Living check to check is not fun. It causes stress and is a key reason that so many people take out bad credit payday loans and cash advances. Getting out of the paycheck to paycheck cycle is really not that hard if you follow a few steps and if you are committed to getting it done. Let’s look at what you need to do.
First, Let’s Create A Budget
If you are living check to check, you probably do not have a budget. In fact, I’m willing to bet that you don’t really know where your money is going at all. You might think you do, but you don’t. Want proof. Take a week and write down everything that you spend money on. You might be surprised at what you are wasting money on.
So, let’s set a budget and make sure that it does not exceed your income. Write down all of your fixed bills and then set a budget for other expenses like food, entertainment, gas, etc. You should also put aside a set amount each month for savings. 10% of your take home pay is a good amount to save every check.
Organize your budget on a simple spreadsheet. Every computer comes with a spreadsheet program, it does not have to be excel. List all of your expenses and then set the spreadsheet to automatically add the expenses and place them in a box at the bottom. Now, you can make cuts to part of your budget and see the result.
Second, The Hard Part
If your budget was more than your income or left no room to save, you need to make some cuts. You have to make the hard decisions to get you back on track.
Usually, making cuts means cutting down on luxury expenses, but not always. Before you cut out the luxuries, let’s look at ways to reduce your fixed expenses.
One easy way to do so is with your auto insurance. Has your provider been slowly increasing your rate? They usually do, even if you have no accidents. Take an hour out of your day and shop around for a better car insurance rate. Insurers often have some great rates for new clients, so take advantage.
Next, look at your electric bill. If you are in an area where you can choose your provider, it may be time to shop for a better rate. You could easily cut 20% or more off of your electric bill by simply switching providers. Just be sure that the rate will last and is not just for a short period, like 3 months. It is often better to commit to a slightly higher rate that is locked for a longer period.
Now, take a hard look at your vehicle. If you are making a payment, what is your interest rate. You may be able to refinance your vehicle and save a hundred dollars or more a month. In addition, now might be the time to downsize to a cheaper vehicle. If you are living paycheck to paycheck, maybe it is time to switch to a lower model.
Finally, housing payments are probably your biggest expense on your budget. If you rent, are you paying too much. Perhaps it would be best to move to a slightly smaller and cheaper place. If you own your home, look into refinancing to reduce your payment. If you have been paying on a 30 year mortgage for 5 years, you could refinance and reduce your payment. Even if you refi at the same rate, stretching your remaining balance out over 30 years again can cut your payment to a more manageable level.
These are the cuts that are much less fun to cut but might be needed.
First on the list is cable or satellite. These bills can easily reach into the hundreds of dollars. You probably already have high speed internet, so why not use that instead. Switch to a streaming service and join the millions of Americans who have “cut the cord”.
Next, you need to look at your entertainment budget. This includes money that you spend on things like movies, eating out or just for impulse buys. Set a reasonable amount and then stick to it. This might be $50 a week or it might be $200 a week. Whatever fits into your budget. Each week, put what you budget in an envelope and then spend it as you please. When it is gone, though, it is gone.
Third, Get Rid Of Your Debt
One of the biggest reasons that people can not make a budget work and need extra money each month is because of debt. Credit card debt can quickly get out of hand and it is not uncommon for people to have $200 to $400 a month in minimum credit card payments.
You need to get your debt in hand and the first step is to stop accumulating it. Cut up those credit cards so that you can not use them for impulse buys.
Now, start tackling them one by one. Make the minimum payment on all of them except one. Take the one with the highest interest and pay as much as you can each month, at least double the minimum payment. Continue this until the card is paid off and then switch to the next highest interest rate and continue.
As you get that debt paid down, more money will become available for other parts of your budget, helping you avoid living paycheck to paycheck.
Fourth, Look At Your Income
You have reviewed everything else and made cuts where necessary. Now, let’s take a look at what actually sets your total budget, your income.
Employers these days thrive on complacency. They will give out small annual bonuses that just cover the cost of inflation which means that you are probably not gaining any ground.
As they shell out tiny annual raises, they also throw big salaries and bonuses at new recruits in the hopes of finding employees in a tight market. So, these days, the only way to really get a good raise is to shop for a new job.
Even if it is a lateral move, you can often get a huge raise from leaving one company and joining another. 10 to 20 percent increases are not uncommon, so get your resume in order.