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Do you find that no matter what you seem to do, you’re always just getting by financially until the next payday comes along? If so, then you’re not alone. According to one study by Payroll.org, nearly half of the participants indicated that it would be “very difficult” to cover their financial obligations if their paycheck was delayed one week1
With the cost of living on the rise, struggling to save is understandable. However, there are some risks with living paycheck to paycheck and it’s not a lifestyle that you’ll want to maintain. Effective money management and utilizing emergency loans instead of high-interest credit are several ways to regain control of your finances. Here are five ways you can stop living paycheck to paycheck.
1) Learn Where Your Money is Going
Before you can solve any problem, you first need to get a grasp of what’s causing the issue in the first place. When it comes to your finances, this starts by paying close attention to where your money is going and what you’re spending it on.
A good way to do this is to review your credit or debit card purchases weekly. If you use cash, keep a journal of those transactions too. Every weekend, comb through them and look for places where you may be able to cut back.
2) Limit Your Purchases
If you have a habit of eating out or shopping when you’re bored, try setting boundaries for yourself. You don’t necessarily have to stop buying things altogether, but you could try setting limits for yourself, such as only eating out once per week or making fewer discretionary purchases.
3) Pay Off Debt to Free Up Cash Flow
Is a major portion of your monthly expenses made up of debt repayments, particularly ones with high interest? If so, you’ll want to consider paying off these debts first:
Work to eliminate your debts by:
- Paying them down using the debt snowball method. The debt snowball method involves paying down your lowest balances first while making the minimum payment on your other debt until you’re debt-free.
- Take out a low-cost emergency loan you can use to pay off your high-interest debt.
- Consolidate your debts into one low monthly payment with a debt consolidation loan or a balance transfer. Both options allow you move your high-interest debts onto a new loan or credit card with a lower interest rate.
The more you can do to lower your interest, the more money you’ll have to put toward the principal. This can help you to pay off the balance sooner and free up your budget.
4) Prioritize Paying Yourself
Though it may seem like you don’t have any money available to save, a good way to trick yourself is to take the savings out of your paycheck before you ever even receive it. One way to do this is by bumping up your retirement contributions to your 401k.
5) Build Up Your Income
While it’s important to get a firm grip on your expenses, raising your income is another strategy to fix living paycheck to paycheck. This can be done in several ways, such as:
- Getting a different job within the same industry
- Switching to a new industry altogether
- Getting a part-time job
- Starting up a side hustle
If you find a way to earn more, what’s important is to maintain your current lifestyle, and avoid allowing your expenses to increase as your income goes up. You can then use the extra income to pay down your debts, invest, and build toward your financial future.
The Bottom Line
Living paycheck to paycheck isn’t a lifestyle you have to be stuck with. You can make a change by getting a handle on your finances and paying off high-interest debt. Don’t forget to think toward the future by looking for ways to increase your income and saving more in your retirement funds.
Notice: Information provided in this article is for information purposes only and does not necessarily reflect the views of urbanmatter.com or its employees. Please be sure to consult your financial advisor about your financial circumstances and options. This site may receive compensation from advertisers for links to third-party websites.