How to Stop Living From Paycheck to Paycheck

When you live paycheck to paycheck, you are constantly scrambling to make ends meet or running out of money before the end of the month. It can be stressful because you feel like you never have quite enough to cover all of the bills and pay for the things you want throughout the month. When you are living paycheck to paycheck, it is nearly impossible to get ahead financially. You are not planning ahead or setting money aside to cover the bigger expenses. You may not be able to handle even a $500 emergency. Often you end up overspending each month, and you run up a little bit more debt each month. It is important to stop living paycheck to paycheck so you can begin reaching your financial goals. If your employer is paying you with a prepaid debit card, it may be even more difficult to stop living from paycheck to paycheck, but you can do it. These steps can you help you start thriving financially.

1
Learn to Budget

Woman budgeting
Geber86/iStock

The biggest thing you can do is to learn to budget effectively. Anyone can write down a monthly budget. It takes just a few minutes, and there are several different approaches you can take to come up with your budget. But writing down a budget and actually budgeting are two totally different things. When you are budgeting effectively you are tracking your spending, and stopping when you run out of money. An effective budget has all of your expenses built into to it, so you are not taken by surprise when your car registration and taxes are due or when you have to pay your insurance premiums.It also helps you deal with fluctuating bills, like higher utility bills in the winter. This is the biggest step in order to stop living from paycheck to paycheck. It can also stop you from having periods where you go crazy with spending and end up blowing all of your money for the rest of the money

2
Cut Back on Your Spending

Getty Images

Once you have established a working budget, you need to begin to cut back on your spending. This will free up money for you to get out of debt and to put into an emergency fund. Once you do this and get rid of your debt, you will have money to spend each month. The challenge in the beginning is to find ways to save in nearly every category. As you get better at saving, you will be able to find even more ways to save and speed up the process.

3
Set Money Aside Each Month

Getty Images

The biggest way to stop living from paycheck to paycheck is to have money in the bank. You can do this by putting money aside each paycheck. For your initial emergency fund, save up between $1,000 and one month’s worth of expenses. Once you have gotten out of debt, you can begin building a larger emergency fund. This emergency 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 no longer feel the same worry and pressure as you deal with life’s challenges. Even if you start with just $50 a paycheck, you will start to feel more confident about handling your finances. Be sure that you ​don't dip into your savings once you begin setting it aside.

4
Get Out of Debt and Stop Using Your Credit Cards

Getty Images

Another way to stop living from paycheck to paycheck is to get out of debt. Your debt is eating up a portion of each paycheck. It can hold you back from doing the things you want to the most. You will not 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, even if you believe the rewards are worth the credit card. This will help you to really control and monitor your spending. Your budget will help you find the extra money you need to put towards your debt each month. Avoid taking out a car loan or other types of loans until you have paid off your debt completely. Your emergency fund can help you pay for car repairs and cover other unexpected expenses so that you no longer rely on your credit cards to get out of a tight situation.

5
Don't Rely on Bonuses to Get By

Getty Images

When your company offers regular bonuses, you may begin to rely on your bonus as part of your budget. Since this not guaranteed income and your company can stop giving out a bonus each year, you should never rely on your bonus to cover your expenses. Instead, you should create a spending plan for your bonus, and use it to reach your financial goals. You can use it to pay down debt more quickly or to create an emergency fund, but you need to work on those goals in addition to the money you get from your bonus.

Continue Reading...