How to Get Out of Living Paycheck to Paycheck
Most people who are barely getting by month-to-month feel that they simply don’t have enough money. They don’t even try to dig their way out because they don’t think it’s possible to improve their situation if they don’t have extra income to work with.
That’s not true in all cases. In fact, when it comes to spending, we find a lot of people are like goldfish that get bigger when you put them in a bigger tank. The more money one has to spend, the more one spends.
We advise acting now to stop living paycheck to paycheck, regardless of your income.
The first thing to do is stop borrowing. Paying off your debts is a crucial part of achieving financial freedom, and you’ll never get there if you’re still using your credit cards. Resolve to make your overall debts get smaller every month from now on.
Now evaluate your spending. All of us have discretionary spending that we could do without. We teach people to track their spending every day, because usually small purchases add up. If you’re paying $2 a day for a cup of coffee, you might not be thinking about it when you tally up your spending. But if you track every day, you’ll see how fast that small daily purchase adds up.
Whatever amount you can carve out of your discretionary spending, apply to your debts. Put the extra money toward the card with the lowest balance to get it paid off faster. When that card is paid off, take the payment you were sending to them and add it to the next lowest balance. Gradually you’ll pay off all of your cards this way.
When you get to the last revolving debt, you’ll be making a much larger payment than you used to, so your payoff should be accelerated. And then you can start applying those extra payments to your auto loan if you have one.
Ultimately, your goal is to get all of those debts wiped out, and when you’re living without those debt payments, you’ll be more likely to have money to set aside for savings goals and to live more comfortably without having to survive paycheck to paycheck.
For more information about living with a budget, check out our free Power of Paycheck Planning personal finance course and ebook, right here in the FIT Academy.
Photo: laughingrhoda
