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An emerging trend in the finance space is the idea of “Early Wage Access”. In this, a company will act as a middle-man between your payroll and your employee’s account. In some cases you have a capped access to the days earned income, like being able to draw $100 a day, other times, if the EWA company is well integrated with your workplace, you may have access to the full days pay.
Now for those of us who can appreciate a regularly scheduled payday, we can call this what it is: A cash advance. Payroll still happens, and if you draw from your pay before it comes, you should be ready for a reduced check. In the end, you’re just borrowing from yourself. That money has to go back to where it came from at some point.
This isn’t to say that if money’s tight, you shouldn’t have access to some emergency cash. A LOT of people are living check-to-check and aren’t even aware of services like this that can help them. There’s a lot of peace of mind in having access to an extra few dollars when you seriously need it.
Unfortunately, there lies an issue that many employers aren’t currently signed up with Early Wage Access solutions. Meaning that any third party that you sign up with likely isn’t free and is actively costing you money every time you make an early draw from your earned wages. This is a huge reason that someone who’s recovering from using credit cards as a crutch and mismanaging their finances on a regular basis should stay far away from this. Using this “earned money” money to feel like you’re getting ahead could bury you the same way interest and late fees did with your credit cards. Most people didn’t expect to land in a mountain of debt from the day that they applied for their first credit card, but, unfortunately, many did.
A lot of good financial habits stem from the very idea that you just don’t get paid every single day. Pacing your spending habits feels much more important when you have a clear goal of making it from one period to the next. Pulling every dollar out from your check a week before you’re supposed to get it simply just lacks discipline.
But I get it, after all, inflation is outpricing all of us out of a life. The bills have no sympathy for your wage. While it can be okay to pull a couple dollars from your next check here and there, so long as it’s done in moderation, there are still other ways to get by. Consider ways of lowering your bills through changes in habits, putting some things off for a time where it’s more affordable. Think about what your bare minimum is for a while, at least until you can save up a month or two’s worth of an emergency fund. And if you’re being crushed by the costs you’ve already put off, consider some kind of debt relief solution. If you can get by without borrowing additional money for a while, you can very much get away with settling debts for lower amounts, and working out lower payments through a third party.
In conclusion, Early Wage Access (EWA) can help in a pinch, providing a lifeline when unexpected expenses arise. However, it’s highly important to understand what little difference there is to this, and a cash advance, where you’re just borrowing from your future salary. While it offers temporary relief, it will lead to a reduced paycheck and the risk of inefficient financial management.
For individuals trying to cultivate good financial habits, relying on EWA should be done with caution and moderation. The key lies in balancing immediate financial needs with long-term financial health, integrating strategies such as budgeting, expense management, and debt relief solutions. Ultimately, fostering disciplined spending habits and pursuing financial literacy can lead to greater financial security and independence.
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