Where did all my money go?
You wonder when you are faced with an empty bank account and have to wait yet again for your next paycheck. If you are stuck in such a vicious circle of living or rather surviving paycheck to paycheck every month, there is hope and a way out!
First, know that you are not alone. Economists at New York and Princeton University found that one-third of all households in the United States are also surviving paycheck to paycheck.
It’s a very dangerous situation because if any unaccounted for expense crops up or some emergency situation arises, you may have to borrow using credit cards or even payday loans. Both options carry huge interest rates.
I lived the paycheck-to-paycheck lifestyle until I was 25 because I didn’t know any better. Thankfully I got a financial awakening before I continued down that path. You can beat debt no matter what age you start. – Scott
The best way to break the paycheck to paycheck cycle is to make a plan to break the cycle.
How to get started breaking the paycheck to paycheck cycle
You can cut back and earn more using the following 12 ideas.
1. Write down everything
You must make a note of all your expenses, no matter how painstaking and time-consuming it is. Tracking will help you understand where exactly your money is going and what you spent it on.
Also, make a list of all your upcoming bills and their dates so you can plan ahead.
The only way to have more money than month is first to know where your money goes.
2. Define your needs
The basic things we need in life are food, clothing, shelter and transportation. Try to organize your expenditure keeping those four things as the main priority.
All other spending costs can be classified as wants to cut down or eliminated altogether.
3. Reduce expenses
It is the little things that ultimately add up and create an expense in your life. Eliminate all these minor expenses. They might not seem like much to you at the time, but they make quite a difference to your total spending.
For example, you can cut down on dining expenses by limiting eating out to once or twice a month and packing your lunches from home. Go over your expenses and cut the little things.
Keep in mind your situation is temporary, and so is cutting back. Not eating out for a while to save money doesn’t mean you’re never going to eat out again. It just means you need to take some action now so you can live the life you deserve later.
Related: 30 ways to save money by being weird
4. Increase your income
It is better to start boosting your income now rather than have to borrow later. Take up part-time jobs or some freelance work online. You can have a garage sale and sell your belongings that you no longer require or sell them online. If all else fails, you can even ask your boss for a raise or bonus.
Related: 50 ways to make extra money from home
5. Cut back
Yes, we all know that this part hurts the most, but when you have no choice, do it anyway. Get radical, cancel your cable.
Cancel your smartphone plan and get a basic phone.
Sell the car you have to make payments on and buy a cheap one with cash.
Try to utilize your existing products to the extent your friends call you cheap. Try to squeeze as much out of your toothbrush, conditioner, soap, groceries, laundry detergent, etc.
6. Government or charity benefits
If things are truly bad and you are facing not feeding your family, call your county government office and ask for food stamps, healthcare for your children, and rent assistance. You pay taxes, so use what is available.
Many churches and local charities can help with:
- children’s clothing
- food
- free vaccinations
- dental care
Please don’t be embarrassed to ask. If you can break the paycheck to paycheck cycle by using assistance for a short period, you will make your life and that of your family better for the long term.
Check out the free service 2–1–1.org for housing and utility help in your area.
Visit Feeding America to find your local food bank
7. Say yes to hand-me-downs
As part of cutting back, you can also reduce your expenses by giving hand-me-downs the green light. If you need a new couch, instead of buying a new one that costs you a lot, ask your friends and family if they have an old spare couch you can use.
Ask about hand me down clothes, shoes, and other items. I’m not living paycheck to paycheck, but I did this when our twins were born and saved a ton. You’ll be surprised at how much friends and family are willing to share.
Related: 48 ways to save money on twin babies (or any kids)
8. Start a savings account
It’s not uncommon for people to think that saving should be done later in life and now is the time to spend. But it’s always a good idea to start saving as soon as possible and lead a frugal life now to reap the benefits in the future.
Savings also comes in handy in emergency situations. Open a savings account with zero fees and do your best to build up an emergency fund and then regular savings. Having savings makes the $500 emergency less of a life-changing ordeal and more of a bump in the road.
We often kid ourselves by saying we’ll save later in life. In college, I thought I was really smart and told my professor I would start saving for my future when I was 40 years old. I was, shall we say, a stupid 20-year-old. – Scott
As the financial editor for NBC’s ‘Today Show’ Jean Chatzky puts it:
By definition saving – for anything – requires us not to get things now so that we can get bigger ones later.
9. Live below your means
Even if you got a salary increase or you’re getting income from additional sources, you should try to avoid going back to your old spending habits. Keep living below your means and saving all your money up for a brighter future.
Once you are in a better financial position, you can review your budget and add back a few things you really want, but keep spending less than you make.
11. Learn to say no
Maybe everyone has their kids in soccer that comes with fees. They need to buy uniforms and snacks for the whole team. Your kids will still thrive without participating.
Say no to invitations from friends that you can’t afford. Be honest and say you’d love to join but you are getting your finances straight and will host them at your house sometime soon.
Saying No is hard because we can feel “less than” others. But remember living paycheck to paycheck is hard and risky. If it is an unnecessary burden on your income, it is best to say no and avoid any financial strain.
11. Understand the benefits
To stick to such a plan, it’s important that you enter the right frame of mind. You must know why you are doing this and what the end goals are. It’s often difficult to tell yourself to stop spending on something unless you know the benefits.
Analyze and make a list of what all benefits you will receive in the future from saving your money now. For instance:
- sleeping better at night because you’re not worrying about paying the bills
- no more fights over money with your spouse
- buying that dream condo in Hawaii
- going for a trip around the world
- a comfortable retirement
- saving for your daughter or son’s marriage
12. Be positive
There is no doubt that living paycheck to paycheck stresses us, but with the right spirit and determination you can fight and break the cycle. Stay focused on your bright future and understand that if you make small changes now, things will eventually change for the better in your life.
Related: Listen to Scott’s show to stay encouraged and find hope
It is easier said than done to cut down on your expenses and save. But it will ultimately help you in the future. By adopting these small principles, you will no longer just be surviving every month and but will be living a financially secure life.
How To Get Started Investing
The international bestseller by CERTIFIED FINANCIAL PLANNER™ Scott Alan Turner. Choose the right accounts & investments so your money grows for you – automatically. No jargon, confusion, or pie in the sky promises. Just a proven plan that works.
