5 Easy Ways to Stop Living Paycheck to Paycheck
Do you countdown to payday? You’re not alone. More than three-quarters of workers are living paycheck to paycheck to make ends meet. Paycheck to paycheck living can wear you down financially and emotionally. But, while living paycheck to paycheck may be “normal”, it’s sure not a good feeling or a good situation to be in Our 5 easy ways to stop living paycheck to paycheck will help you get a better grasp on your finances.
Whether you’re 22 and looking ahead to your post-college years of independence or 52 and moving on from past mistakes, there are some crucial steps to take if you want to be confident in and comfortable with the way you manage your finances
It can leave you feeling:
- Anxious or worried about unexpected expenses
- Feeling a tad bit incompetent at managing your money (or life!)
- Embarrassed – especially when you compare yourself to those around you
You may also feel STUCK – stuck in a job you hate, in a living situation that’s less than ideal…maybe even in a relationship, you’d like to break free of.
If any of this sounds familiar, keep reading. I’m going to offer some practical strategies for helping you break free and become MORE confident, MORE competent, and in CHARGE of your financial situation once and for all!
Track Your Spending
The first step to taking control of your finances is to figure out exactly where all your money is going. Many families don’t realize they already have more than enough to cover their bills because their extra cash gets frittered away throughout the month. Your goal is to track down those hidden budget busters and eliminate them.
So, for the next month, keep track of every single penny you spend, from your monthly rent payment to that dollar for a cup of coffee. Jot down your expenses in a notebook or use personal finance software like Mint to keep track of your spending.
Make your list as detailed as possible. This will help you later when you’re looking for expenses to cut. Make sure to include hidden expenses too, like bank fees or the interest you pay on credit card debt.
Simply seeing all your expenses written down in black and white can be a revelation. For instance, you might realize you’ve been blowing nearly $30 a month on ATM fees or $50 a month grabbing a snack at the convenience store on your way home from work. Seeing how much these nickel-and-dime expenses are costing you could be enough to shock you into changing your habits, freeing up cash in your budget at the end of each month.
Automate your savings
Automation is the key to success when it comes to your money. You take yourself and your emotions out of the situation because your bank is doing the work for you. This makes it much more likely that you’ll actually save, rather than spend, that extra money. Decide how much you want to be saving each month, and set up a direct deposit from your paycheck. If that isn’t an option, see if your bank can automatically move money for you every time you get paid. You’ll be pleasantly surprised at how quickly your savings grows this way. Just make sure to forget you have savings so you don’t touch it unless you absolutely need it!
Create a budget
In order to break the paycheck-to-paycheck cycle, you need to set financial priorities, eliminate excessive and unnecessary expenses, and stick to a plan, i.e., a budget. The first step to creating a budget is to identify your net income and compare it to your expenses. Break down your spending into non-discretionary and discretionary expenses.
Mortgage or rent, groceries, utilities, insurance, and transportation are typically non-discretionary. Discretionary expenses include eating out, entertainment, and clothing. Determine how much you can afford to spend in each category, and look for areas where you could cut back. Be realistic. Once you start following a budget you will see how it can boost your financial confidence.
Increase your income
Sometimes, it isn’t enough to trim expenses and pay off debt. You may earn just enough to get by, and despite living simply, you’re still trapped in a cycle of living paycheck to paycheck. The truth is, getting ahead may require more income.
Now, as a freelancer, I can run down a list of side hustles to increase your income. This includes moonlighting as a consultant, cutting lawns, buying and selling online, watching pets, renting out extra space in your home, etc. But I also realize that not everyone has an entrepreneurial spirit. But even if you don’t want to be your own boss, there are ways to build your income.
Part-time jobs, even seasonally, can help people get ahead and become more financially stable. In some cases, people are left living paycheck to paycheck due to a certain set of outstanding bills. If this is the case, supplementing income with a part-time job on the weekends or several evenings a week could provide enough additional financial support to alleviate the debt.
Live below your means
It can become very tempting to buy new clothes or big tickets items like televisions when you see other people enjoying these things. It can be tempting, but you should also think of the ultimate cost in the long run. Will buying clothes that will be out of style next year really be worth that debt that you are getting into? Will the new car be as much fun to drive if you are barely affording to buy gas for the vehicle? The obvious answer is no so consumers should consider this before they go down the road that leads to this type of debt. If you don’t make enough to handle the monthly expense, you should consider cutting some of those frivolous expenses.
Don’t listen to anyone who says living paycheck to paycheck is normal. It’s not, and whoever says that will probably be sad for the rest of their life. Alas, many people have been conditioned to think this way, and it’s this exact thinking that keeps people stuck.
There’s a better way to live, and it starts with trimming your expenses. At this point, it’s not about your wants; you have to focus on your needs and get rid of any unnecessary expenses. What to cut? These extras: Fast food, coffee runs, going out for drinks… the list goes on and on.