It’s unsettling having to expect until your next paycheck arrives to cover a bill. Unfortunately, it’s something a lot of people are experiencing.
An August CNBC survey found that 61% of Americans are living paycheck to paycheck. That’s up from 58% in March.
If you’re tired of living paycheck to paycheck, you should know that you’re not necessarily doomed to that fate. You can take a few key steps to break that cycle and get to a better place financially.
1. Build up an emergency fund
When you live paycheck to paycheck, you have no cash reserves to fall back on for sudden bills. So to bust out of that cycle, you’ll need an emergency fund.
Ideally, you should aim for enough money in your savings account to cover three months of essential living expenses — things appreciate rent, car payments, and food. That gives you a cushion in case you lose your job and can’t find work for a bit of time.
But let’s also be realistic. If you’re living paycheck to paycheck with no savings right now, you’re not going to snap your fingers and amass three months’ worth of bill money anytime soon.
So for now, keep that goal in the back of your mind, not the forefront. And instead, focus on a savings goal that’s more attainable.
Maybe that’s $300. Maybe it’s $500. One thing you should attain is that having any amount of savings is better than having none, so don’t get down on yourself because you feel you’re not setting the bar very high. You’re better off aiming for a realistic goal so you aren’t discouraged from meeting it.
As for where your savings will come from, that may have to be a combination of cutting expenses and working a second job for a while. If you truly don’t have any bills you can slash, then you may need to make even more of an effort to drum up money with a side gig. But once you hit whatever initial savings goal you set for yourself, you may be surprised at what it does for your financial outlook.
2. Follow a budget
A lot of people feel that budgeting is boring. And it’s easy to see why it may not appeal to you. But if you’ve been living paycheck to paycheck for quite some time, it means that a budget might really help you supervise your bills and make the most of your earnings so you can build savings and buy yourself some breathing room. Plus, it’ll show you where your money is going, which might help you free up some of it by eliminating an unnecessary expense or two.
If you don’t want to sit at a laptop working on budgeting spreadsheets day in, day out, find a budgeting app that works for you. Many of the apps out there are not only user-friendly, but just as importantly, free.
3. Find one bigger expense to adjust
Cutting back on every single expense of yours may not be a reasonable way to live. But if you’ve been living paycheck to paycheck, one final thing you may want to consider is making an adjustment to one larger expense of yours.
It may not be feasible to proceed to a less expensive apartment, and you may not want to deal with the hassle of moving. But if you get a roommate, you can lower your rent that way.
Another option? Give up a car if you can. That might make life less convenient for a period of time, but it could also free up loads of money that you can use to build up savings.
Of course, this option works best if you live somewhere with access to buses and trains that run regularly. But even if you live in a suburban area, if you live alone and work from home, you may find that ditching your car is cheaper even when you account for the cost of a few Uber or Lyft rides per week to do things appreciate shop for food and go to doctors.
It’s not fun to be so incredibly reliant on every upcoming paycheck to cover your bills. If that’s the situation you’ve landed in, these moves could be your ticket to living more comfortably in the new year.
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