“Every month by the middle of the money I’m broke.”
Payday is cool, but it’s disheartening to look at your bank account only to see you’re in the same place you were two weeks ago. Living from one paycheck to the next makes peace of mind an elusive goal.
A lot of people think living like that is pretty normal. And you know what? They’re right. These days, 78% of workers live paycheck to paycheck. And 69% have less than R10,000 in savings. But you don’t have to be normal and live like that for the rest of your life. You can stop the cycle once and for all. Let’s do this!
Follow these steps to stop living paycheck to paycheck.
Get on a Budget
A budget is telling your money where to go instead of wondering where it went. – Dave Ramsey
Don’t know where your entire paycheck goes? Start doing a budget. That’ll tell you exactly where your hard-earned money is going.
Now this may seem like common sense, ‘but common sense is not always common practice’ as Brendon Burchard likes to say.
Without a budget, it’s pretty easy to live this way. Why? Because you don’t have a plan. And you really can’t make your rands stretch because you might not even know how much money you have to work with! That’s where your budget will show you places where you can cut back.
Take care of essentials first
If you live waiting for your next payday and struggle to cover all of your bills, you need to focus on the things you really need to survive. We call these essentials are your priority. So pay for these things in this order before anything else:
If there’s any money left over after you take care of the essentials make a list of what else you need to pay and tackle it in order of importance. When you run out of money—that’s it. If things are really tough, yeah, your credit card bill might not get paid that month. But one thing is for sure: Your family will be fed and have a roof over their head no matter what.
Stop living with debt
Living like this and playing around with debt is a recipe for disaster. You can’t get ahead that way! Believe me, not having enough money to pay for something and then reaching for a credit card to fund it is no way to live.
But debt isn’t just credit cards. Debt is sneaky. It comes packaged as student loans, car payments, store credit cards, mortgages, personal loans, business loans, payday loans, and even “buy now, pay later” deals. Anytime you owe somebody else money for anything—it’s debt.
Your debt is eating up a portion of each paycheck and can hold you back from doing the things you want to do the most. You won’t get out of debt if you continue to put money on your credit cards. You need to stop using your credit cards until you are completely out of debt. This will help you to control and track your spending. If you lack willpower, cut up all your credit cards but one. And pay it off each month, no matter what.
Cut back on spending
Once you have established a working budget, you need to cut back on your spending. This will free up money enabling you to get out of debt and you can put into an emergency fund. Once you pay off your debt, you will have more money to spend each month. The challenge in the beginning is to find ways to save in every category. As you get better at saving, you will be able to find even more ways to save.
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Get a temporary job or start a side hustle.
If you’re living paycheck to paycheck, you probably need to bring in more income consistently. While you can (and should) go after promotions and salary increases.
Some great options for making extra money are waiting tables, driving for Uber or Lyft, working at a call center, or signing up to be a substitute teacher.
And even if those don’t work out, you can still take up odd jobs around your neighborhood. Think cutting the grass, babysitting or dog walking.
If you want to start up a side hustle, focus on using your talents (you know, things you’re good at) to make extra money. You can use your design, sewing or baking skills to help bring in some money. Be on the lookout for opportunities that will add any extra cash in your pocket.
Build an Emergency Fund
The best way to stop living from paycheck to paycheck is to have money in the bank. You can do this by taking money out of each paycheck. For your initial emergency fund, you should have the equivalent of US$1,000, £800 pounds, R10,000, €800 in the event of a real emergency.
Once you’re out of debt, you can begin building your “get out of s@#t fund”. For instance, take 10 percent or 20 percent out of each month’s paycheck for this fund. This fund is the key to stop living from paycheck to paycheck in the long-term. When you have a year’s worth of expenses in the bank, you feel better equipped to deal with life’s unexpected challenges. Even if you start with R50 a paycheck, you will start to feel more confident about handling your finances.
Save up for big purchases.
Nothing makes you count down to payday like knowing you blew your last paycheck on some big impulse buy. Don’t get so caught up in the moment.
The next time you see something you want to buy that isn’t in your budget and you can’t afford right now, save up for it. Let’s say you want to buy a R799 wireless headphones. All you need to do is budget for it. No don’t use your credit card, remember you are working at getting out of debt.
Start living again
Sick of living paycheck to paycheck? You should be. It’s time for things to change. And you have the power to do it!
It’s tough when you’re struggling to make ends meet. I know because I’ve been there. But I know from experience that following the above steps have helped get me out of my financial hole.
Living paycheck to paycheck sucks, but there’s a way out – even if you can’t see it yet. It’s just a step or two away. Start small, track your progress, and be mindful of these principles:
- Create a budget
- No debt
- Cut spending
- Build an Emergency Fund
You got this!