Money is an emotional thing.
For something that is supposed to be so cold and impersonal, money can elicit some raw and varied emotional reactions. The unadulterated joy you experience when finding a $10.00 bill in your winter coat pocket hiding away from last year. The sheer disappointment of an unexpected bill. The utter rage at an unwarranted bank fee. The euphoria of an unexpected bonus at work.
Money can make us feel so many things.
Yet of all of the emotions that money can make us experience, there is one that is more impactful and frightening than all of the rest: The fear of not having enough money to pay your bills.
Living paycheck to paycheck was a reality for my family for a LONG time. The age old saying of “robbing Peter to pay Paul”, yeah I know it all too well. From watching my single mom struggle through it to dealing with it in my adulthood.
It took me and my husband a while to learn how to break the cycle. Now, we make it a point to budget and keep spending in check in order to successfully stop living paycheck to paycheck.
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Direct Result Of Living Paycheck To Paycheck
There have been scientific studies that have shown the significant emotional and physical damage that an individual and their family experiences as a direct result of living paycheck to paycheck.
The stress that comes with living paycheck to paycheck has been directly linked to heart disease, depression, anxiety, alcoholism and other addictions, and obesity. Financial insecurity is terrifying, and the damage can impact families for generations.
The impact and suffering aren’t limited to families living below the poverty line, either. Even families who make a decent middle-class wage can be devastated by living paycheck to paycheck.
The damaging factor is not the size of the paycheck that the family brings in, but rather the stress of not having enough money to pay out.
The question then becomes, “How do we stop living paycheck to paycheck?”
The good news is that anyone, yes anyone, can stop living paycheck to paycheck. With a little effort and a lot of personal dedication, any family can improve their finances, better their health, and create a more sustainable future for themselves and their family.
Here are ten steps to create long-term financial stability and free you and your family from living paycheck to paycheck.
1. Create a budget
You’ve heard the expression, “A failure to plan is a plan for failure.” The same can be said for your money. Money is an unthinking, unfeeling, uncaring inanimate object – it does exactly what you tell it to do. Money does not up and walk away from your bank account on its own; it goes exactly where you tell.
The best way to prepare yourself for financial success and to end the paycheck to paycheck cycle is to create a plan for your money in the form of a budget. Being intentional with your money is crucial to having enough money at the end of each month.
2. Make some important choices
With budgeting, however, comes the needs to make difficult decisions. More than likely, upon creating your budget, you will realize that you are spending more money than you are bringing in.
The only way to stop living paycheck to paycheck is to live on less than what you make – it’s fairly simple. What isn’t simple, unfortunately, is deciding what to keep and what to cut in your spending.
It is critical that you look at your spending and decide what items are a need (food, shelter, water, electricity, medicine, savings), what is helpful (new clothes, cable tv, salon services, make-up), and what is expendable (concert tickets, eating out, subscription boxes).
While you are getting yourself into a financially stable place, it is important to cut out the expendable items, choose a couple of the helpful items, and ensure the needs are covered. Once you are in a better financial situation, you can start to add more of the non-essential items and fun items back.
3. Start an emergency fund
Listen we all know stuff happens. When you are living paycheck to paycheck, having an emergency happen can lead to utter devastation. Building up a small emergency fund of $500 to $1,000 will allow you the flexibility to handle most unforeseen circumstances or emergencies without putting your personal or financial safety at risk.
The emergency fund, however, should never be touched for anything other than an emergency. Add additional funds to it if you wish, but never take the money out unless it is a true emergency. Having this safety net will provide peace of mind and financial security.
4. Pay off debt
You cannot lead a fiscally responsible life while in debt – it cannot happen. Going into debt is a symptom of living beyond your means, and if you are constantly living beyond your means, you will always be living paycheck to paycheck. If you are already in debt, create a plan to pay off the outstanding balances quickly.
Pick one credit card at a time and throw all of your extra money into paying it off until it is gone. Once you eliminate that credit card, take the money you were paying in monthly fees from that card and attack the next debt. Keep doing this until all of the money you were spending on debt is money you can put into savings.
5. Practice a No-Spend month
There are thousands of websites and tutorials on how to practice a ‘spend nothing’ month. The idea is simple: Do not spend a single dime outside of your mandatory bills for an entire month.
Set a modest food budget, identify your transportation costs, and pay your regular bills – and nothing else. At the end of the month, you will have a large chunk of change to throw into your savings that otherwise would have blown away in the wind.
6. Meal plan like a pro
Speaking of food budgets, meal planning could be the key to your financial freedom in the future. The average family of four spends $80 on a single meal out – even fast food dinners range in the $50 range.
By meal planning, you can take the money you would have spent on ONE meal dining out and create an entire week’s worth of breakfast, lunch, dinner, and snacks. If you cut even a single meal out a week, you could save upwards of $3,800 a year.
7. Save your raises, extra paychecks, and bonuses
Raises, bonuses or extra paychecks are like a gift from the heavens – sudden cash that previously didn’t exist. The best thing you can do for yourself is to continue to live off your current budget and place the new money directly into your savings.
You’ll be forcing yourself to live within your means while boosting your savings – all without sacrificing a single thing.
8. Drive a used car
Cars are a terrible investment, and car payments can sink your budget. The minute you buy a car, it depreciates drastically in value, and your car payments will never reduce to reflect that.
Paying cash for a reliable but inexpensive used car can save you thousands of dollars a year in car payments and thousands more in insurance premiums.
Worried your car will break down? See #3 on this list.
9. Consider a side-hustle
While you are getting your financial foothold, it might be necessary to find a side-hustle to bring in a little extra cash. Babysit, drive a car, clean houses, or any other side job you can think of, and then take that money to boost your savings or kill your debt until you are in a secure situation.
10. Schedule your celebrations
Plan one day a month to celebrate your achievements. While getting serious about your financial circumstances never splurging can be exhausting and daunting. It can be hard to stay motivated and it most likely won’t be sustainable if you never allow yourself some fun.
But you need to budget for it. Plan one day a month to either go out to eat, see a show or go on a road trip. Do something to remind yourself why you’re on this road to financial freedom: To live a life not tied down to money.
Stop The PayCheck to PayCheck Cycle For Future Generations
One thing that I have learned from my poor money habits is that I don’t want my children to have to struggle the same way I did. Financial literacy was not something that was taught or much less discussed in my home while I was growing up.
I am determined to break the cycle of living paycheck to paycheck by making sure to educate my children using the Family Money School on the importance of budgets, living within their means, and saving for rainy days. Financial literacy is such an important life skill for kids and teens that isn’t given enough attention, at least in my humble opinion.
Making Ends Meet Without Ending With Nothing
While one of the worst feelings in the entire world is fearing the calls of a debt collector or deciding between the electric bill or your child’s dance classes, one of the greatest feelings is knowing you have enough money in the bank for an emergency.
Reaching the financial stability where you have no debt holding you down, and the freedom that comes from realizing that you have money to spare every week. Improve your health and happiness by improving your financial outlook – it isn’t as hard as you might think.
I would love to know what strategies you have used to stop living paycheck to paycheck. Follow me on Facebook or comment below!