Living Paycheck to Paycheck is a Thing of the Past: A How-To Guide

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Living paycheck to paycheck is the financial reality that many Americans face. Most people only make just enough to pay their bills and eat. That is no way to live. It’s really interesting that some people make a decent living for themselves, but are still living paycheck to paycheck. This is because they have no clue how to budget, nor how to make their money work for them, instead of the other way around.

How to get started on managing your finances better:

Analyze the Current State of Your Finances.

There is no way you can adjust your current financial status, without knowing exactly what condition you’re in to begin with. Follow these simple steps to see exactly where you are financially:

  1. Write down exactly how much you make each pay period, after taxes.
  2. Write down a full list of all of your bills.
  3. Write down all of your expenses.

Bills are things with due dates and tell you when the money is due for payment. For example, you get bills from the gas company or your cellphone provider. An expense is something that you need, so you purchase it right then and there. For example, gas and groceries would be considered expenses. Add up each category. Knowing these numbers gives you an in-depth look into your finances.

Create a Budget.

Creating a budget may be the most important step to stop living paycheck to paycheck. It is imperative that you know when each and every bill is due, in relation to how often you get paid. The key to budgeting is pretending that you earn less money than you really do. This may be really difficult for some, but it is imperative if you want to make a financial change. There are plenty of ready-made budget charts all over the internet, or you can create your very own. Whichever you choose to start with, it will need to include those categories we summed up: income, bills, and expenses.

The key to good budgeting is simple. Cut those expenses. Eating out, buying clothes, and unnecessary trips to the salon/barbershop have to stop. Learn how to say no, and spend more time alone in the house. Just those three put together could potentially save you over $150 a month. Even if you think you have nowhere to cut back from, you do. You will never get ahead, and change your circumstances, if you do not downsize.

You don’t have to live on this budget for the rest of your life though. If you change jobs, or even get a raise, you can adjust the algorithm you have in place to fit your new needs. This is just a starting point to your financial stability.

Set Realistic Goals.

When becoming more stable financially, it is important to set goals for yourself. These goals should be realistic, short and long term. If you are making $8.25/hour and your goal is to save $600,000 this year. This is not going to happen, unless you win the lottery, or patent a life-altering product that people all over the world will obsess over. Be practical, and be honest with yourself.

Stop Using Your Credit Cards. Pay Them Off.

Credit cards are really great for those who can afford to pay for them. They come in handy for large purchases, and when you can’t afford to pay for something right away. However, they become a nuisance when they are maxed out, or they aren’t paid on time. Having too many maxed out credit cards can negatively impact your credit score. A bad score can prevent you from a lot of things you’d want to do in the future: like own a house, or buying a car. Use less than 30% of your total credit limit each month.

Find Your 2nd Income.

Many Americans have elevated themselves financially by adding on a second income. Some people decided to pick up a part-time job, while some created their own. If you are interested in hair/nails/barbering, attend cosmetology school. Many programs offer financial aid, and once you’re certified you can legally request payment for the services you perform. If you’re really good at graphic design and you do it as just a hobby when you’re bored. You can charge people to make creative content: online portfolios, websites, logos, etc. There is something for everyone, you just have to find your niche.

Emergency Fund, No Matter How Small it Starts Off.

An important part of digging yourself out of a financial hole is to save, save, save. You’re probably thinking, “How am I supposed to save, when I’m already living check to check?” Well, with the expenses you cut out, you do have some more money available. You don’t have to go ahead and open a savings account, but remember you are not supposed to touch this money once it is put away. Say for instance that your goal was to put aside $20 out of every paycheck. You get paid on a bi-weekly basis. There are 52 weeks in the year; therefore, at the end of the year you would have saved $520 at the end of the year. Some may that’s not a lot of money, but it is surely a start. Figure out how much you can afford to put away out of each paycheck, and stick to it. Add it to your budget as a monthly expense.

Takeaway Tips:

  • Budget as if you make less than you really do.
  • It is okay to mess up, fix it and move on.
  • Stick to it.
  • Hold yourself accountable for your actions financially.
  • Set realistic goals.

If you haven’t already started thinking and writing out your total income, bills, and expenses by now, please start now. Your financial freedom, could be just a few months away.

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