Start A New Year And Stop Living Paycheck To Paycheck
For a great many Americans, living paycheck to paycheck is, and has been, a way of life for longer than anyone wants to remember. If you find yourself frequently having to borrow money from friends and family, take out cash advances, or use credit cards to cover basic essentials like groceries and gas, then you’re in this scenario.
The good news, however, is that it’s possible to stop living this way. But first, it’s important to understand why living paycheck to paycheck is so dangerous.
Dangers Of Living Paycheck To Paycheck
If you’ve been living on the edge of financial instability for awhile, you’re likely all too familiar with the pitfalls and obstacles that come with it. But for those who may not know already, living in this kind of scenario makes you susceptible to a broad range of financial damage that is not easy to recover from.
Common problems that occur from living paycheck to paycheck include:
- Credit card and/or loan debt accumulation
- Lack of personal savings
- Inability to invest for the future
If you can’t afford to put gas in your car, you likely can’t afford to start a savings or retirement account. And if you’re spending all your disposable income on debt payments, you’ll never be able to save up enough to pay off your balance.
How To Fix The Problem
From a purely financial perspective, if you’re living paycheck to paycheck, it means you either have too many expenses, not enough income, or both. Here’s what to do:
1) Create A Budget
Having a clear, realistic budget is absolutely critical to start climbing your way into a more secure financial situation. A budget tells you in black and white if you’re making enough to make ends meet.
2) Track Your Spending
It’s always a good idea to know where your money is going, and to keep track of it as much as possible. Start by saving receipts, or downloading an app, and seeing which categories – like food, gas, groceries, entertainment, etc. – your money is going to.
3) Decrease Your Expenses
Once you know what your budget is (or should be) and where your money is going, you can start making some decisions about where to cut back. Be aware that doing this may require some lifestyle changes, like drinking less Starbucks or eating out fewer times each month.
4) Increase Your Income
This is almost always easier said than done, but it still merits consideration. If getting a raise and/or promotion is off the table, side jobs, working online, or even selling things on sites like Ebay and Etsy can be viable revenue streams.
5) Educate Yourself About Money
Many people who struggle with money also have only a passing familiarity with how the financial system actually works. Learning about the basics, like how credit and debt work, what a retirement plan is, and how to invest your money will give you a lot more confidence as you put a plan together.
Talk With A Professional
Everyone needs some advice at some point in their lives. If you’re struggling with money and find yourself living paycheck to paycheck, consider speaking with a financial planner to get a point in the right direction.
At Miles Brown Asset Management, we work with clients at every stage in life, across a wide range of income levels, to help them plan, save, and invest for the future. If you need help getting your money situation sorted out, please call us or request a free consultation today.
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