I often hear people complaining about how they do not make enough money even when they live way above what most people would consider the poverty line. Over time most people make more money in their careers as they progress within their companies or in business. The problem is that they also increase their spending in the same ratio or greater. It is not uncommon to find people struggling to balance their monthly finances even when they make a lot of money. In this post we go over how to stop living paycheck to paycheck and finally start enjoying the money we all make in peace.
Have you heard of two spouse families that make six figures but still when the mortgage and car payments are due, they must wait for their paychecks to make the payments? I cringe when I see this because it’s a money management problem that a lot of us have.
It’s not advisable to live this way because it is not sustainable but don’t think that you are on your own on this. Many people struggle with this and this guide goes over some valid suggestions that can help to stop this habit of living paycheck to paycheck.
How to Stop Living Paycheck to Paycheck
Table of Contents
Monitor Spending
Monitoring spending habits means that you are aware of where your money goes. There’s limited spontaneity in spending when trying to achieve financial freedom. Control is important because if we aren’t aware of where our money goes, we cannot create budgets that work. Budgeting for what we spend our money on ensures that not only are we intentionally electing to choose what to spend on, but we also know how much we are spending.
It’s time to seat down and really look at your credit card or bank statement. Look at the things that you spend money on and ask yourself questions like, “Was this worth it?”, “Do I need this?” and “Can I eliminate this expense?” This will lead to potential savings and cut backs that will stop you from living paycheck to paycheck.
Get out of debt
Debt is so expensive and especially debt that is incurred buying things that have no real value. I know the pain on having credit card debt that was accumulated buying things that I don’t even use anymore. These are consumer goods such as designer bags, shoes and expensive things that I really didn’t need.
I have matured over time and have been working towards eliminating debt that has no meaningful value. If you have a car loan for a reasonably priced car that’s totally okay or a mortgage that you are paying off. This type of debt is necessary and it builds wealth. Home ownership is a great thing and a house is an asset that can be leveraged in the future as it also gains value.
Start by paying off debt using the snowball effect. Work on the small stuff and build towards the big stuff. Dig yourself out of the hole and work towards financial freedom.
Save more
Savings are especially important in ensuring that we all have a safety net for times when we cannot work or when things come up that require money immediately. It’s crazy and funny how we all think we are invincible until we are not. Getting sick or getting laid off can happen to anyone at anytime and if we don’t have a safety net to fall on the consequences can be serious.
Start by building an emergency fund. The recommended amount is $1,000 but can be increased. Then work on ensuring that you have saved at least 6 months’ worth of your monthly expenses. This ensures that you not only protect yourself, but you also protect your family’s wellbeing. Don’t be caught unawares and unprepared. Always have some savings set apart.
I often find that when I save intentionally I am more frugal with my money and I avoid the cycle of living paycheck to paycheck. Also, I feel more confident in myself when I save more because I know that I have safeguarded my future.
Along this line, also ensure that you save towards the future with retirement planning. This is important because it ensures that you always have a plan to save even before your money is deposited into your bank account.
Save in a different account
This is an old trick that most people use now. If you don’t have immediate access to money you are able to avoid spending it. Some drastic ideas I have seen for example is a savings account where you don’t have a debit card to withdraw money from. This means that the only way to spend that money would be to move it from the account online or physically. What ends up happening is that it slows down spending because now you must work to get this money.
Unless you had planned on spending it which goes along with controlling spend and budgeting this method ensures that you always have money for a rainy day. Also, it ensures that you spend only what you had planned to spend.
Cut back
If you assess your spending, you will find things that you can cut back on. This may be expenses like cable, phone plans that are too expensive, owning multiple cars that you don’t use and have car payments for, subscriptions that are redundant and that you don’t use. Take a moment and think about things that you pay for that you don’t have to pay for.
Recently I realized I didn’t have to pay to park my car at the train station because street parking is free right outside. Hopefully that doesn’t change but after paying parking for years I could have saved close to $7,200. That’s $60 a day for 10 years. If you find something to cut back on, take that money and send it to your savings account. The short-term savings may not be huge but over time they will make a difference.
Have an accountability partner
Do you have a friend who can keep you in line or spouse? Start working together to get out of the living paycheck to paycheck cycle. Couples that handle their finances together have a closer bond because you are in it together. It is your money so take care of it.
If you don’t have someone or don’t want to involve another person in your finances there are apps out there that will help track spending, budgeting and income. Use these apps to quickly see where you spend your money and opportunities to be more frugal. Many commercial banks now have apps that you can use and will even break out expenses in categories.
If your entertainment expense for example is high perhaps it’s time to cut back on eating out. If you spend a lot on restaurants during the work week, it’s a chance to start cooking your lunches at home and avoid buying lunch. Find these small things that add up over time.
Make more money
There are various ways to make more money. It could be having a garage sale for things you don’t use or selling things online such as clothes, shoes and books. You could even take online surveys which are great ways to make money quickly. Rideshares and delivering food have provided so many people with a chance to make more money.
Another option is to change jobs or ask for a raise. This is subjective because not everyone deserves a raise so ensure that before you take this route that you have done your research. I’ve seen people stay in jobs for too long when they could be making more money. If you are over qualified for your current job start looking for new opportunities that pay more.
Move to a cheaper city
There is an incentive to stay in big cities because you want to be close to everything including your job. Perhaps it is time to consider moving a little further out of the city to get more bank for your buck so to speak. Rent is so much higher in urban cities than in the suburbs. I have friends who pay triple what I pay for houses that are much smaller than what I have. They like the comfort that comes with living in the city with shorter commutes but it comes with a high price tag.
Stop living paycheck to paycheck by moving to a more affordable city. Find roommates if you must stay in expensive cities if this is an option. However, to get more financial freedom you do have to give up something. I personally don’t see the value of paying triple the rent amount to stay in a home you will never own. Invest that money in something else.
