Does the rule-of-thumb to “save 10% of your income” sound like a pipe dream? Does your money run out between paydays? You’re not alone – almost 75% of Americans would find it difficult to cover expenses if their paychecks were delayed by even a week, according to a survey by the American Payroll Association. Everyone’s financial situation is unique, but trying out one of the six cures below might help you bust out of the paycheck-to-paycheck rut.
1.Create A Budget
Yes, we know that you know. Everyone knows that budgets are good and necessary. But, have you actually made one yet? If so, have you stuck to it? Budgets work, and it’s easier than ever to create one with plenty of budgeting apps able to link to your bank and credit card accounts. Take time to go through the last couple of months of bank statements and categorize your expenses. Then, starting with your average expected income, start inputting your expenses. Most people work within a monthly budget, but certain line items – such as groceries, eating out, etc. – are best to break down into weekly allotments. Once you’ve made your budget, look at it – frequently! It’s not helpful to only review your budget at the end of a month. Categorize your expenses daily, if possible, to make sure that you stay on track as the days go by.
2. Cut Certain Expenses
A budget doesn’t work if you have more expenses than income, so you’ll need to cut out expenses. Streaming services or subscription apps add up quickly, so take a hard look at them and eliminate some. Maybe you only have one streaming service going at a time, and you can switch which one you have active every couple of months. Eating out usually eats up a lot of funds – can you cut that back to once a week or less? When you go grocery shopping, make a list and absolutely stick to it. Compare insurance quotes – you may be able to find a better rate that wasn’t available when you first signed up. Call your internet provider and see if you can negotiate a lower monthly rate. Cut cable or satellite services. Do you actually use that gym membership? Could you save money by finding a way to exercise at home?
3. Start An Emergency Fund
Living paycheck to paycheck doesn’t leave anything in the balance for the unexpected medical bills, car repairs, or home repairs. You likely charge those unexpected expenses to a credit card, but now you’ve increased your monthly budget even more. Even if you’ve only got an extra $100, open an emergency savings account. Aim to save $1000 to start with, then gradually increase that amount as you’re able. Ideally, your emergency fund should be full enough to cover a couple of months of expenses if you lose your job or handle the larger unexpected bills. Make sure you stick to the definition of “emergency.” This is not a savings account you should be comfortable withdrawing from.
4. Get A Better Job
There are literally millions of jobs available right now. This is the time to switch employers if you can. Searching for a better job can feel like a full-time job in itself, but won’t it be worth it when you have more extra in your account after handling your monthly expenses? If you love your current job, or it’s simply not feasible to quit, then consider a side hustle. The various grocery or takeout delivery companies are a great way to add some extra income.
5. Live Within Your Means
This can sometimes be a hard reality check, we know. Perhaps you grew up with a higher standard of living than you can afford on your own. Maybe you had dreams of your degree opening up more income than it has. A job loss can quickly make an old lifestyle unfeasible. It’s hard, but if you want to stop living paycheck to paycheck, you’ve got to rein in expenses. Some restaurants just won’t be an option. Maybe you need to move to a less expensive apartment or downsize to a smaller house. You could trade in your luxury vehicle for something used and practical. Could your family operate on a single vehicle, at least until your financial situation changes? Buying clothing and furniture secondhand can save you hundreds of dollars. Maybe you need to reconsider how many extracurriculars your children are enrolled in. These are difficult decisions, but getting control of your finances now will reap untold benefits later.
6. Pay Off Debt
If you’re only paying the minimum monthly payments on credit cards or mortgages, you’re truly losing money. Pick one of your debts and commit to paying a little extra on it each month, even if it’s only $50. Once you knock that one out, don’t use that freed-up income on anything else! Keep using it to work on your debts. For example, let’s say you were spending $200 monthly on Debt A. Once Debt A is paid off, take that $200 and add it to the minimum payment of, say, $100 on Debt B. When Debt B is paid off, then that now $300 can be added to the minimum payment of Debt C. This is called a “debt snowball.” It doesn’t free up income immediately, as you’ll keep allocating the same amount to “debts” in your budget. But, it does lower debts faster. Once they’re gone, you’ll have significant financial freedom!