How Can I Stop Living Paycheck to Paycheck?
December 13, 2019
Living paycheck to paycheck can be incredibly stressful. It means that if a financial emergency were to come up, you could end up finding yourself in a lot of trouble. You need to have a little bit of flexibility so that you can pay your bills without worry. In order to do this, you need to create a personal budget that will help you stop living paycheck to paycheck. The following are a few tips on how to create a personal budget that will help improve your financial situation quickly.
1. Establish a Clear-Cut Financial Goal
Creating a budget doesn’t have to be difficult but sticking to that budget can be a real challenge. This is especially true if you don’t have an actual goal to work towards. With a goal in mind, you’ll be much more likely to stick to a budget. For example, maybe the goal is to save up for a down payment on a house. Maybe it’s to pay off one of your credit cards. Before creating a budget, set a financial goal.
2. Take Account of All of Your Expenses
Write down every single expense that you have within a month. Segment the list by expenses that are set in stone (such as mortgage payments, insurance, utility bills, and the like), expenses that vary (such as groceries and gas for your car), entertainment expenses (such as Internet and streaming subscriptions), and all other expenses (such as going out to eat or shopping for things you don’t need).
3. Determine if Major Changes Need to be Made
If you compare your expenses to your monthly income and you realize that your monthly housing expenses exceed 28 percent of your monthly paycheck, then you may need to make a major change, such as downsizing.
4. Identify Regular Expenses That Can be Trimmed
If you notice monthly payments that are going to non-essentials, such as streaming channels or gym memberships, look at what you can cut. Maybe choose just one or two streaming channels instead of paying for five different ones. Maybe cancel your magazine subscriptions. A lot of these expenses may seem minor, but they all add up-and that money could be used for something better-like your savings.
5. Place a Cap on Non-Essential Spending
If you notice that you’re spending a lot of money going out to eat or out to the movies, then put a cap on how much you can spend on entertainment. Keep track of what you spend on non-essentials. Doing so can help limit your spending, thereby helping you save money.
6. Make Savings Automatic
Instead of telling yourself that you’ll put extra money into savings at the end of every month, make it automatic so that some of your money goes directly to your savings account so you can’t spend it on non-essentials. This way, you don’t lose track of your spending and accidentally end up with no extra money to put into savings.
7. Only Bring One Credit Card Out With You
Paying down credit cards is hard when you keep using them. Only take one credit card with you. You’ll be less likely to use it more than once if you do. If you have multiple credit cards on you, you’ll be more likely to spread your spending around, making it seem like you’re spending less even though you’re actually spending more.
Use these tips on creating a personal budget and stick to it. Doing so can help you get out of the habit of living from paycheck to paycheck and help grant you a little bit more financial freedom. For additional advice on how to improve your financial situation, reach out to us today.
By Jeff Mohlman