If you’re living paycheck to paycheck, you’re not alone. When you combine the high cost of living and the average consumer’s debt with mediocre pay rates, you’re in for a world of trouble. It’s hard to make ends meet while creating a life that you want to live, but it can be done. Follow this basic advice and stay focused on reaching your goals.
Get Your Budget under Control
The key to breaking out of the paycheck to paycheck cycle is understanding how much money your family is spending. Track your big and small common expenses to see where your money goes and compare that with your income. You need to have more income than expenses, and if you don’t, you’ll need to find ways to regain that balance. Remember to factor in expenses that occur every couple of months, such as car insurance or utility bills in addition to regular shopping. There are plenty of budgeting solutions for tracking expenses, such as a site like Mint.com or even a basic Excel spreadsheet. If you’re married, remember that husband and wife need to be on the same page when it comes to finances.
Cut Your Spending
You can’t get ahead if you’re spending too much. Before you can gain financial freedom, you need to set a budget. Your budget allows you to see where you’re spending money, and you should now look for ways to reduce your expenses. For instance, you might see that you’re spending a lot of money on groceries or fun weekend activities for your kids. Realizing just how much money you spend on these activities can be really eye opening. Cutting your spending doesn’t have to mean going without. You can save money here and there on groceries by purchasing store brand food rather than name brand products or using coupons. You could seek out free activities for the kids rather than spending $50 at a bounce house place. You could also do things like cancel your cable service, share rides with friends, or stop going out so much if you haven’t already done this. By doing things like this, you can easily free up $100 or more from your budget, then use this money toward debt or savings, which is great news.
Eliminate Your Debt
You’ll never stop living paycheck to paycheck if you still have a lot of personal debt on a credit card. Every month you have debt, you’re paying money in interest fees. No matter how much debt you have on your credit cards, you need to make a plan to pay it off. Start by finding ways to lower your interest rates on your cards. Sometimes, creditors will lower the rates if you ask. Alternatively, you can seek out balance transfer offers with low introductory rates or apply for debt consolidation loans. This often means tightening up your purse strings for a while, but it gives you greater financial freedom down the road. When you pay less in other areas, use that money toward your debt.
Improve Your Credit Score
The problem with poor credit is that you end up spending more to borrow money than others because you don’t qualify for the best rates. This is often the case for those who live paycheck to paycheck. High interest rates make it impossible to really get yourself ahead. Fortunately, there are many easy things that you can do to improve your credit. Read our online guide to improving credit if you don’t know where to start. With better credit scores, you’ll get better rates when you need to finance something.
Build Up Savings
It’s just as important to focus on saving money as it is to pay off your debt. If you don’t have savings available to cover your unexpected expenses, it’s easy to fall behind again. This often happens just when you were starting to get ahead. Little things like car repairs, an unexpected bill, or broken appliances can really set you back. That’s why it’s so important to build up an emergency fund. Even if you’re focusing on paying off debt or just getting by, try to put aside $10 a week or so into an emergency savings account. Even a small part of your paycheck is helpful. Eventually, you want to build this account up enough that it could help you survive a job loss or other big financial emergency. You could also think about saving for retirement and your children’s college expenses.
Start a Side Hustle
Most people simply don’t earn enough money at their jobs. If you want to get serious about getting out of debt or building up your savings, you need more money. Starting a “side hustle” is a good way to supplement your income. It basically refers to bringing it a bit of extra money in some way or another. It doesn’t have to be a major business. For instance, you might get a part-time job during the holidays to bring in an extra paycheck. You could also consider offering services like tutoring in the evening, making and selling popular crafts, teaching skills through the local community center. Many people simply earn a bit of extra money by looking around their house for things to sell on Craigslist or at a garage sale. Any of these activities can easily bring in at least a couple of extra hundred dollars each month.
Increase Your Earnings
In addition to your side hustle, it’s smart to look for ways to increase your earnings at your regular job. If you work part-time, you might be able to ask the boss for extra hours. You might look for ways to get a promotion or get up the courage to walk in and say, “I deserve a raise.” If you’re in a position that doesn’t really have any room for advancement, look into switching careers. Your local community college probably has affordable evening programs to help people make this transition. Depending on your current job and your the type of education you receive, you could easily double your income in a few years. The more you can earn, the easier it becomes to make ends meet.
Keep It Up
All of these suggestions are about creating lifestyle habits and a mindset that keeps you out of debt and helps you manage your money. Of course, you need to stick with it for the rest of your life. Even when your income increases, you need to be careful about how you spend your money and stick to your budget. You’ll start to see how nice it is to have cash on hand whenever you want to take a vacation or make a big purchase. Resist the urge to buy more than you can really afford.
It’s possible to get out of the paycheck to paycheck trap if you really want to. Get smart about personal finance with these ideas, follow our basic steps, and you’ll soon be able to do away with living paycheck to paycheck.