How to Break the Cycle of Living Paycheck-to-Paycheck
Are you always finding that you’re running short on cash no matter how much you try? If you’re living from paycheck to paycheck, know that it’s not an uncommon scenario. More than half of all Americans live this way. When your bank account is empty, the feeling that you’re broke and going nowhere can be devastating.
The good news is that it doesn’t have to be this way. Understanding why you’re in this situation and finding the solution is all about knowing. All you need to do is improve how you manage your money. You’ll need time to build that financial security and stability, but it is possible. For now, let’s look at why many people feel that they’re always broke.
Uncontrollable Spending
If you always spend money right away, it can be hard to track the cause of why you’re living paycheck after paycheck. You may have gotten used to a lifestyle where you always need to buy the latest gadget or purchase the newest things for your hobby. There are so many things to spend money on that it can be hard to control that spending. However, you need to do it if you want to find financial stability.
It may not even be you who’s eating up most of the budget, but your spouse. If you are sharing funds or have access to the money, you both need to understand how spending affects your accounts. Stop buying anything and everything that looks interesting. Even if a good portion of your budget goes to needs, many still go to wants without knowing.
The first thing you need to do is examine your current spending. The best way to do that is to create a budget. List down every essential and nonessential cost you have to understand where your money goes. From there, you can make adjustments and begin saving money. For example, you can cut online purchases in half or lessen food deliveries to your home.
Budgets will allow you to set spending limits. For example, if you only have 30% of the total budget allotted for entertainment, you have to work with that. It will teach you to live within your means and see where you may be overspending.
For those that may have trouble getting this started in the first place, you may want to seek out a financial professional. Many planners specialize in creating budgets or plans that help you reach your goals. Maybe you want to save for retirement or a child’s future education. They can help allot your money to reach your goals when the time comes.
The truth is that many people don’t have the knowledge required to help free themselves of uncontrollable spending. The insight of someone who understands can help you reach your goals. Don’t be afraid to ask for help, even if it is only for setting budgets.
Fixed Expenses Are Eating Up Your Income
Recurring expenses eat up most of your income. You pay rent, taxes, monthly bills, and other subscriptions. However, the issue is when these expenses may be too large for what you get. It means you are essentially living beyond your means, making it impossible to set yourself up financially.
The first thing you need to do is to look at each of these fixed costs objectively. You can list them and include things like:
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Gym subscriptions
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Entertainment subscriptions
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Car payments
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Rent
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Phone bill
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Electricity
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Water
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Internet
You’ll notice that a portion of your monthly expenses isn’t needed. You can begin cutting off payments that you no longer use. Why keep paying for cable if you can watch everything online? Maybe you can cut off the gym membership and find a routine at home?
If you cut out the optional expenses and still feel like it’s eating up too much, consider the items taking up the most of your income. Are the car payments worth it? Do you need to move to a smaller home?
Also, think about how you can lower your bills. Apply practices that lessen your use of electricity or save water. Maybe you want to switch to solar or ask the services if they have any discounts or promotions available.
Unorganized Finances
You may have trouble getting a hold of your finances because you don’t know when it’s coming and going. You forget that there’s a bill payment due this month and incur late fees. Your automatic payments are being withdrawn from your bank automatically, making you forget. These small things can lead to bounced checks, over drafting, and other fees you don’t need to pay. Tracking these things doesn’t have to be challenging.
Modern technology helps us track these things faster. There are now mobile apps, so you understand when money goes and comes in. You can set up notifications and know when you have to make bill payments. Even your bank should have an app to help you organize, or you can get a dedicated budget app.
Organizing goes hand in hand with budgeting. You can set up alerts to know if you’re going below your account’s maintaining balance. You avoid the fees, and suddenly you’re freeing up more money in your account each month.
A Borrowing Mindset
Credit card debt accounts for the majority of personal debt among most Americans. Today’s system makes it easy to borrow money when you want to buy something. Don’t have the money to buy the thing you want? You can always put it on your credit card and pay later.
You also see how common buy now and pay later schemes have become. You can purchase something and settle the bill within three to six months with no additional interest. The secret here is that they’re already making moves to make you commit your money even if you don’t have it yet.
A borrowing mindset can lead you deeper into debt. For example, you commit your money and then experience a medical emergency. Now, you don’t have the extra to put to a need leading you to borrow more. It can spiral out of control and make it challenging for you to catch up.
If you find that you’re always using your credit card and running out of money, it’s the usual outcome. You’re paying more for the convenience when borrowing money using a credit card. There are interest rates, convenience fees, and other charges on it.
The secret is to stop using credit and focus on eliminating any outstanding debt. Don’t spend money on items if you cannot afford them yet. Today’s society focuses on new things, and people develop a fear of missing out. Once you take a step back, you can find how you don’t have to spend every time there’s something new.
Begin dedicating part of your monthly income to paying that debt. The lower you get, the less interest you’ll need to pay. As you tackle each debt, you’ll free up more of your income, leading you closer to financial stability.
A Lack of Income Sources
Another reason you may be having trouble getting the money needed is that your current income source isn’t enough. It does not matter if you’ve dedicated yourself to your job for five to ten years. If it’s not enough for your needs, then you need to figure out how you can change that. Many people find the harsh truth that living costs can quickly outpace their capacity to earn income.
How do you get past this? Consider how you can fit in another income stream with your current circumstances. People look for side hustles and alternative jobs to help them make the most of their hours. If you don’t have the time, you may want to look for opportunities that won’t require most of your time. Some examples include:
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Selling online
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Renting property or cars
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Royalties
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Automated online businesses
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Dividends and stock returns
You’ll need to brainstorm and see what ideas may be possible for you. You may also want to try your hand at asking for a pay raise at work. See what you need to get a promotion, or maybe you can see offers other companies provide for similar work. These can be a way to boost your income fast.
Take Time to Learn
While many are guilty of the faults above, there is always an opportunity for change. If you need help with money, you can begin building wealth by working on yourself. Take time to learn, read, and educate yourselves on how others can lift themselves from financial straits. Like anything, finances is a skill you need to build.
While you’re doing that, stay motivated and envision yourself in a position to succeed. It all starts with a small action and your next paycheck. Don’t let your current circumstances prevent you from reaching a more stable life. Take care of your problems from the roots, and you will flourish.
