Living paycheck to paycheck is not an unusual situation. Modern life is expensive and it’s easy for finances to go into the red because of a string of bad luck. If this is your reality, you need to take steps now to get out of the hole and build a cushion before you run into serious hardships.
It won’t be easy and it will involve some sacrifices. Make the decision to feel the pain of feeling deprived in the short-run to save yourself years of anxiety and uncertainty. Know that you can improve your situation now and build on that to achieve your long-term dreams instead of satisfying short-term desires.
1. The first step is to make a conscious decision to stop living paycheck to paycheck. Give yourself a list of reasons why you want to end the cycle, such as:
- No more having to wait to go grocery shopping until payday.
- No more praying that the fumes in your gas tank will keep you going for one more day.
- No more getting into debt for minor purchases.
- Finally build up an emergency fund.
- Stop having your entire paycheck disappear by the day after payday.
Don’t worry, almost all of us have been there! Think about how good it will feel when payday is just another day of the week and you don’t have to worry about meeting your every day expenses.
2. You need to account for all of your expenses and make a budget. It will be nearly impossible to get on firm financial ground unless you know exactly where your money is going. It’s also very easy to overspend without a plan in place for your money.
Having a budget doesn’t have to feel overly restrictive. In fact, after a couple of months, you will probably start feeling more in control and able to make better decisions about your money. Having a plan and working to meet your goals is one of the most liberating feelings there is.
3. As you go through your expenses, look for ways you can eliminate or cut back on expenses. Be brutal – remember, if you’re living paycheck to paycheck, it’s time to start austerity measures! With some creativity and research you will find that there are viable free or low-cost alternatives to many “necessary” services.
Some things you might consider cutting:
- Cable or Satellite TV – There are many ways to view programming for free.
- High Speed Internet – I consider internet access to be quite important, but you might be able to go down a couple of tiers or switch providers to get a better rate. You might want to also check out the Verizon FiOS promotions or AT&T UVerse promotions that we have gathered.
- Landline or Cell Phone Service – Again, some sort of phone service is a necessity, but do you need both? Can you lose the data plan or get a cheap pre-paid plan?
- Gym Memberships – Exercise is great but getting fit doesn’t have to be expensive.
If you can’t cut a service because you are under contract or have a genuine need, you can still call and find out your options. There might be a cheaper plan that you are eligible for or you could qualify for a short-term pause in services to help you get caught up. You won’t know unless you ask.
4. It’s time to find a way to bring in extra cash and get jump start on building an emergency fund and paying off debt. You probably already work hard, but commit to working a bit harder for a few months. You’ll be glad you did once your money starts outlasting your month.
To get some ideas for earning extra money, check out these CouponShoebox articles:
5. Go on a serious spending diet. Again, this is a financial emergency, so it’s time to pull out all the stops and get things back on track. Do give yourself and other family members a small allowance of money to spend as you choose each month, but other than that, eliminate all non-essential spending and cut groceries down to the bare bones.
6. Take an honest look at what you’re spending on housing and transportation. Run the numbers to see if you can really afford where you live and what you’re driving. If not, it’s time to make some hard decisions.
If this is the case, research all your options and make the decision that is the best choice for you and your family. These two areas usually don’t have a quick and easy fix, but if it’s not sustainable in the long run, it’s better to start looking for a solution now.
7. Be aggressive about getting out of debt. A snowball debt reduction plan works well for most people, but if you prefer to pay the highest interest debt first, do it that way. You’ll be amazed at how much you can pay off in just one year.
One thing to keep in mind: although paying off debt is important, you also want to take steps to avoid future debt. Be sure to put a certain amount aside in savings every month so that you have an emergency fund to deal with unexpected expenses. Look at savings contributions just like any other bill that you have to pay. It is an obligation, not a “maybe”.
8. Think about ways to improve your financial situation in the long run. Is it time to start looking for a higher paying job or pushing for a promotion? Would moving to an area with a lower cost of living help your prospects?
While it’s certainly possible to live paycheck to paycheck on a high income or in a cheap area, the truth is, it’s much more difficult to get out of the cycle when you’re low income or living in a pricey area. It’s worth it to at least consider your options to see if there are steps you can take that will make it easier for you to be more financially comfortable.
Have you broken out of the paycheck to paycheck cycle? What steps did you take to get there?