- Personal Finance
Break the Cycle of Paycheck to Paycheck Living
Most people in the United States, regardless of the amount of the paycheck, live paycheck to paycheck. Living paycheck to paycheck means you have no cushion in the bank and you are waiting on the next paycheck to pay the bills due. If you have extra money in the bank and can pay bills as they come without worrying about where the money is going to come from, then good for you. Way to go! You are several steps ahead of the majority in terms of being in control of your finances. Let's talk about how the majority of people can get to that point.
First and most importantly - do not spend all of your paychecks. Live below your means and make sure that you have extra money at the end of each pay period. Put money into savings each month to be a cushion to cover emergencies or unexpected things that pop up. I have found that it is the unexpected stuff that frequently blows a budget and creates financial stress. If you live below your means then you will have the money to cover this and over time have extra money in the bank.
Second, make a plan for your money. Figure out where your money needs to go each month based on all the bills that come in each month. It might take some time, but it will be worth it in the end. Once you know the set bills that need to be paid each month you can make sure you have the money in the bank ahead of time. After you know the set bills, figure out where the rest of the money needs to go. You know you need food and gas for the car. There might be school fees that come up, clothing needs, haircuts, gifts, etc. Decide how much is needed for those. If you end up with an amount larger than your income you have to cut somewhere. Trim as much as you can until you are living as far below your means as you can.
Once you have done these two things you will quickly build up a cushion in your checking account so that you are not living paycheck to paycheck anymore. When you get a nice cushion then start building your savings. Unexpected expenses can ruin the best laid plans. Try to anticipate everything you can and set money aside ahead of time. For instance, I know that our car insurance is due every six months. I set money aside in a savings account each month to cover this bill. It isn't an emergency when the car insurance bill arrives. You shouldn't have to scramble to cover it. Planning ahead for everything you can will make your life much less stressful.
You will find that planning ahead for as much as you possibly can, living below your means, and having a plan for your money (a budget) ahead of time will make living a lot easier. You will no longer have the financial struggles you have living paycheck to paycheck. Once you reach this point you can relax and enjoy life a whole lot more.