Hooray! Payday has arrived. Time to get that new gadget you’ve had your eye on and maybe go out for a nice meal.
But wait- first things first. You have to pay your rent/mortgage. Oh, looks like utility bills are due too. You also have some monthly subscriptions that auto-draft next week. Still have room in the budget for your wish list? Maybe next payday…
According to CNN Money, more than 25 million middle class American families are stuck in the vicious circle of living paycheck to paycheck. Because most monthly incomes go towards fixed and flexible spending, there is not much left over for savings and asset allocation.
It can be difficult to live like this, but breaking the paycheck to paycheck cycle is possible. Here are 6 steps that will help you break the cycle:
1 – Pretend you earn less than you do
Easier said than done, but by simply “cutting” your paycheck you can be on your way to breaking the paycheck to paycheck cycle. Once you commit and start having money left in the bank at the end of every pay cycle, you will begin to be better about your finances. You can begin putting some away whether it’s for that new gadget or an upcoming vacation. Just make sure to start small by setting aside 10% of your paycheck. Try setting up an automatic transfer to make it easier.
2 – Create a budget
Take advantage of the budget planners and trackers that are available online. They offer an organizational advantage and consistency. Try one of the FREE Frugal Fanatics templates.
3 – Build an emergency fund
Unexpected household repairs? Medical bills piling up? Even if it’s small, it’s important to have some money aside for when emergencies happen. Tips on how to build your emergency fund. Also, consider using TitleMax®. We help our customers get the cash they need every day. Let us help you in your time of need.
4 – Consider downsizing
If your flexible spending is already very low, you may want to consider a lifestyle change. That may mean dropping the gym membership and opting for at home workouts, moving to a smaller, less expensive home, or eating out less. Think about where you can trim your budget and go from there.
5 – Pay down debt
Debt is the main cause of a paycheck to paycheck lifestyle. The sooner you can get out of debt, the sooner you can break the cycle. Make it a goal to pay off your debt immediately. Try maintaining all debt minimums but one. Pay double or triple the minimum on that particular debt. Once it is paid off, move onto the next.
6 – Don’t forget the future
If you have access to a 401(k) or IRA at work, take advantage of it. Start at 3 or 4 percent, and increase as you become more comfortable. Also, if there is a company match, take full advantage of it. If not, you are leaving free money on the table.