We have all been there. Waiting anxiously for the next paycheck to pay bills just before they’re due. Watching every dollar because one mistake, accident or unexpected expense meant a bill would go unpaid. It’s stressful. And it prevents personal and financial growth.
But how can you save or get ahead financially while living the paycheck to paycheck life? Use these tips to help break the cycle:
Know your spending and make a budget
You may be thinking, “but I don’t make enough to have a budget”! Yes, you do. Every little bit you shave from your monthly budget brings you a little bit closer to breaking the paycheck to paycheck life cycle.
Start by tracking every dollar you spend daily. Don’t leave out a single purchase or expense, not even a $2 bag of chips. At the end of the month, you will have a clear view of how you spend your money. That will give you the foundation you need to start a budget and slashing unnecessary expenses so you can begin saving and getting ahead financially.
You can start your budget with a simple spreadsheet, or there are many free budget apps that can help.
Slash to save
Once you have a good view of your monthly expenses and budget, start slashing expenses. Cut where you can. It doesn’t need to be a large amount. Small amounts add up over time!
Look at your streaming use. Do you really need 3 streaming subscriptions, or can you get by with one or two?
Look at your food budget. Do you use delivery services frequently? Eat take-out a lot? Try decreasing the frequency of these habits.
Look at your clothing budget. Do you shop online or in-store for clothes monthly? Try reducing the frequency to 3 or 4 times per year.
Just these few items can shave enough off your monthly budget to start your savings nest egg.
Save for the unexpected
Unexpected expenses are budget busters. A flat tire, or broken glasses can put you in a financial hole if you’re living paycheck to paycheck. Setting up an emergency savings account for such expenses will prevent you from having to neglect paying essential bills to meet an emergency obligation – saving you late fees and stress.
Start by putting the extra money you saved from slashing extras from your monthly budget into an interest earning savings account. These accounts offer ease of access to your money, high interest rates and no fees or minimum balance. No amount is too small. Even $10 a week will put you on the right path for breaking the cycle.
Set a savings goal
Think about saving the amount you would need to cover the most common emergencies in your life. How much would a replacement tire cost? How much would you need to replace your glasses? Start small and set a goal to save that amount. After you have reached that first savings goal, set your next one. Think about how much would need to pay one month of your basic bills like electric and internet. After you have reached that second goal, move up and save enough for one month’s rent or mortgage. Keep going until you have enough to cover your living expenses in full for at least 3 months.
Save any windfalls
Did you get a good tax refund? Or maybe a work bonus? Birthday money from your parents? Resist the urge to “treat yourself” and spend that money. Instead, deposit all of those funds into your savings account to get closer to your savings goals.
Once you have saved at least 3 months of full living expenses saved, you have accomplished the first step to breaking the cycle of living paycheck to paycheck.