How to Break the Paycheck-to-Paycheck Cycle
It can be so frustrating when you have more month than money! Everything is a battle and a challenge, just living day to day. The trick to getting out of that cycle is to make a plan for every single dollar. If you decide where you will spend your money before you receive it, you can make better choices and alleviate some of the stress.
Start With a Budget
Add up all of your income for the month. Next, subtract all your expenses. If you are unsure what those are, you need to do a little investigating. Start by going to your bank statement and pulling 30 days’ worth of spending. Then categorize every purchase. You will have food, eating out, snacks and drinks, gas for your car, and any other category you find.
After you have recorded the entire 30 days, add up each column. Now you know what to put in each expense of your budget. You will want to put your fixed expenses as well. Those are the ones that are the same every month, like rent and car payment. When you subtract all of your expenses from all of your income, do you have a negative number? If you live paycheck-to-paycheck, you probably do.
That means you need to review every line on your budget and determine if what you are spending money on is moving you in a direction you want to go. Sometimes, those small purchases day after day are what keep us from financial security. Is that cup of coffee from the coffee shop making you feel secure or would brewing a cup at home and saving the money make you feel better? Only you can answer that question.
Focus on Your Spending
Then you can find the extra money you need to start saving. Even if you can only save $5 a month, every little bit helps. Having a savings account to fall back on when a disaster strikes will keep you off the paycheck-to-paycheck merry-go-round.
If you are absolutely watching every dollar and still don’t have enough to cover all your necessities, the other option is to add income. There are options other than a part time job (which of course would also help). Think about cleaning a friend’s home twice a month, getting a roommate, or cleaning out that storage shed and having a sale. Brainstorm and come up with an idea that works for you. Think outside the box!
The choice is up to you. You are in control of your situation; you just have to be willing to make the necessary changes and make the hard choices. The good news is, this won’t be forever. As you practice your money management skills and start to master them, you can get out of the paycheck-to-paycheck rut.
Linda Jacob is a Certified Financial Planner® and an Accredited Financial Counselor®. Linda began working in the banking industry in high school and put herself through college. After years of growing assets for her clients, her true purpose in life became clear. She was put on earth to help everyone become successful money managers, get out of debt, and reach their financial goals. When Linda isn’t working, she enjoys cooking, golfing, and reading.