Personal Finance

How You Can Quit Living Paycheck to Paycheck

Let’s be honest, living paycheck to paycheck isn’t much fun. You may be stuck in this financial rut for reasons beyond your control or you may just need some smart advice on how to manage your money with an eye on frugality. If you’re one of the millions of Americans who are struggling to save a little while working hard to make ends meet, then we have some tips that can help you change your long-term outlook towards your wealth (or lack thereof).

When we say “living paycheck to paycheck,” it means that you are living off the entirety of your income on a routine basis, sometimes barely able to pay bills on time and short on available cash. Despite making a decent income wage, some people are still unable to put anything away to start saving for their retirement and this can prove to be a significant detriment as they get older.

This is fine when you’re in your 20s, maybe even your 30s, but there comes a time when you need to start planning for the future. So what’s the solution? How do you stop living paycheck to paycheck and start squirreling away some extra dough for the future? We have some helpful tips to get you on the road to fiscal improvement.

Acknowledge the Issue

Like any negative habitual behavior, you need to admit there’s a problem before you can fix it. In order to realize the error of your financial ways, you have to understand the severity of the hole you’re digging for yourself. If you’re constantly paying bills late and relying on your next paycheck to arrive in order to buy groceries, then there’s an issue. What comes after is figuring out the root cause – are you not making enough money or are you allocating it poorly? Not everybody who is living paycheck to paycheck has a cashflow problem and vice versa.

Figure Out Where the Money Goes

If you’re not making enough money at your job, then there are ways to solve that problem. Whether you pick up a second gig or find a new position that pays more, insufficient income has a few specific remedies to keep you from living paycheck to paycheck. However, if you are bringing home more than enough money to cover your bills, put food on the table, and meet other monthly expenses, than you may have a problem with your spending habits.

The best way to determine just how frivolous you’ve become with your money is to figure out where it goes. Start keeping a ledger or a journal and document every penny you spend. Write it all down, be sure to include the necessities such as rent, utilities, and car payments, along with the daily purchases from the smallest to the biggest. If you put a quarter in a parking meter or buy a fancy blu-ray player, enter it all into your running tab.

Soon enough you’ll start to get an accurate picture of your spending habits. Then you can pinpoint where the problems lie. Don’t forget the money you pay in bank fees and interest on your credit cards, either. That’s still your money being taken from you.

Build a Budget

Now that you have a good sense of where your money is going and when, you can begin to make a budget to help curb your spending. This should include some cutting where possible so you can start to save a little bit of money.

If you find that you’ve been going out to eat 15 out of 30 days in a month, you can reduce those costs by choosing to buy groceries at the supermarket and making more meals at home. Try to cut down on driving your car so you buy gas less frequently. This exercise is all about becoming more frugal with your expenditures.

Find other ways of minimizing your expenses by getting creative. Stop using credit cards with the highest interest rates, call your bank and see if you can get lower rates on any loans you might be paying off. Find other costs to lower such as your monthly car insurance premiums or change your cable TV package to a less expensive one. ¬†You will only be able to determine where to tighten the belt after you’ve tracked your spending habits.

Try Downsizing Your Life

The cable TV package is a good place to look for cutting some costs. But go a few steps further and downsize other areas of your life, too. Maybe that home you’re living in is just too big and you’re paying everything from excessive property taxes to crazy heating and electricity bills to stay there. Why bother?

If you don’t need all of that space then why not put extra money back into your pocket by cutting down on all of those costs, not to mention making a potential profit on the sale of a home that you can no longer really afford. Move into a smaller place, pay off any mortgage you might be carrying and move on. If you’re a renter and living comfortably in your apartment or condo, then look around to see what monthly bills can be reduced in your situation.

Change the Game

Once you start making some serious progress with respect to your income or your current negative spending habits, you may just notice the change in your bank account. Now is the time to start adopting positive spending behaviors such as paying your bills on time and showing more responsibility in your saving habits. You’ve taken great strides to alter your routine; don’t make the same mistakes again.

Refrain from treating yourself to “a little something nice” for a job well done. Put that money away. Start saving for the future and that little something nice will translate into something impressive in the form of a burgeoning nest egg that you can rely on down the line. The bigger your savings, the happier you’ll be that you made the effort to stop living paycheck to paycheck and started taking control of your finances. You won’t even look twice at that unused credit card anymore.

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