Is your wallet or bank account empty by the end of the month? Are you struggling to meet ends meet? Well, you are living paycheck to paycheck. Having the money in our bank account at the start of the month feels so satisfying. But most of the time that satisfaction doesn’t last long as by the end of the month there is nothing left. Living paycheck to paycheck often leaves us in a place where we are consistently running out of money before the next paycheck arrives. This article explains about the meaning of Living Paycheck to Paycheck.
It’s bad to live that way. It hampers the prospect for a better future and leaves us with no money during emergencies. It’s better to always save a little for emergencies and the future. But does your paycheck not allows you to do that? Are your expenses out of your control? It’s time you break the cycle and save a little. Here’s how you can break the cycle of living paycheck to paycheck.
What is Living Paycheck to Paycheck?
Living paycheck to paycheck refers to a situation where you spend all of the money from one paycheck even before receiving the next paycheck. Such a way of living translates to a situation where you will be unable to meet your financial obligation in case of unemployment. It is like spending all your salary and having nothing left by the end of the month or saving anything at all. This leads to higher financial risk as you may not have any cushion to fall back on (savings) during no-income days.
Low salaries, higher living costs and improper financial planning may lead to such scenarios. Creating a budget, cutting down on unnecessary expenses, having a side gig, and saving any bonus income or tax refund can lead to better financial planning. All these small habits can help you start saving and creating a good corpus.
Living paycheck to paycheck may lead you to unnecessary borrowings to get through the month. To be able to meet certain expenses, individuals may get into borrowing money at higher costs. Ultimately, paying off this debt will greatly impact your financial status. Thus, rather than putting yourself in such a position, you should start planning and budgeting your finances in the best way possible. Forgo all unnecessary expenses and luxuries. Focus only on your needs till your financial position gets better.
How to Stop the Living Paycheck to Paycheck?
1. Major Lifestyle Changes
Your focus should be on downsizing. Cut your expenses. This needs major lifestyle changes. Move to a smaller apartment with lesser rent or share your apartment with others to split the rent. Stop that expensive gym membership and go out for jogging or running. Stop spending money on coffee and make one on your own and carry it to work. Make your own meals than ordering it out. Use public transport like a bus or a metro instead of cabs. Instead of buying a newspaper, read one that’s available at work. These small changes make a big difference.
2. Create a budget
Create a budget and write down all your expenses and do not exceed the budget. Track your spending and you will know where you are spending excess and you can cut down on that extra expenses. Save first from your salary and then spend the rest. This will inculcate the habit of saving. Include savings in your budget first and gradually increase the amount of savings and then move towards investment.
3. Pay off debt and stop using credit cards all together
Pay off the debt first. The most debt you will be having if you are living paycheck to paycheck is credit card debt. So stop using them altogether. This might sound crazy but it will help. Without you knowing you are paying a lot to the credit card companies. They charge the highest interest and it is consuming most of your paycheck. Hence do yourself a favor and cancel your credit cards. Once you take control of your finances you can get a credit card and use it responsibly. Before even thinking about saving payoff your debt completely.
Having an extra source of income will help you. Living paycheck to paycheck gets exhausting. Having extra income helps in covering expenses and helps you save. Go get a new job which will help you save. Use your talent to get an extra job maybe during the weekends or before or after your actual work time.
5. Create an emergency fund and invest for your future
Once you are done paying all your debt to have an emergency fund and keep adding to it till you have at least 6 months of expenses covered in it. Then move on to get insurance – both life and health. Then divert your savings towards your future. Invest in the future. Have financial goals and invest in achieving them. Mutual funds are an excellent investment option that helps you invest in small amounts regularly through SIP. Visit Scripbox to know more about them.