How To Stop Living Paycheck To Paycheck
Over 80% of Americans are living paycheck to paycheck, meaning they are using up the entirety of their income before their next payday. This can be a very stressful and vicious cycle and can be very troublesome in the case of an expensive emergency. Although breaking this cycle can be a difficult task, we have compiled a few steps to help break down the process and hopefully lead you on a path to financial (and emotional) freedom.
Assess Your Current Spending Habits
First step is to take a good hard look at where your money is going each month. Are you spending your money on a shopping habit, an overly expensive car, going out to eat every night? Or are you spending your money on rent, gas, and food from the market?
Evaluate Needs Vs. Wants
It is important to look at the things that you want versus the things that you actually need to spend your money on. Now we aren’t saying that you should NEVER treat yourself, but it is important to differentiate between the two and to recognize where that extra money is disappearing to.
Make A Budget To Accommodate Spending Habits
Budgeting is the best way to give yourself an idea of where your next paycheck is going. It is important to be realistic when creating your budget so that you don’t find yourself going over each month. There are a few apps out there that can help break it down for you, but we recommend the Mint app for monitoring daily spending.
Write Down Everything That You Are Paying For
Making a budget isn't the hard part, following through and holding yourself accountable is where it gets tricky. One way to do this is to write down everything that you purchase; every time you get yourself a morning coffee, every time you fill up the car with gas, every time you go out to buy shampoo, conditioner, or even food for the dog. When you write everything down, you become more aware of your spending and give it proper attention. It can be a little tedious, but you’ll thank us in the end!
Cut Back On Spending When Possible
After about a month of budgeting, re-evaluate and see if there are certain things that you can cut back on. Did your initial budget work for you? Do you need more money? Less? Be honest with yourself and if you can cut back a little more, it will in turn lead to more money that you can save.
Set Money Aside Each Month
In your budget, you should also try and set aside money from each paycheck to put into your savings account. Try putting aside 10% (or even 5%) of each paycheck and after a few weeks, you will see your savings start to grow.
Get Out Of Debt
Getting out of debt is very important in general, but it also plays a large part in living paycheck to paycheck. Once you are finally in the clear, you won’t have to put money aside each month to pay off what you already owe and then that extra money can go straight into the bank!
Don’t Rely On Bonuses and Tips To Get By
Many people rely on bonuses, tips, and commission to pay their bills. Instead of factoring that money into your finances, try looking at it as extra money that you can set aside for when you want to make a big purchase.
Extra Side Jobs:
We have talked a lot about “Side Hustles” in the past, but they work! If you have extra time, try looking for gig work in your area to help stack a few extra dollars for when you really need it. Whether it be nannying, or food delivery service, anything extra will help you in the long run.
Living paycheck to paycheck doesn’t have to be the way you live your life. Budgeting can help you pay for the things that you really need, and save you when you get stuck. At Madison Monroe & Associates, we're here to help. If you are struggling financially, reach out today at firstname.lastname@example.org or (877) 346-2797.