How To Stop Living Paycheck To Paycheck Plus Two Best Tools for Saving Money
Living paycheck to paycheck, can lead to constantly struggling to make ends meet. You get your paycheck, you pay your rent, pay your bills, purchase groceries and other necessities and you run out of money again, until the next payday.
According to studies, many people are living paycheck to paycheck. But what if you could escape such situation and start saving money and take control of your finances.
Living paycheck to paycheck may prevent you from getting ahead financially. You may not have enough money to meet emergency needs or save for your retirement. Instead, it can lead to overspending and debt increase.
Also, this type of lifestyle, where you must wait for your next payday, until you can buy anything, can be so stressful and frustrating.
The best way to break the cycle, is to take actions now! Here are 5 ways to help you stop living paycheck to paycheck.
Create A Budget
You’ve probably already heard or read about creating a budget and why it’s important. It’s one of those things that are critical to have, if you really want to start saving money.
Creating a budget and living on a budget are two different things. Anyone can create a budget but following a budget, can be challenging or difficult in the beginning. But then you get used to it, because you’ll start feeling better about your money.
The best thing I like about having a budget, is that it helps you track your spending. Each month you dedicate certain amount for spending, and once you run out of money, you stop spending.
Simply budgeting is a way to control your spending. Once you’re able to control and track your spending, you can focus on saving your money.
“Beware of little expenses; a small leak will sink a great ship.”
— Benjamin Franklin
After you’ve created your budget, you need to cut back on your spending. Start by making a list of necessary and optional expenses. This is the first step to see where you can save money.
Cutting back on spending may need some lifestyle changes. For example; instead of eating out, prepare meals at home. Or if the rent or mortgage is eating chunk of your paycheck, move to a cheaper or smaller place.
Whatever it is, making changes can benefit you, by reducing your monthly expenses.
How you look at your current situation is very important, because it impacts your level of success. To make changes in lives, you need to be positive. If you think you can get out of the debt, you will. If you think, you can still save up some money each month, then you will.
But if you keep telling yourself, that you will never get out of debt, then most likely you won’t. Because that’s what you believe.
To take full charge of your financial circumstances, you need to think positive. You need to be ready to make the changes. You need to be happy that you are going to make changes that will create a better lifestyle for you.
Pay Down Debt
If there are debts that are impacting your budget significantly, then pay those debts first. Make a commitment to get rid of those debts.
Set goals for each debt with a deadline. Make reaching those goals your priority and stay committed. It may take some time to pay off the debt, but eventually you will be at a point where you’ll start to see more money going to your savings.
Simple changes like using only cash for spending, is a step to avoid accumulating more debt. Credit cards are convenient to use, and they are also an easy way to increase the debt if not paid on time.
Think of the Future
This is important, because how you handle your money now can impact your future. If you start saving money now, and make contributions to your retirement accounts, you’ll be able to use that money later.
Set an automated transfer for your bank account. Transfer certain amount each month from your checking account to your savings. Since this is automated, each month money will be going to your savings account without you having to do anything. It’s that easy and convenient.
Best Tools for Saving Money
Using Budget Planner to Pay-Off Bills
Planning is the key. Using a budget planner to manage your expenses or finance, can help you pay-off bills much faster. Everyone wants to be debt-free and to achieve that you need to use a practical tool like budget plan.
Using a budget planner has helped me keep track of my expenses more closely than I ever had before. It shows me how much I spent that month and how much I saved.
When I say a practical tool, I mean a personal budget planner that helps you plan your money and gives you a clear picture of where your money is going. An effective budget planner will also help you manage your day, and your life.
Well you see, to achieve any goal you need to track your progress. Your budget planner will help you with your financial goals, keep you motivated, and keep you on track. As you make progress, you’ll feel more delighted, especially as you pay down your debt.
The best way to pay down your debt is to know everything about your debt. For example, if your goal is pay off your credit card bill, you need to know how much interest you are charged, are there any other fees or charges associated with the balance, payment due date (very critical to avoid late fees). Include all the details in your personal finance plan and this should be done for each debt. Also track the payments made; amount and date.
Prioritize your debt or expenses. There are certain bills that just need to be paid like utility bills, insurance, groceries, rent or mortgage. You need to figure out which bills should be paid first. In other words, which expenses are more important than others.
Budgeting should be done every single month. Monthly budgeting is easier to manage. Get all your bills, receipts, invoices together and enter the amount in your plan. After you got your revenue and your expenses down in your plan, you’ll be able to recognize the areas where you are overspending and help you make decisions where and how to cut back.
The more specific you are with the details (in your plan), the easier it will be for you to track down your money.
When it comes to setting goals, be realistic. Break it down into short-term and long-term goals. Short-term goals will help you stay on top of things. You’ll be able to pay your bills on time, track your progress closely, get motivated as you make each progress and help you make better decisions when it comes to money. Reaching finance goals also mean you are closer to your other personal life goals.
Budget planning is important for financial success. It ensures that you’ll have enough money for things that you need and things that are important to you, like vacation, home renovation, extended education, or new car.
If you are serious about saving money, I highly recommend The Total Money Makeover by Dave Ramsey. The book is very well written with inspiring stories of real people. He has also written The Financial Peace Planner: A Step-by-Step Guide to Restoring Your Family’s Financial Health. This book comes in a workbook format, allowing you to frequently monitor your progress and, most importantly, to face your situation honestly.
Envelope Budget System
Another effective method or tool for managing your monthly expenses is using the envelope budget system. The best part about the envelope system is that it simply works. Why? Since you are only paying for things using cash, once you run out of cash, you cannot spend anymore, so simply there is no overspending.
How Does the Envelope Budget System Works
— When you get paid, (first paycheck of the month), take out cash for different categories of your budget and put that cash in a labeled envelope. For example, you’ve budgeted $100 per month on restaurant/eating out. From your first paycheck, take out $50 and place it in an envelope labeled “restaurant/eating out”. When you get your second paycheck of the month, take out another $50 cash and place in the in the same envelope. Now you have your $100 put aside for restaurant.
— Do the same for all other categories like, entertainment, groceries, fuel/gas, clothing.
— Be strict about how the cash or money placed in the envelopes is used. The money in your “Groceries” envelope should only be used for grocery and nothing else. Say you took $200 cash for grocery shopping and the total comes to $215, take out some of the items from your cart and put them back. Stay within what you’ve budgeted. If your total comes to $195, put the leftover $5 back in that grocery envelope.
— At the end of the month, if there are leftover cash in the envelopes, you can put that in your savings account.
Envelope budget system is a powerful tool to save you from overspending and help you manage your money more closely. You have a better control of how your money is being spent and how much is saved each month to meet your financial goals.
Final thoughts on How to Stop Living Paycheck to Paycheck
There are many other ways you can stop living paycheck to paycheck. Everyone’s situation is different, so a technique that may work for one person, may not work for the other. But it all starts with the basics that we talked about in this post.
You need to get yourself ready to make the lifestyle changes and cut down the spending. You need to sit down and create a budget, so you can track where your money is going.
Take note of the debts, where most of your money is spent and set goals to get rid of those soon. This will help you save more money, once those debts are paid off. If you want to be happy in future and not worry about money, then start contributing money to your retirement accounts. Your future will be so much better, and you’ll be glad that you decided to stop living paycheck to paycheck.
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