How to Stop Living Paycheck to Paycheck


If you find yourself living paycheck to paycheck each month, it may feel like a never-ending battle to stay on top of your finances. You can get ahead, however, no matter what your income. Get organized, take control of your finances and stop living paycheck to paycheck.

Establish a spending diary where you record every penny you spend every day, and examine it carefully and honestly. After a week or two, you'll have a better idea of where some of your money is going. For example, many people buy a cup of coffee in the morning from a convenience store or specialty shop, paying from one to several dollars. A cup of coffee prepared at home, though, costs significantly less, saving you hundreds of dollars a year. Snacks and meals you purchase during the day also represent a significant unnecessary expense. If you purchase music or apps online, keep careful track of that spending as well.

Review your regular bills with the same objective of identifying and eliminating unnecessary spending. If you have a programmable thermostat, make sure it's programmed to economical settings when nobody is home. If you pay for satellite or cable television, eliminate premium channels and special programming that you rarely, if ever, watch. If you spend a great deal of time watching TV, consider replacing costly and limited premium TV options with services like Netflix and Hulu that let you watch a broad range of programming. Likewise, make sure your Internet service isn't more than you really need, and seek out less-costly cell phone service that doesn't require a contract.

Create a budget after you've started to identify and eliminate some of your unnecessary spending. Prioritize the items by first listing all the recurring and necessary expenses such as housing, utilities and any outstanding loans. Next list all your credit card bills. What's left over after spending on these items is available for groceries, clothing and entertainment. When you reduce or eliminate an expense, make a note of it on your budget and note how much you're saving -- that is, how much is now available for other categories, or for saving.

If your budget reveals that your expenses are larger than your income even after eliminating the unnecessary spending, you must increase your income. If you work on commission, this may involve working more hours to make more sales. If you're paid hourly, you can work overtime if it's in the company's budget; otherwise, you can get a second job. Even though the pay might be low, it will help you bring your costs under control.

Set goals for paying off loans. Car payments, student loans and credit cards eat up a lot of your monthly income. One approach to eliminating debt is to make the minimum payment due to each item except the one with the highest interest rate, to which you pay as much as you possibly can. In most cases, those debts with the highest interest rates will be credit cards. Once you've paid off the most expensive credit card, shift the extra payments to the next-highest interest rate, and so on. Another approach is to pay off the card with the smallest balance first. You won't save as much money, but you'll get the momentum of cancelling one or more bills quickly.

Learn to live within your means and to recognize and avoid impulse spending opportunities. You can do without the new designer jeans or the concert tickets if they are not within your budget. You can also find good bargains on clothing, housewares and furniture if you shop at garage sales and thrift stores from time to time. Many people find themselves living paycheck to paycheck because they don't know and recognize their limits.

Develop thrifty habits like using store coupons and purchasing items when they are on sale. Save on energy by remembering to shut off lights when you leave a room and save on gas by walking to close-by places.

Avoid unnecessary fees. Most bills incur late fees if not paid by the due date, and some offer a discount if paid early. With some bills, especially credit card bills, late fees are only part of the cost of not paying bills timely -- even a single late payment can dramatically increase the interest rate you pay for that card and for some others as well; in addition, late payments adversely affect your credit score, making it more costly to obtain credit in the future.

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