Living paycheck to paycheck creates an underlying sense of stress. You know that if you miss one week’s income, the financial house of cards you are living in could suddenly collapse. Instead of continuing to exist on the financial brink, take steps to end the cycle and create financial security.
1. Live below your means
Realize that just because you bring home $700 per week, you do not have to spend that amount. Pretend that you make $500 per week and budget a way to live on that amount. Unfortunately, people often accumulate expenses that account for every penny they bring home. Stop doing that and improve your financial situation.
2. Create a spending plan
If you do not already have a spending plan in place, create one. List your bills on a piece of paper. Include everything you spend in a month. While rent, heating and cooling costs and transportation expenses are obvious bills you must pay, do not forget to include things like the cost of prescription medications, money for entertainment and a clothing allowance for when you need to replace items of your wardrobe.
3. Cut unnecessary expenses
Once you have created your budget, look it over for ways you can cut out unnecessary expenses. While you might enjoy buying lottery tickets, magazines and expensive lattes, realistically these are things you could do without in order to secure your financial future.
4. Reduce your bills
While it is probably impossible to completely cut out some of the bills you pay each month, you can always take steps to lower them. Choose insurance plans with a higher deductible to lower your premium, opt for generic medication at the pharmacy and run all of your errands at once instead of making several trips to save gas.
5. Build an emergency fund
People who are financially secure always have money put away for an emergency. Even if you can only save five or ten dollars per week, sock that money away so that when you get a flat tire, need a new microwave or chip a tooth, you will be able to pay for it.
6. Pay bills before the last minute
If you wait until you receive a disconnect notice to pay your bills, you are doing something wrong. Pay each bill as soon as you possibly can, preferably as soon as you have opened the envelope. Paying at the last minute causes stress and costs you late fees.
7. Pay off your debts
Work hard to pay off as much debt as possible. If you are able to secure some overtime hours, work them and use the extra cash to pay off installment loans and credit card bills. Choose the bill with the highest interest and keep paying until you have erased the debt. Then start paying off the one with the next highest interest until you have cleared all your bills.
8. Downscale your lifestyle
Take a good look at your life and determine how you can downsize. Scaling down will give you more money and help eliminate the paycheck-to-paycheck cycle. Sell the big house that you had when all the kids were home and move into an abode that requires less time, effort and money. Buy a small, fuel-efficient car instead of driving the monster SUV you had to have.
9. Save extra money you receive
When extra money like an inheritance, tax refund or sweepstakes winning comes your way, save the money instead of blowing it. Simply put the money into an account where you can access it if you need it and leave it there.
10. Plan for the future
Do not forget that the day will come when you want to retire. While it may be hard to picture now, eventually you are going to stop working and you will need money to live on. Open a retirement account and put away enough money to make a difference in your future without leaving yourself broke today.
Once you have broken the paycheck-to-paycheck cycle, you will be surprised at how peaceful you will feel when you know that unexpected expenses will not derail your budget and cause you financial ruin. While turning your finances around does take awhile, it is time and effort well spent.
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