Here are few simple ways on how to stop living paycheck to paycheck.
Change Your Mindset About Money
Let me be honest with you, if you don’t change how you act and respond to money, you’re never going to get a grasp of your finances. You’ll find yourself spending more than you have and begging for payday to come. And if you never have enough money to cover even the basics, such as rent and utilities, how are you going to have enough to live your best life?
Our upbringings had a lot to do with how we view money as adults, no matter if we admit this to ourselves or not. If you grew up in a household of spenders, you’re going to view money differently than someone who grew up with savers. That’s just a fact. Also, our parents are our first teachers so we may find we mimic their actions when it comes to how we handle money.
Assess Your Financial Situation
Be honest with yourself and admit you have a problem. Don’t think you have a problem? Well, let the figures do the talking. It’s easy to lose track of your spending, so for an entire month write down every place you spend money. No matter how little or how small write it down. Jotting down your expenses will help you to see where your money goes.
Once you have tracked your expenses for a month, you may be surprised that you are spending a lot of money in areas you didn’t expect. One time I tracked my expenses and realized that most of my money went to girl nights and happy hour with my coworkers. At the time it didn’t seem like a big deal, but when I put the figures down on paper I realized my money was going down the drain.
So, for an entire month, keep a journal with:
- Income from all sources (include money from your side gigs)
- Expenses (expected and unexpected)
- Feelings (this will help you to get a sense of how your emotions control your money)
Create a Budget
Did you know that even millionaires keep a budget? Though they may not use an envelope system or cut coupons, you better believe they know exactly where their money is going each month. A budget helps you to:
- Not spend money you don’t have and
- Save money you do have
Creating and keeping a budget will help you get a hold of your finances and stay on track. With a budget, you’ll be able to track how much money you make and how much you have to spend. If you know what bills are due and for how much, you’ll get a sense of your net worth.
To create a budget, you can read this step-by-step guide and read these tips over at Money Crashers as well as use tools such as Mint (my favorite) and You Need a Budget (I’m currently using their free trial and will give a review of it in a later post).
Cut Out Unnecessary Expenses
If you tracked your expenses for a month and created a budget, you already know there are some areas that need to be cut. Expenses such as eating out seem to be huge budget busters and can be eliminated with little preplanning and creativity.
When I looked over my expenses, I realized I spent a lot of time and money over at Starbucks. As much as I love their coffee, I didn’t need to have it everyday. I purchased a Keurig, started making coffee at home, and literally saved over $75 a month! I also cut out my gym membership, because I never went and preferred walking outdoors anyways. Even at only $20 a month, it was still a waste of money.
Determine what you need to cut so you can have more money to spend each month. Do you really need 200 channels? If not, try cutting out cable and use a digital antenna instead. Afraid you’ll miss your favorite shows? Subscribe to Netflix, Hulu or Amazon Prime Video and you will still save thousands each year.
Build Up Your Emergency Fund
Accidents happen when you least expect them and usually during the worse time possible. You can expect your car to break down right after you’ve paid your car note or to get sick when you don’t have any health insurance. That’s life and the only way to deal with these unfortunate events is to be well prepared with an emergency fund.
Are you prepared? Probably not. According to this Credit Donkey’s survey, half of Americans have less than $500 in their savings. This scary statistic is true for the poor as well as the middle class who are considered to have everything going well for them.
Before you start saving money and paying off debt, you need to at least build up an emergency fund of at least $1000. This fund needs to be in cash where you can get to immediately. When I took Dave Ramsey’s Financial Peace University, I was ready to quit after learning this was Baby Step #1. I then realized that I had to do it because I was one paycheck away from catastrophe.
Once you have your $1000 saved, though, don’t stop there. A sound emergency fund should have enough to cover three to six months of living expenses. All of you know no one’s job is 100% safe.
Stop Trying to Keep up with the Jones’
The Jones family looks good over there with the big house, nice cars, and green grass, but looks can be deceiving. While you’re trying to keep up with them, you didn’t realize that the Jones were in debt up to their eyeballs.
We tend to buy things we can’t afford to impress people we don’t even like. This is how we get ourselves in a lot of trouble and become bogged down with debt. These are the actions that keep us broke and put our financial health at risk.
Yes, your neighbor’s car looks great but did you know they probably leased it because it was the only way they could afford it? Or that the husband had to pick up extra hours at work to pay for it?
There’s no way to know another person’s financial situation and what looks good on the outside may be crumbling on the inside. Make sure to assess your finances first and only make purchases that make sense for you and your household.
Make More Money
Sometimes cutting expenses and eliminating unnecessary debt may not be enough to make ends meet. You may actually need to make more money to stay afloat. You can make more money by getting a second (or better) job or find ways to bring in additional income.
I am not a proponent of getting a second job, simply because in my opinion it takes you away from your family. I mean, if you’re young and single, then, by all means, go for it. However, I think you can find other ways to make money such as selling items you no longer need or completing side gigs that will bring in additional income.
When I side hustled my butt off to make extra money I was then able to get better control over my finances. I tutored students after school, completed surveys, sold items from my home and signed up for cash back programs such as Ebates and Swagbucks. Every bit of extra change helped a lot. I also started blogging, which eventually took the place of my income as an elementary school teacher.
You can to start your own blog by following my step-by-step guide here. Starting a blog is easy and affordable and if you sign up with Bluehost, you can get hosting for as little as $3.95 a month if you use my link here.
Making more money may help you to build an emergency fund and add to your savings, however, if you don’t control your spending you’ll suffer. I know people who are making close to six figures a year and are still living paycheck to paycheck.
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