Living from Paycheck to PaycheckMar 31, 2022
If you live paycheck to paycheck, you know how difficult it can be to get ahead financially. It is a very risky way to live because one unexpected expense can completely derail your budget. This blog post will discuss steps you can take to break the cycle of paycheck-to-paycheck living. We will also provide some tips for building financial security.
Breaking the paycheck-to-paycheck cycle
When someone lives from paycheck to paycheck, it means a person who ultimately expends all of his monthly income to cover monthly expenses without having any extra money left by the end. Living from paycheck to paycheck can be risky because it only takes one instance of a significant life event, such as an accident or illness, to blow your finances, possibly leaving you with more debt. Being unemployed presents a considerable danger to your finances when you spend all of your monthly income. There are several reasons why many people live such a lifestyle.
- The monthly salary is not enough or barely meets the required monthly expenses.
- A person's spending habits may exceed his monthly salary.
- Salary cannot keep up with the rising goods and essential services prices.
It's important to note that living paycheck to paycheck doesn't only apply to low-wage earners. People who earn higher incomes can also live paycheck to paycheck because of their lavish lifestyles and uncontrollable spending. Living such a lifestyle robs one of looking forward to the future due to the absence of financial security. Surviving is the main priority for people who live such a lifestyle and prevents them from exploring other life opportunities. For some people, one can't help that they are forced to live in this kind of situation. However, some people earn a significant income that can cover basic expenses and still have enough for savings. Unfortunately, it doesn't happen because of how they spend their money. There are ways to stop living paycheck to paycheck, and it's time to break the cycle to start living a more financially secure life.
1. Learn to budget your money
The first thing one can do to stop living paycheck to paycheck is to get into the habit of doing a monthly budget. You don't even need to be an expert accountant or a mathematical genius to create a budget. All it takes is some basic math knowledge and planning. Learning how to budget your money is critical for developing awareness of where your money goes and how you spend it. In addition, knowing how much cash goes to each aspect of your life can help you adjust.
When making a budget, it's essential to set aside money to cover your basic expenses per month. These expenses include food, shelter, transportation, and bill payments. Ensure that you have enough to cover these things. Your goal should be to try having some leftover money after covering your monthly expenses.
2. Cut back on unnecessary expenditures
Unnecessary expenditures include leisurely stuff and spending on "wants." You can live without these things, so you should stop spending on them if your goal is to make yourself financially secure. However, it can be challenging to let go of these things, especially when they have become part of your lifestyle. So sacrifices have to be made sometimes. Keep in mind that cutting back on leisurely expenses can be temporary only. It's just that you want to make yourself financially secure first. Once you reach that point, you can gradually add back your leisurely expenses, but you still need to exercise self-control. After all, spending some money for leisure can also take care of your well-being by making you happy and feeling satisfied.
3. Settle your debts
Debts are a huge reason you might find it tough to save money and budget your income. Imagine having a specific portion of your monthly income eaten away by debt payments every time. It's a significant amount of money you could have used for something else. Sometimes, some of our debts should not even be there in the first place had we controlled ourselves from making that extra shiny purchase. Interest can accumulate fast and eat away at your income.
When it comes to settling loans, one should allocate money for their payments monthly so as not to let interests accumulate. Try paying small loans first, then move to bigger ones once you have more money. Also, you can do some preemptive measures by not creating long-term payments beyond your capabilities or swiping your credit card mindlessly. Finally, stop adding more loans when you already have existing debt payments. Using a loan to pay another loan is destructive to your money. Settle one loan first before trying to get another one, and make sure you indeed need that loan and not just another extra expense you don't need.
4. Start saving money
Saving money can be difficult if you are barely making ends meet. However, developing it into a habit is an excellent way to make yourself more financially secure. If you can, try saving an amount of money every time you receive your monthly pay. It doesn't matter how small you keep as long as you can have some savings every month. The money you save will eventually accumulate and can act as an emergency fund. Then, when you have more breathing room, you can start to save more significant amounts. You can use these savings to explore more opportunities and safeguard your life against unexpected situations.
5. Live within your means
We mentioned before that even people who earn high incomes monthly can still suffer from living paycheck to paycheck, and it can mostly be their fault. When one receives a pay raise, there can be a tendency for people to inflate their lifestyles. You can now afford things you couldn't before, such as eating at restaurants, buying expensive gadgets, or taking trips more often. As a result, your monthly income is still not enough to have room for savings and possibly incurring more debt.
When trying to curb the paycheck-to-paycheck lifestyle, one should learn how to live within or below your means. Don't think that just because you are earning high today, it will be like that for the long term. You never know when unemployment can strike or if a sudden life situation occurs. So make sure you have your regular expenses covered, set aside some money for savings, and limit how much you will spend on leisure. In addition, cut back on things you don't often use, like monthly subscriptions to streaming, gaming, or cable TV services. Sometimes, it's not that our salaries are not enough; it's because our lifestyles are beyond what we can afford.
6. Use cash to buy things instead of credit
It's very tempting to blow your budget when you have a credit card that has a high spending limit. However, the ease of use and the ability to make online purchases are tempting. When buying something expensive, try to save money instead and wait until you have enough to buy what you want. It's easier to regulate your spending when you are limited on what you can buy based on the amount of cash you have. Also, think about why you have to make such a big purchase. Is it something you need, or can it be delayed for later? You can always ask yourself why you need to buy something whenever you have to make an extra purchase aside from basic needs. Does it contribute to your goals, or is it just another way to blow your budget?
7. Find additional means of income
If you have tried everything and still find yourself lacking to cover your monthly expenses, you must then look for additional sources of income. It can be a part-time job, a second job, or a little side hustle. It can be tough and tiresome to work multiple hours per day for several jobs but remember that this can only be temporary. Once you find yourself in a more stable financial situation, you can let go of your other gigs since you need to care for your health. You have to muster enough discipline and motivation to break the paycheck cycle so that working one job can cover all your monthly expenses and have enough time to spend for yourself.
Living paycheck to paycheck doesn't have to be a lifestyle.
Many people live from paycheck to paycheck, but sometimes, some factors are within our control that will prevent us from living such a lifestyle. For example, not having any financial security creates a constant fear in our minds that anything can fall at any moment. Therefore, it's better to have peace of mind that you have enough cash for everything you need in life now and in the future.