How to Stop Living Paycheck to Paycheck — RISMedia
Many Americans are caught in a paycheck-to-paycheck lifecycle. If you’re struggling to make ends meet from one payday to the next, you understand the stress and anxiety it can cause. Here are some strategies to stop living paycheck and start investing in an emergency fund, retirement, your kids’ college education and other long-term goals.
Determine where your money is going
The first thing you need to do is figure out what you are spending money on. You might think you know where your money is going, but you might be surprised how much you’re spending on takeout, coffee, entertainment, and other things you really don’t need. These purchases can quickly add up, and they can keep you stuck in the paycheck-to-paycheck trap. For a month, write down everything you buy so you have a clear idea of how you’re currently spending your money.
Create a budget
Write down how much you earn each month (after taxes, health insurance, and other deductions). Then figure out how to allocate that money. You need to make sure you have enough money to pay for essentials, such as housing, utilities, food, and transportation. Once you factor that in, you can figure out how to cover other expenses.
You may need to reduce or even eliminate your expenses in certain areas to cover all your expenses and have money for the future. For example, if you eat out a lot or have coffee every morning on the way to work, cook more often at home and brew your own coffee. It may be less convenient, but it can save you a lot and help get you started on the road to financial security. Look for inexpensive or free forms of entertainment. For example, you can stay home and watch TV or visit a local park instead of going out to dinner and seeing a movie at the theater.
Pay off the debt
If you currently have high-interest credit card debt, that’s probably one of the main reasons you’re living paycheck to paycheck. Decide to pay it back as soon as possible. If you haven’t already, look for a low- or no-interest balance transfer credit card or consider a debt consolidation loan.
As you strive to pay off your debt, don’t pile more debt on top of it. It can mean giving up something you want or postponing a purchase until you can save some money.
Increase your income
If these steps don’t help you reach your goal as quickly as you’d like, you may need to increase your income. You might want to take on a part-time job or a side gig or find a way to earn money through a hobby. Even working a few extra hours a week can make a difference in your total income and help you stop living from paycheck to paycheck.