Living paycheck to paycheck is the opposite of secure. You never know when an unexpected expense will tap into the money you intended to use for rent, groceries, or bills. You want to save, but no matter how hard you try, there’s never any extra money to save for emergencies, debt repayment, or even that family vacation you’d like to take. Even positive events, like anniversaries or birthday celebrations, can be financially stressful when you’re living paycheck to paycheck.
When it comes to your personal finances, some things really are beyond your control. At the same time, though, there are practical things a lot of us can do to transition away from paycheck-to-paycheck living and into a safer place with money set aside for our needs — and maybe some of our wants.
Want to stop living paycheck to paycheck? Here are some steps to consider:
1. Take an honest look at your spending habits. Maybe you haven’t thought about how much those coffee runs add up each month or how much of your monthly budget is devoted to cable TV or restaurant dinners. Take the time to conduct a detailed financial audit, and include all of your purchases: gasoline, oil changes, pet food, baby-sitters, groceries, toiletries – put down everything.
2. Draw up a realistic budget plan. Once you’ve completed your financial audit, it’s time write down your new spending and savings goals. Set objectives that you can realistically meet. Look for areas that can be trimmed, from an unused gym membership to a too-high smartphone bill. And don’t forget to include savings in your new budget: Choose an amount to set aside each month for savings. But remember to be realistic: Pick an amount that you really can manage. Otherwise, you won’t stick to it.
3. Make a plan for your savings. As you trim your spending and start to set money aside, your first priority should be creating an emergency fund that you can draw upon when an unplanned expense – such as medical bills, car repairs, or some other emergency — comes up. Once you’ve got a solid emergency fund, you can look at other ways to improve your financial situation, like reducing your debt.
4. Leave the credit cards at home. If you have credit cards, leave them at home – especially if you’ve had problems with debt or impulse purchases. Repaying high-interest debt makes it even harder to stop the paycheck-to-paycheck cycle.
5. Pay bills as soon as they arrive. Living paycheck to paycheck can often mean that you don’t have the money to pay bills when they come in – and sometimes, this means paying late fees. As you gain financial stability, make it a habit to pay bills as soon as they arrive so you can avoid paying unnecessary, budget-draining late fees.
6. Get creative with social activities. It is possible to enjoy life without spending lots of money on restaurants, movie nights, and concert tickets. Do an online search for free and low-cost activities in your community. You’ll probably find concerts, festivals, parks, and museums that you can enjoy without blowing the budget. Cook more at home and enjoy that time with friends or family. Take this approach, and you just might have some money in place for an occasional splurge.
7. Get support from those close to you. Cutting back on spending is like going on a diet. It’s a big adjustment, and it will help if you seek help from your spouse and/or family. Ask them not to tempt you with shopping outings and other activates that will tempt you to blow your budget. You might even want to consider recruiting a “money buddy” you can turn to for sharing your challenges, frustrations, and temptations.
These steps won’t necessarily be easy, and it probably will take some time to build up your financial security. But you will find that getting out of that perpetual financial crisis mode is more than worth the effort.