Living paycheck-to-paycheck means having a necessity to meet all financial obligations with current earnings from one pay cycle to the next. In simple terms, it’s a financial situation in which if you cease to get your next paycheck (like in a job loss), you will have trouble paying your next water, electricity, or even grocery bills. That’s because paycheck survivors usually don’t have enough liquid assets in savings.
This lack of a backup also means that you’re never prepared for an unforeseen event, such as a family or medical emergency. So, before any such emergency hits, and puts you and your family in a troubling situation, start working on your personal finance to stop living paycheck-to-paycheck.
Here are the 5 smart ways you can triumph over the paycheck-to-paycheck cycle:
Identify Your Resource and Expenses: First you need to grab your most recent credit card statements and receipts, bank statements, and even your grocery list, and sum up total expenses. Don’t forget to write down your fuel cost, car and home maintenance cost, and other miscellaneous expenses, etc. The idea is to take account of every penny you spend. Then, compare it with your take home pay, and analyze where you could have saved. If your expenses are more than what you bring home, you need to trim it wherever possible.
Trim Your Non-Essential Expenses: Well, it’s tough to define non-essential expenses. For some, a gym membership or eating out for lunch can be essential expenses; while, for some these are avoidable. You’ll have to choose for yourself. How much liberty you can take here, depends on the gap between your take home pay and your total expenses. It’s only when you have gotten rid of your unnecessary expenses that you can create more disposable income; which you might use in paying off some long-held credit card debt, if you have any.
Set Aside a Portion for Paying Debt: In the third step, you need to pay off your short-term debts as quickly as possible. So, if you’re up for a credit card or a bank overdraft payment, or some bucks that you borrowed from some friend, pay them off with what you have been able to cut out of your regular expenses. If you have many such payments on your plate, try paying off the ones with high-interest rates first. The more debt you would have paid off, the more money you’ll be able to save.
Make Room for Emergency Savings: The closer you are to having paid off your debts, the sooner you can start paying to yourself, i.e., saving your hard-earned money. By building a cushy savings account, you can avoid having to borrow money or use your credit card again; at least not for an emergency or unexpected expense. Set up an automatic savings schedule which can ensure that a certain part of your paycheck is automatically transferred to your savings account on the same day you receive your salary. Or, at least schedule it for transfer before you pay your bills.
Create Additional Income: It’s understandable if after following the above given ideas, you’re still not able to save enough to be able to stop living paycheck-to-paycheck. That may be because you may have some real expenses that you can’t just write off. In that case, you’ll need to create an additional income to get ahead of your paycheck-to-paycheck cycle. No matter what your main job may be, you can still set aside 1-2 hours out of everyday for earning some extra bucks. And frankly, there are many opportunities today! Simply get a part time job, a weekend job, a data entry job, or a job writing online. They will pay you enough that you can save a significant amount every month.
A peaceful life seems to be far away when you are under some kind of a financial pressure. By following the above given 5 steps, you can not only stop living paycheck-to-paycheck, but you can also start adding some additional income to your take home pay.