How To Mitigate Living Paycheck To Paycheck

Surveys show that many people are living paycheck to paycheck more than ever before. It is not because people are not making enough money to cover their bills. But the increase in personal debt has double the trend for many people living paycheck to paycheck in recent years. But what does living paycheck to paycheck means? It means that your monthly income only covers your expenses and nothing left to save or invest. You could be making more than $150,000 but can still live paycheck to paycheck if you’re buried in consumer debt.

Here are ways to break the paycheck to paycheck lifestyle.

Know your Bills

It is wise to know precisely how many bills you pay every month. Most people will have (Mortgage or Rent, Insurance, food, and Electric bill) expenses. Other expenses may include loans, Internet, Cable, Medical bills, credit card, transportation, personal care, entertainment, and gym membership. Taking a hard look at your bills will help you decide and devise a plan to downsize or eliminate some of your expenses.

Track your spending

The best way to track your spending is to pay attention to the monthly outflow of your income. It involves knowing your regular monthly expenses plus all the money you spent on things rather than your standard bills. Another way to track your spending is to study your account statements, as this will you to see where your money is going. Then you can create a plan or a solution to pay off some of your expenses like student and car loans or credit card debt and build your savings. 

Make savings automatic

Making money is hard. Saving money is even more challenging, but anybody can do it. There are better strategies you can use to curve your financial habits. One of the ways to save money effortlessly is to make your savings automatic. Making automatic direct transfers from your work to your saving account is a sensible way to save money and break the paycheck to paycheck cycle. 

Open Saving account in a separate bank

Automatic direct transfers to your savings account will work well if you have a savings account in a separate bank rather than the bank you are paying your bills. Having a different bank will help if your spending is based on how much money you have in your checking account rather than following a budget. Therefore, having savings account in a separate bank limits the urge to spend your savings. Another advantage is that access to your saving account will be limited, leaving it to grow. It is true that if you have a saving account in the same bank, there is a high chance that you will invade your savings if your checking runs out of money.

Make more money

One essential part of breaking the paycheck to paycheck lifestyle is finding ways to earn extra money. If your expenses are more than your income, you seriously need to downgrade your lifestyle as living above your mean will only get you into more debt or the potential of becoming homeless. You can downgrade to a more affordable apartment/house or find a roommate. You can also get rid of that expensive car that is sucking your money out of your pocket in substantial monthly payments.  

It is sensible to take up a part-time or second job to boost your income and build your savings. But if you are making good money already and still caught up in the paycheck to paycheck lifestyle, you need to take a harder look at where your money is going. So, creating a budget will help identify where your financial problems are.

Here are some ways you can increase your earning potential, you can drive for uber or lift, deliver pizza part-time, do surveys, babysitting, selling stuff on Amazon, etc. My favorite way to make extra income is to start a side hustle business.

Avoid using credit cards.

The convenience of credit cards is a sure way to get you in debt faster. Credit card fees and high interest rates can bury you in debt if you have huge balances every month. The daily exponential growth of interest for these credit cards will keep you in a cycle of debt that can be hard to escape. The best way to keep more money in your pocket is to stop using credit cards to make purchases.

Make a budget

Following a budget is the key to breaking the paycheck to paycheck lifestyle. A budget is a financial plan that accounts for your income and expenditure for a specific period. It can help you create a plan to carefully spend your finances to pay off loans, stay out of debt, and build your financial future.