Ah, the freeing feeling of payday, when you actually have some money. And that is soon followed by the sinking feeling that you’ve already mentally spent your paycheck on the basics: food, rent, electricity, car, credit card and more. How to get out of the disheartening cycle of living paycheck to paycheck? One of the best ways to combat the situation is to have a healthy savings account to cushion yourself against both surprise and everyday expenses. Another is to realistically evaluate your situation, making choices that will help you defeat the cycle. Below are some ideas to get started.
1. Have a plan.
I am not talking about mentally knowing about how much your bills are and then hoping you have enough money in your bank account to cover them. No, this is a real, written down plan for your money before each month begins. Call it a money plan or (the dirty word) budget, but this is how you get control of your money before it controls you. You can go the old paper and pencil route, set up a spreadsheet or utilitze one of many online tools or apps (everydollar.com and mint.com come to mind). Knowledge is power, and just knowing where your money is going is a huge step in setting yourself up for winning financially.
2. Think beyond your 9-5.
Once you’ve evaluated your financial plan, you may find that your expenses exceed your income or that you have no extra money for the all-important savings cushion. To get there, you may have to look for a side hustle. This is not necessarily a permenant situation, but just something to help break the paycheck to paycheck cycle. Lots of businesses are run by you (Uber, Lyft, Air BnB) or you could sell items on Etsy or Ebay. Even having a yard sale or selling things on Craigslist or local online yardsales can be a huge boost to your savings goals.
3. Look into refinancing options.
Sometimes you can be paying more than you need to in finance charges, whether on student loans, credit cards or car loans. Take a close look at your statements to see if you can refinance to a lower interest rate that will take less out of your pocket each month.
4. Enroll in automatic savings.
Usually offered through your bank, automatic savings are set up in such a way that you can control how much comes out of your checking account each week, pay period or month. This is a relatively painless way of savings, because that extra $25-$50 a week isn’t a huge amount but can end up to be a couple of thousand dollars after one year. If your company has an automatic savings option, consider that as well as making a goal of saving 10% of your income.
5. Step back and evaluate your habits.
Take a good, hard look at your checking account or credit card statements. Where are you spending money on a regular basis that may be out of line? Are there lots of coffee shop charges, restaurant and bar purchases or online shopping orders? It pays (literally) to evaluate your habits and cut back where you see excess.
6. Think about your free time.
Is your free time being spent spending money? Using free time to relax, go to the movies, go out to eat, shop recreationally and enjoy the finer things in life is definitely not a problem. However, if you find yourself constantly spending money in your free time, maybe it’s time to reevaluate. Just about every area of the country has things to enjoy that are free or nearly free, whether it’s taking a hike, visiting a local historical site or watching a movie or your favorite sports team at home on your TV.
7. Reassess your living situation.
Are you living beyond your means? Could you downsize your apartment or get a roommate for a while? Is your car payment out of line for your income? Truly try to take a realistic view of your situation and make a conscious choice to live differently.
Only you can ensure your financial stability, and making thoughtful choices along with a plan can save you from a lot of heartache and help you to live the successful life you deserve.