Living paycheck to paycheck is no joke and no fun. It is filled with dread, worry, and copious amounts of stress and it is a struggle to find balance in order to keep money flowing to the end of month. This is a struggle that I personally know all too well.
I was once drowning in over $11,000 of credit card debt alone and was very much so living paycheck to paycheck hoping that I would not receive an eviction notice on my door. This struggle apparently was not exclusive to just me, even though at the time I thought I was the only one struggling. How do you stop living paycheck to paycheck and start reaping the benefits of having a fully funded emergency fund, money for retirement, and manageable expenses?
It took about a year for me to completely stop living paycheck to paycheck. There are three strategies that I used to regain control over my money to make the ends finally meet.
This is an obvious first step for anyone attempting to gain control over their finances but a super necessary one nonetheless. Budgeting does not have to be rocket science or follow some complicated math formula; you simply just have to do it. Start by writing down your monthly income, followed by your monthly expenses, and then subtract the two. This will give you a clear picture of what your expenses look like, your expected income and if you are in the red or not.
If you’ve never created a budget before, I encourage you to check out The Quick Start Budget which is the FASTEST way to get started budgeting – seriously, you’ll have the budget created in no time!
If you like real-life examples of budgets, head here to read our family of five’s 2016 actual budget – yes, our real budget.
2. Emergency Fund
This by far has saved us from certain financial failures and disasters many times. An emergency fund is essential to healthy financial living – seriously, your financial health depends upon you being able to afford an emergency. It doesn’t matter if you’re trying to pay off debt, plan for a baby, save for retirement, or just take a family vacation – without a savings account to buffer the blow of life you’re going to struggle to afford the basics of life.
So, I can’t encourage you enough to make this a priority in your life – start saving and building up your emergency fund today. Start with a $1,000 and then work your way up to the next level. The goal is to have at least 3 to 6 months of living expenses saved. If you have irregular income you will want to have 6 months saved since your income is less predictable.
3. Half Payments
This is a little trick I started doing after I had a little money saved up. I would take my expected payments and divide them by half (I was being paid bi-weekly) and in my checkbook register I would write out the half payment and subtract the money from my account.
Example: divide a $300 car payment into two $150 payments. Whenever your bi-weekly check is paid to you, immediately take the $150 out of your checkbook register (or whatever expense tracking system you use). This way you always have the money ready to pay when the bills came due and never have to run around searching for ways to bring in more money before the month end. To see this process in more detail, head here to read the full post.
4. Pay off Debt
Okay, so I know the post says that there are just 3 strategies and the three above are in fact the ones I used all those years ago to stop living paycheck-to-paycheck, but I can’t finish this post without mentioning that if you want to further keep the paycheck-to-paycheck cycle happening again, you need to dump the debt.
Yes, that means no credit cards. Yes that means living frugally for awhile so you can pay off as much debt as possible. Yes, that means it won’t be easy but as a family of five that has paid off over $55,000 of consumer debt (in just 2 years!), we are living proof that life is so much easier to live when don’t have to rob Peter to pay Paul.
Start today to put an end to the paycheck to paycheck trend and save yourself financial hardship.
How did you stop living paycheck to paycheck?
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