Living paycheck to paycheck has become quite common among working professionals.
You may have heard a lot of people saying they can only buy their needs and wants when the next paycheck arrives. This cycle is scary because it basically means you have little to no money left after you have spent most of the money from one paycheck, and thus need to wait for the next payday to make ends meet.
If you constantly find yourself running out of money and scrambling to cover all your bills per month, then you know that getting ahead financially seems like a far-fetched dream.
Having heard SO MANY stories from people living paycheck to paycheck, I’d even go as far as saying that this has become a financial epidemic.
When surviving from one paycheck to another feels like an endless cycle, it’s nice to know that there is a way out.
Sure, it takes a lot of effort and honesty to calculate your spending and to decide whether you need to spend less or make more money, but all of this comes down to breaking your big goal into smaller steps to achieve your goals.
The steps are not intended to be easy, but they can help you see those little things you need to address to break free from bad money habits.
9 Easy Steps to Achieve Financial Freedom for People Living Paycheck to Paycheck
1. Add up your debt
This step is one of the most important because it will let you analyze how much of your salary goes to covering financial charges from debt repayment. Once you’ve computed all your debt, why not use it as a motivation to break free from paycheck to paycheck living.
2. Track your expenses
If you don’t have a clear idea where your “essentials” money goes, or how you are spending your “extras” money, then it will be challenging to have more control of your current financial situation.
To be able to identify where your money is going, you want to add up all your bills including utility, rent, food, mortgage, medical insurance, transportation, and your debt repayment budget. The amount of money left is your “extras” money, which you normally spend on other things aside from your essential bills. To keep track of where your “extras” money goes, make it a point to write down your purchases, and then assess where your money went for that month.
3. Track your Credit Card usage
If you always use a credit card or debit card for your purchases, then keeping track of your spending should be easy, as you simply need to take a look at your credit card statement or bank statement.
You might find this step tedious in the beginning, but at the end of the day, it pays to know where your money goes so you can assess if your current salary is enough to cover your needs.
4. Assess how much you are making
A low wage and high cost of living is never a good combination. What’s worse is that even when there’s a salary increase, the cost of living may also go up, leaving you in a vicious cycle of struggling to pay your bills. Fortunately, we now live in a time where you have a lot of opportunities to make more money on the side, and not rely solely on the salary you get at work.
5. Spend less money on frivolous items
Don’t make the mistake of thinking you are not making enough money when your financial hardship could be pinned down to poor money habits. If, for example, you always eat out instead of making your own meals, or you think $10 dollars for a cup of coffee at a gourmet coffee shop is reasonable, then maybe you are getting enough pay, but spending your money poorly.
6. Earn more money
If you can honestly say that your monthly paycheck is barely enough to cover the bills or repay your debt, then it’s a good idea to look for a side hustle like selling stuff online or even getting a freelance gig that pays well. There are many ways to earn money from the side, so don’t be afraid to explore these side hustles, ask for a raise, or get a second job.
7. Identify your bad money habits
Even when you have a stable job with great pay, you still have to work around a limited amount of money every month to avoid getting into financial trouble. Ask yourself if you are always buying things before even considering whether you really need the item or not. Or maybe you make plans to buy things as soon as you receive your salary?
If you were given $1000, how do you think you would spend it? Will you buy a name-branded bag because you find it cute, or would you set aside that amount for your savings?
Addressing these bad habits is important because oftentimes, you may not even be aware that you have poor money habits until you actually stop and think about your spending habits.
8. Intentionally improve those bad habits
No one’s perfect, and everyone definitely has his or her weakness when it comes to budgeting, but it is always best to try and get a good grip on your money attitude before they get out of hand. For example, not seeing money as something you need to spend right away and treating available credit as an amount that is “not available” are great ways to start to changing your money attitude.
9. Read Great Books
There are many ways to cultivate good money habits, but if you’re not sure where to start, I suggest investing in books that give useful advice on saving money, budgeting, and ultimately gaining more control of your financial future. Another educational option would be to buy a course. A great personal finance course to buy is Jessi Fearon’s Real Life Money Plan, which contains step by step instructions on different ways to develop a money plan that will work for you.
So those are the 9 Easy Steps to Achieve Financial Freedom for People Living Paycheck to Paycheck. What are your thoughts? Do you have any additional suggestions? Let me know in the comments section below!