Are you consistently running out of money before your next paycheck arrives? Do you always find yourself borrowing money from friends or relatives, or taking payday loans or cash advances, until your next payday? Then you’re living paycheck to paycheck.
Why Living Paycheck to Paycheck Is Risky
Living paycheck to paycheck is actually risky. It means you’re susceptible to financial damage. It’s easier to accumulate a lot of credit card debt or worse, payday loan debt. The more credit card debt you accumulate, the higher your minimum payments will be. Before you know it, you won’t be able to afford your minimum payments and you won’t be able to borrow more money to make ends meet. Because your future is dependent on your current spending, you have to stop living paycheck to paycheck now.
Tips to Help You Stop Living Paycheck to Paycheck
Start by creating a budget.
- A budget helps you plan how to make the most of your income. Creating a budget lets you know ahead of time whether you make enough money to make ends meet. If all your expenses fit within your budget, then your income is enough and your spending is the problem.
Track your spending
.You may also need to track your spending to figure out where your money is going. Save your receipts for a few weeks. Separate them into categories like gas and food, then add up receipts for each category. This will let you see where you’re spending the most money. If you have online checking and primarily use checks and your debit card, you may be able to download your transactions into Excel or finance software like Mint.com.
Cut your expenses
.Once you figure out where the money is leaking, you can start plugging the cracks. This process might require some lifestyle changes. You have to let go of some luxuries because if you’re living paycheck to paycheck, you really can’t afford it.
Increase your income
Increasing your income isn’t always a possibility, but there are options outside getting a raise. If you typically get a tax refund, you may be able to change your tax withholding and get more money in your paycheck each month. Of course, that will mean you get a lower refund (if you get one at all), but you’ll have more money to use during the month. You might also consider working part-time or making money on the side with a hobby. However, making more money won’t always solve your paycheck to paycheck problem.
Change your attitude about money
Often people who live paycheck to paycheck don’t make the wisest spending decisions. They sometimes overestimate how much money they can spend and end up spending more money than they really make. You may find yourself spending more money on things you want than things you need. Or, it could be that your money is slipping through cracks you didn’t know were there. Whatever, the case, setting up a budget and paying close attention to your spending will help you get back on track.