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You can get out of the hamster wheel of living paycheck to paycheck.
You’re here today because you are stressed, tired, and frustrated from living paycheck to paycheck.
However, you are not alone, there are 78% of US workers who are living paycheck to paycheck.
And if you think you’ll have to live paycheck to paycheck for the rest of your life, think again!
Today, I will share with you actionable tips on how not to live paycheck to paycheck that you can do right away.
However, they will only work if you put in the work.
Now, let’s dive in.
What Does It Mean By Living Paycheck To Paycheck
If you are constantly worrying about having enough money to cover your rent, pay the bills, or put food on the table before the next paycheck, then you may be living paycheck to paycheck.
Living paycheck to paycheck simply means that your income from paycheck to paycheck is just enough to meet all your financial obligations.
In short, you do not have extra money left after all bills are paid.
How Not To Live Paycheck To Paycheck
1. Establish Your Goals
Establish your financial goals and break them down into shorter achievable goals.
For example, if one of your financial goals is to buy your first home, your long term goal would be to save for a downpayment (e.g., $10,000)
Your downpayment would then be broken down into shorter goals, for example, save $500 a month for 20 months.
Defining your goals clearly and writing them down will help you stay motivated while working towards achieving them.
Access the free resource library to download the Slay Your Goals workbook and start writing your goals
2. Create A Monthly Budget
Creating a budget will improve your awareness of how much money your household is bringing in and how much is going out.
By knowing precisely what you are working on, you will be able to create a plan of action.
Here’s how you can learn more about starting a monthly budget that works.
3. Track Your Expenses
Track every single dollar spent so that you will know where your money is going. You can use budgeting apps or simply paper.
You can also download the expense tracker from the free resource library.
4. Build An Emergency Fund
Now that you have a budget and have an idea where all your money is going make it a priority to build an emergency fund first.
An emergency fund will give you peace of mind while working on your finances. You’ll have a cushion when something unexpected expenses arrive.
You can start out by saving $1000, and as soon as you’re debt-free, work on increasing it to a 3 to 6-months worth of expenses.
Here’s a beginner’s guide to building an emergency fund.
5. Create Sinking Funds
Sinking funds are different saving buckets that help you save for big expenses, like a vacation, annual subscription fee, annual premiums, a new appliance, etc.
One of the benefits of having sinking funds is to help you stick with your monthly budget. A single significant expense in one month will quickly blow your monthly budget.
Here’s a simple guide on how to set up sinking funds.
6. Live Below Your Means
Now that you know precisely your income and expenses, you now also know how much you can afford.
Re-evaluate your lifestyle and see if you can live below your means. Sometimes when we let our lifestyle grow with our income, that’s when everything goes haywire.
7. Eliminate Unnecessary Expenses
Refer back to your expense tracker and re-evaluate each item by asking yourself, “Do I really need this?” and “Can I still live without this?”.
You’ll be surprised how many items you will say “yes” to.
8. Reduce Your Expenses
As you go through each of your expenses, you’ll find that there are expenses that you can eliminate, and there are those that you cannot.
For the indispensable expenses, see if you can reduce them. Either by negotiating your rate or finding an alternative.
For example, if you have an expensive phone plan, this phone plan alternative will save you money.
Or if you’re not comfortable negotiating, this company will negotiate for you. They won’t charge you if they are not successful. And if they succeed in saving you money, the charge is very minimal.
9. Pay Down Your Debt
One of the reasons why someone is living paycheck to paycheck is debt. If you are dealing with debt, make it a priority to pay it off as soon as you can.
If you’re dealing with multiple debts, create a debt pay off plan, and start working on it. Here’s a helpful guide in paying off debts.
10. Be Smart About “Windfall”
Sometimes, we get so caught up with bonuses, tax refunds, or what have you that we treat these “windfalls” as an escape from our reality.
When you any of these “windfalls,” be smart on what you do with them. If you have debt, use it to pay it off, or if you do not have an emergency fund, use it to build one.
Use your “windfalls” towards your financial goals.
11. Automate Your Savings
When you automate your savings, you are treating it as a monthly expense. This will help you prioritize your savings contributions and avoid the temptation of spending it.
Automating your savings will help your savings grow faster because you’ll never miss your contribution.
12. Save For Retirement
By starting tackling your finances today will help you prepare for the future. Besides, you are not planning to work forever.
Take advantage of your employer’s retirement plan like a 401K or open an IRA account. The truth is when planning for retirement, the earlier you start, the better you’ll be because you’re taking advantage of the power of compound interest.
13. Supplement Your Income
If you want to reach your financial goals sooner, you can work on supplementing your income through side hustles.
You can earn extra income by using your time outside your regular hours to pick up side jobs.
There you have it!
There are ways that you can do to stop living paycheck to paycheck. But I repeat, for you to be successful, you need to be willing to put in the work.
Any other tips on how not to live paycheck to paycheck? Let me know in the comments.
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