A lot of pressure comes with living paycheck to paycheck. With no money to fall back on, any unexpected costs or emergencies could prove to be financially devastating. However, you don’t have to live that way forever.
By being smart with your money and taking control of your finances, you can build up savings that provide you with some relief.
Here are three tips that can help empower you financially and end your paycheck to paycheck lifestyle.
Create a budget for yourself
A budget is a key part of any effective financial strategy. It’s a tool that helps you track your spending, save money, and work towards both short- and long-term financial goals. With a well-organized budget, you’ll know exactly how each of your hard-earned dollars are being spent and be able to see where you can cut down on spending.
If it’s your first time making a budget for yourself, consider starting with a zero-sum budget. This means that when you subtract your monthly expenses from your monthly take-home income, it should equal zero.
To be clear, this kind of budgeting doesn’t encourage you to spend every single penny you make in a month. Rather, the idea is to give each dollar a purpose, a place to go.
So make a list of all your expenses in a month, from rent to food to car payments to entertainment. Add it all up and subtract that sum from your monthly income. If you have any money left over, then you must decide to do with that as well. You could use it to pay off debt or put it in a savings account, but it’s ultimately up to you.
The point is that you want to get organized and create a plan for how you spend all of your money in a given month. If you need some assistance in designing a budget or tallying up your expenses, there are many free online budgeting tools out there. And just remember that creating a monthly budget is pretty simple—sticking with it is the part that takes self-restraint and discipline.
Eliminate any debt
Being in debt can be crippling to your lifestyle. When a chunk of each paycheck is being allocated to debt payments, it can really limit the amount of freedom you have with your finances. Plus, if you can’t pay some of your debts on time, interest rates can cause them to snowball into larger and larger amounts.
So how do you get rid of your debts? First of all, stop borrowing money. You need to stop using your credit cards and adding to your debt, at least for the time being. Perhaps this isn’t an option, though, in which case you should pick a single credit card and only use it for purchases that you know you can pay off on time.
As far as how to get rid of existing debt, there are a number of ways to go about it besides just flat-out paying it off. In many cases, you can reach out to creditors and negotiate your debt down to a lower amount.
For instance, if you have a tax debt you can fill out an Offer in Compromise application with the IRS. An Offer in Compromise allows you to settle your debt for less than you owe if you’re unable to pay your full tax liability.
Find places to cut costs
Take a hard look at how much money you’re spending on a monthly basis and see if there are any areas where you can cut costs. Creating a budget that takes all of your expenses into account will help you with this analysis, but you can also just make an effort to think about your needs versus your wants.
Try reviewing your largest expenses and see if there is any way you can save money. For example, maybe it would be cheaper to utilize public transportation rather than purchasing and maintaining a car. Or maybe, rather than living alone, you can share a place with some roommates or move in with family.
These options may not sound very appealing to you but, if they allow you to save money and build financial security, it might be worth it in the long run.
It can take a long time to break your spending habits and build wealth, so be patient. Massive changes won’t happen overnight. But if you actively work at improving your financial situation, you’ll be more likely to see positive changes, little by little.
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