As many people who’ve struggled with money previously will tell you, living paycheck to paycheck is hardly living. It’s stressful. It’s like existing under a cloud of worry.
Fortunately, there are things you can do to improve your situation. These strategies may require changes to your lifestyle and a little bit of homework. But if you stick with it, you can make it easier for yourself in the long run.
Demystify Your Situation with a Budget
When you’re financially strapped, it can be a chore to even look at your incoming and outgoing money. You already know you’re in the hole, so why dig into it? In reality, this can do more harm than good. As GI Joe says, “knowing is half the battle.” And the best way to understand the flow of your finances is to build a budget.
Building a budget might seem tough at first, but it isn’t too difficult. Here’s a quick walk-through:
- Start With Your Take-Home Pay. If you get a routine paycheck, you probably recognize that a portion of your earnings automatically go to taxes, Social Security and the like. This doesn’t have too much effect on your day to day, so ignore it for now. Just figure out your take-home pay for each month.
- Calculate Your Routine Outgoing Costs. Do you pay rent, car payments, student loans, an electric bill, internet service, or some other recurring cost? Write down everything that you know the cost of ahead of time, along with the due dates for these bills.
- Buffer for Variable Costs. Other monthly costs include gas, groceries, and the like. These costs aren’t fixed, but you should have a general idea of how much you expect to pay each month. Try adding a little extra to each estimate so you don’t go over your allotted budget.
- Determine Destinations for Remaining Dollars. Have leftover dollars? Well, you need to find a home for them before you spend them. Consider using the remainder for savings, emergency accounts, paying down your loans, or simply set it aside for future big-ticket purchases.
Once you’ve tallied up your income and your expenses, you may have found more available money than you initially imagined. Then again, you might see that things are tighter than you anticipated. Either way, you now have a roadmap with which you can navigate your financial life. And that’s important!
Reduce Spending However You Can
While writing your budget, you may have found ways to cut back on spending. Do you go to the gas station every morning to pick up a protein bar? Do you get your car washed once a week? Do you go out for lunch every Wednesday? Those little expenses add up.
It’s never fun to restrict your own spending, but it’s often necessary. Tally up your day-to-day costs to see how much you could potentially save by foregoing certain expenses.
Pay Down Your Debt
Outstanding debt is a major drag on your personal finances and your credit score. The average American household has more than $8,000 in credit card debt! As you might expect, debt looks different to different people. Some folks are making steady progress on their debts, while others are merely treading water or even drowning under their dues.
If you are in the latter category, know that there are services to assist you when you need them. One example is Freedom Debt Relief, a debt settlement company that could help reduce the total amount you owe, so you can catch up on your debts more quickly. Similarly, the invitation-only Consolidation Plus bundles various debts into a single account so debtors could simplify their financial situation.
Admittedly, these services aren’t for everyone. But if you are drowning in debt, services like these might be a life preserver.
Lower Your Reliance on Credit Cards
As you start to raise yourself out of your debt situation, you may be tempted to use your credit card. After all, credit cards offer instant money that doesn’t need to be taken out of your budget, right?
Well, not exactly. Credit cards are designed to charge interest on top of each dollar spent. In other words, you’ll be paying more in the long run. Avoid using your credit cards unless you absolutely must or if you have a sound strategy in place for paying it off.
It’s not easy living paycheck to paycheck. Nor is it easy to adjust your lifestyle and direct money where it needs to go. However, once you have a roadmap, you can strategically adjust your spending to best match your personal goals.