes a recommendation or advice as to whether any investment is suitable for a particular investor. You alone are solely responsible for determining whether any investment, strategy or service is appropriate for your objectives. Past performance is no guarantee of future results. Inherent in any investment is the risk of loss.