Okay, So this was a topic I felt very iffy about writing because I know a lot of people live this way, not by choice, but some choose this way because they either fear stepping out and making a difference, or their minds are still enslaved to live “hand-to-mouth”. Many people like myself (well….I “use” to) avoid “budgeting” because we convince ourselves that we have a good handle on money, but very often people who are making a decent salary still cant seem to get out of the vicious cycle of living a “paycheck away from poverty”.
Do you know where your money is actually going every month? If not, then that’s a huge warning sign that it’s time to start paying attention. Don’t get me wrong, I know that improving ones financial situation isn’t easy or fast but it is possible. Here’s how to stop living paycheck to paycheck this year.
5 ways to stop living paycheck to paycheck
1 | Create a Monthly Budget
Many of us are poor at money management because we haven’t been taught the proper ways to manage money. Creating a monthly budget and sticking to it as much as possible is “rule 101”. Budgets are a great way to get you back on track. Some budgets can be as simple as keeping track of your paydays and the due dates of all your monthly expenses, then determine items you might be able to cut back on to start saving money.
Get out a sheet of paper and…
• List out all fixed expenses (Rent/Mortgage, Utilities, Phone Bill, etc.)
• List out all minimum debt payments (Credit cards, Car Loans, Personal Loans, Student Loans, etc.)
• Go through your bank statements and look for the averages for all monthly variable spending (Groceries, Gas, Clothing, Home Décor, Entertainment, Travel, etc.)
Divvy up your paycheck to cover each part of the budget. You can set up different accounts for each area of your budget and have your paycheck automatically split among those accounts with enough money to cover all the expenses, then whatever is left should go automatically into savings. If you want to go the old-fashioned route, pay in cash for whatever you can, using envelopes to split up your money and keep you within budget.
2 | Set goals
If you don’t know why you’re saving, it often gets put on the back burner. So identify what your big goals are and then start taking steps to reach them.
So you’ve set your goals and created a budget, which is a great start, but if you don’t track it, that’s when actually sticking to the budget becomes nearly impossible.
3 | Tracking your expenses is the best way to get control of your money — for several reasons.
If you want to stop living paycheck to paycheck, you have to know where your money is going, and you have to give every dollar a purpose. Tracking how much money is coming in versus how much is going out— and where exactly that money is going— is the only way you’ll really be able to understand your finances. Having a confident relationship with money is crucial — it’s what allows you to make the right decisions at the right time — but in order to do that, you must understand your patterns and routine.
Knowing exactly what’s going on with your money every day, week and month is the key to making smart financial decisions that have a big impact on both your life now and your future.
If you don’t pay attention, it becomes very difficult to make sure that you’re adequately prepared for each of your big goals— including retirement savings, building an emergency savings fund and saving for big purchases like buying a house, car or even going on a vacation.
4 | No matter the amount, “put up a likkle tups” (SAVE! SAVE! SAVE!)
The risk of not saving becomes real when you draw for that bank card or walk into that bank, trust me!
Regardless of your income, there are always ways to reduce costs in order to put money away into savings.
One big problem many people face is the psychological barrier — prioritizing present needs and wants over future needs — no one expects an emergency to come up, so it’s easy to assume that there will always be more time to save later. You’re so wrong!
This is a really bad mindset to have, for two reasons. First, time is money. The earlier you save, the more time your money has to grow (make your money labour for you). So, even if you save a lot of money down the road, it still won’t be worth as much as the money you save now.
Second, emergencies do happen —and the reality is, if you don’t have the money to cover it, one unexpected bill can end up causing you major, long-term financial damage. Regardless of how much money you make, if you don’t make saving part of your routine and monthly budget, you will very likely reach the end of the month and realize you’ve spent what you had planned to save.
5 | Stop Spending Impulsively
How many times have you grabbed something that has been placed at the end of an aisle at the grocery store, clothes store or mall? At some point or another, I am sure we are all guilty of this. Often we don’t ever use the product, or we may get home and instantly regret purchasing it.
Whew 😌! These are great nuggets. Go ahead, use them, I dare you! You’ll be glad you did.
Share your plans of breaking the “hand-to-mouth” mentality cycle.