How to Stop Living Paycheck to Paycheck

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Living paycheck to paycheck can certainly be a stressful existence for anyone. Research shows, however, that more and more Americans are struggling to pay their bills, feed their families and put their children through college (without taking out exorbitant loans or hoping for the blessing of financial aid.)

If you find that you are a “deficit spender” – meaning you spend more money than you actually have by using credit cards and loans, you are unfortunately digging yourself into a deeper and deeper hole every month that you continue this lifestyle.

Do you have virtually no money in a savings account and pay your bills with your fingers crossed every month, hoping that none of the checks bounce? If so,  you’re actually tempting fate for something catastrophic to happen and a financial disaster to ensue.

What would happen right now if you needed to buy a new car? How about needing to replace a big appliance in your home? What would be the outcome if you were to lose your job unexpectedly? If any of these circumstances would put you immediately into financial distress, then it is time to do something about your current financial plan of action.

There are many things that you can do yourself that will enable you to slowly build up a nest egg and stop living from paycheck to paycheck. This will not be a quick, easy fix, but rather something that will take time and dedication. If you would like to build up some wealth, you have to change your line of thinking from spending what you earn to spending slightly less than you earn.

The very first step to building wealth is to open a savings account. Even if it seems that you have barely anything to put into the savings account, do it. You will find that once you have the savings account, you will repeatedly scrap together money to toss into that account. It often becomes a little game, and before you know it you will have developed a “savings habit.”

Decide on a dollar amount that you would like to automatically deposit into your savings account from every paycheck that you receive. Even if this dollar amount is as low as $10-$25 to start, it is something, and it will build up quickly. Any time you get a raise or come into unexpected money, be sure to adjust the amount of cash that you put into savings.

Once you open a savings account, it’s important to set up a realistic but strict budget so that you can maintain your standard of living while saving at the same time. Some important parts of setting up an achievable budget include:

Attack your debt with a debt snowball. This is one of the quickest and easiest ways to open up more money to put into your new savings account.

Next, you are going to need to make sure that your budget for spending is realistic. Set out a dollar amount for each of your bills, including groceries, gas, and all debts. Look for areas in your budget where you could eliminate or lower your payments.

Instead of trying to give up your $2.99 caffeine habit, consider this: make a bigger change that will have a more significant impact on your finances. Suggestions include: canceling your cable subscription, downgrading your cell phone package, putting your gym membership on hold and exercising outdoors, refinancing your mortgage, and other debt negotiation strategies.

By taking some of these steps now, you should have an admirable chunk of money in your savings account by this time next year!

Image Credit: John Pearson (flickr)

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One Response to How to Stop Living Paycheck to Paycheck

  1. Pingback: How to Get a Handle on Your Budget Using the Envelope System | Veitengruber Law

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