When I graduated from school I had student loan debt, credit card debt, and a car loan.
Even though I worked full-time I was cutting it pretty close between my living expenses and debt payments. I got paid monthly, so I spent the last week of every month stressing out over my bank account. It was exhausting and anxiety-inducing.
I knew I had to break the cycle, but figuring out how to stop living paycheck to paycheck was tough.
When you’re living paycheck to paycheck
If you’re living on a tight budget, the idea of saving money can seem impossible to achieve.
Recurring expenses can devour a small salary, leaving you with not much to work with. But that doesn’t mean you’re stuck. Start small and keep at it consistently by following these four steps.
If you’d like to break the cycle and stop living paycheck to paycheck, read on to find out how you can save $1,000 in no time (even on a tight budget).
1. Track your spending
Before you can start saving, you need to know exactly where all of your money is going.
For at least two weeks, write down everything you spend in a notebook or a spreadsheet. Consistently keep track of the amount spent and what you bought each day. You can also try tracking expenses with an app.
Many people find they frivolously spend very small amounts of money. I know when I tracked my spending, I was amazed to see how much packs of gum, magazines, or fast food can add up.
Once you see where your money is going, you can identify areas where you’re wasting your cash.
You may still have a deficit — the amount of money you spend each month that surpasses what you bring in — but eliminating little treats can help close the gap.
Ultimately, this will make it easier to figure out how much extra money you need to make later on.
I had joined a professional group when I moved to another state. While it was worthwhile, once I found a job I didn’t need it anymore.
Yet I didn’t realize that, after an introductory period, they would charge me $50 a month to be a member. Once I caught the charge on my account, I was shocked I had just thrown money away on a service I wasn’t even aware I still had.
While auto-pay is convenient, when you are trying to break the cycle of living paycheck to paycheck, it can be dangerous.
When you sign up for subscriptions like Amazon Prime, Netflix, or other services, the monthly amount for each individual service might seem small. But add them all up and you could easily spend up to $100 a month without realizing it.
Review your bank and credit card statements every month. Look for any services that charge a monthly fee. If you do not use them, cancel them right away. That will free up more money in your budget to cover your deficit or give you a head start on your savings.
3. Pick one area to improve
Trying to be frugal in all things can be overwhelming. When I had my wake-up call, I was determined to follow every personal finance blog tip. And I may have gone a little overboard in the process.
I made my own laundry detergent, walked everywhere, and basically only ate rice and beans. It was awful, I lost a ton of weight, and my clothes looked funny. Doing too much at once was impossible and I was miserable.
Instead of doing what I did, choose one area at a time to make a difference. For example, if you notice you spend a lot of money on food, spend two weeks solely focused on reducing your food budget. Reinvent leftovers or use a slow cooker to create tasty meals for a low price.
Once you’ve made something a habit, then you can work on another area. Except you should skip making your own laundry detergent (it was a poor life decision).
4. Lower your debt costs
Debt can keep you stuck in the paycheck-to-paycheck cycle: You have debt that eats up your money, so you end up with a deficit in your budget. You have to borrow to cover your expenses, which increases your debt. Then your payments — and your expenses — go up, as well.
If this sounds like you, get strategic with your debts and look for ways to lower these costs. Look at one type of debt at a time and look for options to refinance or restructure those debts.
For credit card debt, consolidating with a personal loan or transferring the balance to a 0% interest credit card can lower interest rates and monthly payments. You can refinance student debt to a lower interest rate, or get on a new student loan repayment plan with smaller monthly payments.
5. Increase your income
Even after cutting my expenses back and tracking every penny, I still had a deficit.
After paying my bills and my living expenses, I was about $400 behind every month. There was no way to cut back any more, so I had to increase my income.
I took a lot of side jobs. From freelance writing to selling things on eBay and Craigslist, I did extra work whenever I could to make up the difference.
Eventually, I started bringing in about $500 a month in extra income. Not a fortune, but it was enough to fill the gap and allow me to put away $100 each month. Within ten months, I had $1,000 saved up.
When you’re living paycheck to paycheck, you can only reduce your expenses so much.
To get ahead, you ultimately need to increase your income. Here are some ideas to get you started:
- Ask for a raise
- Walk dogs
- Sell things on eBay
- Drive for Uber or Lyft
- Grocery shop for Shipt
- Babysit through Care.com
- Write or design things on Fiverr
If you can dedicate just a few hours a week to a side-hustle, you can increase your monthly income by hundreds of dollars. And if you transfer that money to your savings account, you can save $1,000 in just a few months.
Living paycheck to paycheck can be an exhausting experience. However, I also found that taking charge of my finances and working to increase my income gave me a greater sense of security and peace. It was a hard battle, but I was able to turn my financial life around.
If you are ready to end the cycle and start improving your income, check out this guide on launching a side hustle that pays up to $50 an hour.
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