LIVING PAYCHECK TO PAYCHECK
Unfortunately, it has become all too common.
Regardless of income, living paycheck to paycheck has become a way of life for most Americans. In fact, a 2017 CareerBuilder study found 78% of Americans live paycheck to paycheck and 66% would struggle to pay a $1,000 dollar emergency. Most would have to borrow or use a credit card to cover an emergency expense.
Living paycheck to paycheck may be normal these days but it does not mean it is easy. A study by creditcards.com found that 65% of Americans lose sleep due to stress and worry about money. But there is good news. Living paycheck to paycheck is a two-part formula and both can be controlled. If not immediately, then certainly over time.
Before we dive in – If you want to speak with someone about addressing your credit card debt. Click here to schedule a 15-minute call with a financial coach. The 15min call is free.
The two parts are:
- Income
- Expenses
We may even use these two parts to create this equation in our mind. It’s great! Through that simple formula, our financial lives can improve! But if the formula is so simple, why don’t more people find financial security?
Well, frankly stated, although the principles are simple, putting them into practice usually isn’t.
Every dollar we spend or have spent in the past is a decision and we usually spend that money to try and buy things that will bring us some happiness. If the item was purchased with debt (like a credit card) we just increased our expenses. This means we’ll have less money in the future unless we increase our income…. and if we do we won’t have any more money than we have today because we’ve already spent the extra money. Throw in emergencies, accidents, repairs, and other expenses, it’s easy to see how most of us get caught in a cycle living paycheck to paycheck. Sometimes it feels there’s no way out.
I have come to learn that the key is building some buffer in your life, extra savings, something to ease the mind and reduce the stress. Let’s talk about a few things you can do to help with living paycheck to paycheck and build some financial buffer in your life.
Decrease Expenses
It’s not always fun but cutting expenses is by far the easiest method for creating some extra money at the end of the month. Since most spending is a decision we have to work hard to flex control and lower expenses. Here are a few ways to reduce expenses.
- Create a spending plan and only spend money on the things you decide to at the beginning of the month. No unplanned purchases.
- Use cash only (check out my Envelope System poster in the Info page)
- Downgrade or cancel cable
- Shop your insurances for lower cost plans
- Cancel rarely used subscriptions
- Downgrade the car – to get a lower, or even better, NO payment!
- Move to a lower cost area or get a roommate
- Meal plan for the week and pre-cook and pack meals so you’ll be less likely to eat out.
Increase Income
Of course, you may be able to work some additional hours or pick up a second job to increase income but that’s not always fun. Here are a few ways to generate some income in your life.
- Check out my "side hustle" poster in the Info page
- Overtime or second job
- If you get a big tax return – Adjust your tax withholding so you get more money in each paycheck
- Rent out a spare room (to a trusted friend!)
- Sell unused possessions
- Get a flexible job like delivering pizzas, diving Uber, babysitting, dog-walking
- Educate yourself in a new marketable skill
- Enroll in evening courses for higher education
Regardless of the methods and tactics you choose to use, the key is control.
Creating a monthly spending plan (a budget) is the foundation from which success can be built. Why do I say that? If you earn more money but start to spend more money you will not have made any progress. If you choose to cut costs you’ll have to be mindful of your spending so you’ll need to create a monthly spending plan as well.
If you think you could benefit from creating a monthly spending plan or working with a financial coach to review your situation you can get started below.
Click here to schedule a 15-minute call with a financial coach. The 15min call is free.