How to Stop Living Paycheck to Paycheck
About 42 million Americans say that if they missed one paycheck, they would have to pay an important bill (like their rent, utilities, or car payment) late. In other words, a lot of us are living paycheck to paycheck.It’s not a comfortable way to live, that’s for sure. What happens if you get sick, or have an accident? And yet, if you’re used to living paycheck to paycheck it might feel like you don’t have any other options.
Don’t worry getting out of this cycle is simple. It will take a bit of hard work and commitment from you, but after just a few months you’ll be so glad you did it.
1. Change your mind
Living paycheck to paycheck is basically a countdown to zero. Believe it or not, having money left over each month will take some getting used to. As you build your emergency fund (which well talk about below), your expectations will start to change so that getting close to zero will feel uncomfortable. That feeling is a very good sign that your mindset is changing.
2. Start an emergency fund and add to it regularly
This emergency fund will be the cushion that floats you through hard times, unexpected problems, and other money troubles that would otherwise keep you up at night. Start by setting aside just $5 or $10, and don’t touch it. Give yourself time to get used to having slightly less money in your pocket. If you take it slow, you could very well find that you hardly miss the money. Over time, you can increase the amount you put into your emergency fund.
3. Cut Your Expenses
Cutting your expenses might seem impossible right now. But take some time to track your spending, so you know exactly where your money goes. You might find that making a few simple changes can free up a small chunk of money each month, which you can add to your cushion. Some great places to look include monthly social activities like country club dues, or entertainment. Maybe you don’t watch the premium movie channel you’re paying for, or not utilizing your movie rentals enough. If you’re unsure whether or not you can cut it, you probably can. Add up how much you cut, and stash that money in a high yield savings account.
4. Increase your income
Sell things on eBay. Volunteer for overtime. Pick up a part-time job. Ask for a raise. Whatever it takes to pad your checking account, do it. After just a few months, you could be sitting on a nice cushion. And as long as you keep these new habits up, you could be free from the paycheck-to-paycheck life forever.
Make This Work for You
…in 15 minutes or less
- Find about how a savings account can help
…in 1 hour or less
- Learn the ins and outs of emergency funds
…in the long run