Living paycheck to paycheck is a reality for many people and can be a very stressful situation. According to a survey conducted last year in the US, two-thirds of Americans stated that they were living paycheck to paycheck with the pandemic worsening the situation.
With the rising cost of living, it can be tough to keep up with your expenses and stay afloat. At the same time, it is important to make an effort to save money for a rainy day and to keep some of the money you make. With this in mind, it is essential that you have a budget and start to put some measures in place to alleviate your situation. These tips will help you start saving when you are living paycheck to paycheck and give you the tools to change your money life.
Organize Your Finances
If you are living paycheck to paycheck, chances are you need to assess your total financial life. How is your money organized? Do you know where your money is going on a monthly, bi-weekly basis? The first thing you need to do is book a time in your calendar and declare that time as your money time.
If you are married or a part of a couple, come together and go through your finances with a fine teeth comb during this dedicated money time. Look at all your bills, financial statements, credit card bills, pay stubs and understand how much you are paying for your fixed and variable expenses. This will help you to determine your financial situation.
Now in order to save or make any changes to your finances especially when you live paycheck to paycheck, you need to know where you stand. You need to know what your money life looks like and once you come face to face with finances, then you can start taking serious action. Organizing your finances is your first step and most important step in the right direction of saving money when on a tight budget.
Create a Budget That Works for You to Save Money
Creating a budget that works is critical when you are living paycheck to paycheck as it allows you to track your income and expenses so you can understand how your money flows in a given time period. When you have no room in your income to cover all of your expenses, your budget will give you a snapshot of what your key expenses are and what expenses may not be necessary.
To set up a budget that works for you, start by writing down your income and your expenses. Next, start to give every dollar a job – to your expenses, to your essentials (food, health etc.) and to your debt. This exercise will help you to see if there’s any money available to save something and can make you realize where you have a deficit. If you have extra money left over, open a high interest savings account and automate this extra amount to go to that savings account every month. A budget also helps you develop a framework for allocating your money to different categories so you have a structure you can work with every month.
Look for Ways to Cut Expenses
When you do a budget, you will find the expenses that take up the bulk of your cash. This gives you the opportunity to cut expenses that are unnecessary. If you find that you eat out a lot, cut out the takeout and make a shopping list when you go to the grocery store and cook more of your meals. If you are looking to save on food, and when you shop online, use apps like Flipp and Honey to help you find the lowest prices at your local grocery stores and favourite retailers.
Learn to control impulse spending – identify where you may be making impulse buying decisions and make a concerted effort to stop. Drive a different route that avoids the shopping mall or unsubscribe from all the retail site emails. This will cut off the triggers that will make you spend more money.
Now cutting expenses may require you to make some sacrifices which can be a tough experience but you need to think long-term, sometimes making a temporary sacrifice is what you need to do to get to where you want to go.
Speak to a Financial Professional
If you are living paycheck to paycheck because you are drowning in debt whether it’s car payments, a mortgage, credit card bills, or student loans, now is the time for you to reach out to your financial institutions to negotiate better rates. Visit a branch or make a phone call and ask about ways in which you can transfer credit or your debt. You can also ask for lower interest rates and see what they can do for you. Sometimes these institutions can help you consolidate your debt so that you save on interest and makes the debt more manageable. Also, a Financial professional can help you with developing a money management plan and help you to organize your finances.
Increase your Income
There’s a limit to how far you can cut your expenses, in the end you will always have to pay your bills. However, there’s absolutely no limit to how much money you can earn. As a matter of fact, your earning potential is limitless as there are many ways in which you can make extra cash. If you have the time, you can consider a second job where you can get some extra money coming in and save this amount or use it to help pay down debt.
Another way you can earn money is through a side hustle, which has some serious potential to help you make money. To decide on a side hustle, first of all, write down all the things that you are good at. Are you good at teaching people? Then consider becoming a teacher online with VIPKID and make some extra money this way. If you have a special skill or expertise, you can also start a blog where you write about your experiences and grow an audience that can be monetized. If you love to talk and enjoy engaging an audience, then consider becoming a podcaster and start a podcast or start a YouTube channel. With technology now available at our fingertips, there are many opportunities like never before to make money on the side. You can even find things around your home and sell them online on Etsy, Poshmark or Facebook Marketplace.
Conclusion
Living paycheck to paycheck can be a tough place especially in these times with the pandemic wreaking havoc on people’s income and opportunities. However, with these tips you will be in a good position to start saving more money and look for ways to make extra money on the side. Apply these steps and you will be able to make small changes that can improve your finances and put you on track to better your money life.
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Sound off in the comments, how will you be applying these steps to help you save money?
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