Living Paycheck-to-Paycheck is No Way To Live
Do you understand where your cash is actually going every month? If not, then that is a warning sign that it’s time to evaluate your personal spending habits.
A lot of people avoid “budgeting” because they’re convinced they have a good handle on their cash. But quite often, individuals that are earning six figure salaries can not seem to escape the paycheck-to-paycheck lifestyle. A recent MetLife poll discovered that 49 percent of employees are “worried, anxious or fearful about their current fiscal well-being.”
This is a serious issue for American households.
Think about it this way: how often do you reach the end of the month and realize you spent the cash you had planned to save?
If you’re like most Americans, it’s probably most of the time.
Frequently, the problem is that people have no clue what they’re actually spending their hard-earned money on — and without paying attention at all, it becomes very easy to waste the money that you intended to save. Even worse, a lot of people wind up racking up credit card debt to keep up their present lifestyle.
Until you choose to start paying attention to where your money is going, the cycle will never end — and eventually, it is going to keep you from achieving your long term goals. Credit cards only last so long and the deeper in debt that you go, the harder it becomes to dig your way out.
There’s one very simple solution to keep your finances in order and avoid getting sucked back into this paycheck-to-paycheck lifestyle.
TAKE CONTROL OF YOUR PERSONAL FINANCES!
If you want to take control you have to understand where your money is going, and you need to give each dollar a purpose. Tracking how much cash is coming in versus how much is going out is the only way you’ll truly be able to truly get a grasp on your personal and family finances. However, to be able to do that, you must understand your patterns and routine — and what life adjustments you need to make. Knowing what’s going on with your money every day, month and week will be the key to making smart decisions. If you don’t pay attention now, it is going to be very difficult for you to accumulate a retirement savings, establishing an emergency savings fund and conserve cash for big purchases like buying a home or a car.
Take 3 Steps & Stop Living Paycheck-to-Paycheck
1. Set goals
Determine what your priorities are for the short and long term. For instance, purchasing a home, buying a car, a huge vacation, emergency savings, retirement etc. Your long term goals will often gets placed on the back burner if you don’t have a good handle on your finances..
2. Start Budgeting
Start by figuring out precisely how much money you have coming in and how much is going out.
Go through all your monthly expenses and figure out exactly what you’re paying each month for every one your recurring bills and obligations — housing (mortgage or rent), utilities, insurance, transportation, other recurring monthly invoices (cell phone, tuition, deductions such as cable tv, dinners etc.) and some other monthly debt obligations (such as credit card bills). Identify any areas where you can reduce what you are paying each month, and then create your own budget.
Start allocating your paycheck to different parts of your budget. If you would like to proceed the old-fashioned route, pay in cash for whatever you can, even using envelopes to divide your money and keep you within budget.
You can also set up accounts for every area of your budget and also have your paycheck automatically divide one of those accounts with enough cash to cover most of the expenses. Whatever is left should proceed into savings.
If you need guidance on creating your budget, here is a step-by-step guide and much more resources below.
3. Track Everything
So you have your set your goals and you have created a budget, which is a great beginning, but if you don’t monitor it, that’s when actually sticking to it becomes almost impossible.
Making a mental note of your spending isn’t going to be enough. There are great tools available that can help you follow your budget by tracking how much you are spending on each region and the progress you’re making toward reaching your bigger goals. And you can do it all right from the smart phone (or tablet computer or computer — whatever you prefer).