Are you running out of money before your next paycheck? Are you having trouble paying your bills on time? Do you have to decide which bill you won’t pay when an unexpected expense arises? If this sounds like you, then you are living paycheck to paycheck.
You might wonder how other people that live the same way, manage to do it… Well, there’s a good chance they are struggling just like you are!
You might think that the average person living paycheck to paycheck is the minimum-wage worker, struggling to make ends meet, worried about paying the rent on time… But you would be wrong. A study from the Brookings Institution finds that two-thirds of U.S. households living “hand-to-mouth” are actually middle class. Only about one-third of those just getting by financially are what most would consider poor, with median incomes of about $20,000.
About one-third of all American households (38 million) are living paycheck to paycheck. So how do you break this cycle and stop living paycheck-to-paycheck?
If you do not have a budget, start one now! You must be able to keep an accurate account of how much money you make and where that hard-earned money goes. It is important that you come up with a system that allows you to continually monitor your finances. Having a budget will let you know ahead of time if you have enough money to make it until your next paycheck.
A “general” budget is not going to cut it if you are living paycheck to paycheck. Putting down $400 a month on groceries is not good enough. You need to be able to see what your $400 a month actually purchased. This way you can look for items you can cut back on or find a less expensive alternative.
Track Your Spending / Find the Waste
You will probably be shocked to see where your money actually goes. You must track every dollar you spend. There’s an app for that! There are numerous apps, many free, that will help you track your spending down to the penny. It is important that you track everything. Include all the seemingly inconsequential items like candy bars, bus fares, the random sodas or cups of coffee and bottles of wine or packs of cigarettes. Be sure to categorize all of the items you buy.
At the end of the month, you’ll be able to see where your money is going and if there are any places where you can make some cut-backs… I bet you’ll find a few!
Sure spending can be fun, but are you spending your hard-earned money on things that you could do without? Go through your spending and look for items that do not fit with your new goal of getting out of the paycheck to paycheck cycle. Prioritize your spending into two categories. Needs and Wants. Look at each item that you spend your money on and decide if it is something that you must have (rent, electricity, gas) or is it something that you want (Starbuck’s, Netfix, Cable Premium Sports Package). If you don’t need it, cut it! …or at the very least, reduce the frequency.
Saving, yeah right! Even if it’s $20 a paycheck, you need to start putting money aside. When setting up your budget, you must apportion your income toward you needs first, then put a portion towards savings and reducing your debt. After trimming the fat from your budget, you can use the money you would have spent on that gourmet coffee to reduce your credit card debt!
Reduce Your Debt
The key to controlling your spending and becoming financially responsible, is to rid yourself of unneeded debt. Stop using your credit cards. If you must use a credit card, do not put more on your card than you are able to pay off at the end of the month. Your credit rating will improve as you pay down your credit card debt. A high credit utilization is detrimental to your credit score. Your goal should be to keep your credit utilization at under 30%… ideally under 5%!
Find Extra Income
For many of us, the only way to have extra money at the end of the month is to increase our income. While it is easier said than done, consider a part-time job. Ask for a raise, change your tax withholding so you get more money in your paycheck (of course your refund will be less), make money on the side having a yard sale or by selling unwanted items on eBay.
Living paycheck to paycheck is tough and sometimes you feel like there is just nothing you can do about it… you just don’t have enough money. But if you create a plan and stick to it, you will soon see that you will be able to get beyond the paycheck to paycheck lifestyle!
If you find yourself struggling with debt or would like to find out about becoming debt free, call Debthelper at 800-920-2262, or visit @ www.debthelper.com.