Updated: Jan 26
Sometimes you need to make difficult choices in order to stop living from one paycheck to the next.
By: Allan R Kirby
Are you ready for any unexpected expenses that may come in? Will you be stuck using a high interest credit card just to get things paid? If so, this can lead to a situation where you get further behind and run up more debt and continue to overspend each month. Living Paycheck to Paycheck is a situation that nobody wants to be in. Sometimes bad things happen to the best of us and we land ourselves in this type of situation. I was certainly in that position when I was in school and it’s not fun. In fact, I found it can put an immense amount of pressure on a person and for some it can even be a major contributor to health related issues. In my situation, I came to the conclusion that I needed to get myself out of a hole and this entailed making tough decisions. I really needed to do this because the stress at the time was affecting my relationship with my family and friends and that was what I hated most about my situation. The process was much harder than I thought. It meant building up basic financial skills, but in the end I was successful, so let’s see what can be done.
“Time to make the tough choices"
Controlling expenses by cutting spending
Cutting spending will help control your expenses and it is the first thing you need to do because it will have an immediate impact on your finances. You need to really look at the things you buy each week and determine what can be cut. For example, going out to restaurants and buying drinks and/or buying expensive coffee every morning can be cut. I know it sucks, but I learned quickly that you need to sacrifice in order to succeed. This means learning to make your own coffee and preparing your own lunch; it takes more time but it’s worth it. Keep in mind, this may not be easy for some of you, but cutting back is a necessity in controlling expenses or at least slowing down the spending will get you on a better footing. This may mean some lifestyle adjustments, but I recommend a slow withdrawal if possible. This has less impact and helps facilitate a higher success rate.
Pay your credit card debt
I think we are all aware of the importance of not carrying a balance on a credit card. The high interest fees can cost you a substantial amount over time. One myth that has cropped up, from some people I have talked to, is the assumption that carrying a balance on a credit card improves your credit rating. This is not the case and could ultimately affect your credit score if you are just paying the minimum payments all the time. So please ensure you pay more than the minimum and get your cards paid off.
Learn to budget effectively
I have found this takes time. People need to learn how to budget and manage money, but it’s a slow process. If you have never done it, it is not a one day process and everything is good. It took me about two months of learning and adjusting to come up with a budget I could finally follow. I will reiterate this time and time again, financial management is a journey not a sprint. For most people, find a way to create a simple budget and follow it. Do not worry if you make mistakes or need to adjust. It just takes time to understand the process. Using simple excel or google templates will work best for most. I would initially avoid trying more complex software, I have seen too many people, including myself, get frustrated because it ends up taking hours to set everything up and it may be overly complex for beginners. Try Microsoft, they have many free templates MS Office
Save a little for each pay
I cannot stress this enough. Pay Yourself first. This means that every time you get paid, put some money aside for your savings and retirement. For many people it’s best to set up automatic transfers the day you get paid. That way you can ensure you have money set aside before you spend your money or pay your bills. You have guaranteed you have saved and not spent the money; think of it as an extra deduction on your pay.
Seek Help from professionals or DIY.
It’s important to know that personal finance can be difficult so I will always advocate that readers seek out a money coach or visit a financial institutions to talk to a financial advisor if you so choose. Doing nothing will not solve the problem. So, if you’re a DIY type of person, do your research and try and see if you are successful. However if you find it’s just too difficult, then seek out a professional that can help you out. Regardless of the path you decide to take, you will still have to make difficult choices in order to stop living from one paycheck to the next. That is not avoidable, lifestyle changes are normally needed when people struggle with their finances.
“Sometimes you may end up liking the changes you made".
The reality is that difficult choices have to be made when living paycheck to paycheck. It can mean changes to your lifestyle but over time you may find it’s not that bad at all. I began to adjust and found that I could easily live without having to go to the restaurant every day. In fact, preparing my meals actually was not as bad as I thought it would be and making my own coffee made me realize I can make a good cup of coffee. To this day I still make my own coffee every morning.
This is a MySmallBank.com blog written by Allan Kirby, who writes and produces Personal Finance articles and videos.