Stop Living Paycheck to Paycheck
It’s a pretty common thing to live paycheck to paycheck these days. This is true for every income level. Even people making six figures report living paycheck. This is because we become accustomed to a certain lifestyle. People enjoy comforts and this leads to spending whatever is in their checking account.
Build an Emergency Fund
It’s important that you plan and save for emergencies. To prevent going into debt trying to pay for accidents create an emergency fund. At all times your emergency fund should have $1,000. This fund is only to be used in actual emergencies. When something unexpected happens and now you have hospital bills you have to cover is a time where you could use your emergency fund. This is not meant to be used to hospital bills that you know are coming like for the birth of a child. You should save up for those separately.
If you have to use your fund then after you use it, make sure you get the balance back up to $1,000. If you don’t have any consumer debt then you should try to have 3-6 months expenses saved up. When I say debt I don’t mean your mortgage. Try to save up at least three months expenses so if something should happen where you get injured or fired and can’t work you’ll have a three-month safety net. The ultimate goal is to have enough for six months of expenses saved.
Look at Where Your Money is Going
Pull your bank and credit card statements for the past couple of months and see where you are spending money. It’ll help you get a better understanding of where your paycheck is going. Gaining perspective on the issue and figuring out what the problem is, is all part of making a change.
Separate your expenses into categories like entertainment, eating out, groceries, insurance, rent/mortgage, etc.. See what you’re spending in each category and compare it to how much you think you should be spending and see where changes need to be made.
Evaluate Your Fixed Expenses
If when you’re looking at your fixed expenses, such as rent, you might see that you’re paying more than what is sustainable. If you rent is too high try moving to a different neighborhood, downsizing, or getting a roommate. Your fixed expenses are the expenses that stay the same every month. So if you find that your phone bill seems excessive, talk with your provider to see if you can change your plan. If you tell them that you are considering switching provider, they will usually be able to find you some deals or discounts.
Pay off Your Debt
Credit card and loan payments might be a part of your monthly spending. If they aren’t then kudos to you! Most people have some amount of debt. If, when you’re evaluating your spending habits, you find that a big chunk of money is going towards your debts then put everything you can into getting rid of those debts. Build up your emergency fund to $1,000 then put all extra money towards your debts until they’re paid off.
Paying off your debt will take a lot of stress out of your life and it frees up a lot of money for you to save up for whatever you want! Think about how great it would be to go to sleep at night without worrying about how you’re going to pay for things. Once you’re debt-free the habits you developed to get that way will most likely stick with you. You can then use those habits to stay out of debt and to meet your goals.
It’s hard to get serious about something if you don’t have any goals set. You can be doing 20 different things, but not making any progress. Make goals for yourself and then figure out how you’re going to reach those goals. Make a couple of small goals, like saving $5 a week, and also make a big goal to work towards. A great big goal would be to pay off all credit card debt within a certain amount of time. Make your goal challenging, but possible. Continuously meeting little goals will keep you motivated on your journey to meeting your big goals!