2024-05-07
Living paycheck to paycheck is a scary and stressful cycle. You need to make sure you have enough to cover your vital expenses — but when your vital expenses take everything you have, it’s hard to save money for emergencies.
If this describes your situation, you’re not alone: 78 percent of American workers are in the same situation, which has recently grown due to the pandemic.
With a potential financial crisis looming and global instability causing worries about the economy, it’s time to consider what you can do for yourself to break the cycle of paycheck-to-paycheck living.
Track and Budget
How much do you currently spend on what? While you surely know how much things like rent cost offhand, your other expenses can add up. Some of them, like your grocery bill, may also vary. Knowing your financial standing is critical before you create a budget.
Track your spending honestly for four weeks, including all credit, debit, and cash purchases. You’ll be able to identify any expenses you can eliminate.
The goal isn’t to convince you not to drink the occasional latte or to make you feel guilty, but to set you up for success by allowing you to establish realistic goals with a budget. You have to know where you are before creating an action plan to achieve your financial goals.
Always Prioritize Your Four Walls
Four-wall expenditures consist of food, utilities, shelter, and transportation. These expenses are critical. Once you consider them, it’s time to prioritize everything else.
During this process, most people find that they are overspending on entertainment, restaurant meals, and travel. Because subscription-based services are so popular, you might spend more on these than you think.
To avoid overspending on tertiary or secondary needs, you may want to track and cancel your online subscriptions using tools like Rocket Money.
How to Start an Emergency Fund
Your next goal is to establish an emergency fund: your safety net. If an emergency happens, you will need these funds to avoid relying on credit cards or taking out more loans (which come with interest).
For example, if you have insurance for your pet’s veterinary expenses, many of them require you to pay out of pocket before you get reimbursed, unlike most human insurance. In a veterinary emergency, it’s better to have cash on hand so you don’t have to worry about being reimbursed before your credit card company applies interest on your charge.
It’s recommended that you start with a $1,000 emergency fund. If you can do this, the buffer will help you feel better. $1,000 covers most insurance companies’ emergency room copays, deductibles for auto insurance incidents, and many surprise bills.
When it comes to major purchases, plan when possible to save for them rather than pay off debt.
Boost Your Income With a Second Job or Side Gig
If you want to move to a better, higher-paying full-time role, you can always boost your income temporarily. Getting a side gig or second job is a great way to pay off debt and establish an emergency fund.
You can raise your income with a side job or part-time position, such as becoming a virtual assistant, food delivery driver, dog sitter, writer, influencer, or rideshare driver. Gigging as a second income is relatively popular now and a great way to establish an emergency fund.
As you work hard to break the cycle of paycheck-to-paycheck life, know you’re not alone. Success in moving beyond paycheck-to-paycheck takes dedication, persistence, and patience, often while you’re doing other things like building your credit and paying down debt.
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Want more tips on how to save money? Read these articles:
Breaking the Cycle of Paycheck-to-Paycheck Living: Tips on Budgeting, Emergency Funds, and Boosting Your Income
Living paycheck to paycheck is a scary and stressful cycle. You need to make sure you have enough to cover your vital expenses — but when your vital expenses take everything you have, it’s hard to save money for emergencies.
If this describes your situation, you’re not alone: 78 percent of American workers are in the same situation, which has recently grown due to the pandemic.
With a potential financial crisis looming and global instability causing worries about the economy, it’s time to consider what you can do for yourself to break the cycle of paycheck-to-paycheck living.
Track and Budget
How much do you currently spend on what? While you surely know how much things like rent cost offhand, your other expenses can add up. Some of them, like your grocery bill, may also vary. Knowing your financial standing is critical before you create a budget.
Track your spending honestly for four weeks, including all credit, debit, and cash purchases. You’ll be able to identify any expenses you can eliminate.
The goal isn’t to convince you not to drink the occasional latte or to make you feel guilty, but to set you up for success by allowing you to establish realistic goals with a budget. You have to know where you are before creating an action plan to achieve your financial goals.
Always Prioritize Your Four Walls
Four-wall expenditures consist of food, utilities, shelter, and transportation. These expenses are critical. Once you consider them, it’s time to prioritize everything else.
During this process, most people find that they are overspending on entertainment, restaurant meals, and travel. Because subscription-based services are so popular, you might spend more on these than you think.
To avoid overspending on tertiary or secondary needs, you may want to track and cancel your online subscriptions using tools like Rocket Money.
How to Start an Emergency Fund
Your next goal is to establish an emergency fund: your safety net. If an emergency happens, you will need these funds to avoid relying on credit cards or taking out more loans (which come with interest).
For example, if you have insurance for your pet’s veterinary expenses, many of them require you to pay out of pocket before you get reimbursed, unlike most human insurance. In a veterinary emergency, it’s better to have cash on hand so you don’t have to worry about being reimbursed before your credit card company applies interest on your charge.
It’s recommended that you start with a $1,000 emergency fund. If you can do this, the buffer will help you feel better. $1,000 covers most insurance companies’ emergency room copays, deductibles for auto insurance incidents, and many surprise bills.
When it comes to major purchases, plan when possible to save for them rather than pay off debt.
Boost Your Income With a Second Job or Side Gig
If you want to move to a better, higher-paying full-time role, you can always boost your income temporarily. Getting a side gig or second job is a great way to pay off debt and establish an emergency fund.
You can raise your income with a side job or part-time position, such as becoming a virtual assistant, food delivery driver, dog sitter, writer, influencer, or rideshare driver. Gigging as a second income is relatively popular now and a great way to establish an emergency fund.
As you work hard to break the cycle of paycheck-to-paycheck life, know you’re not alone. Success in moving beyond paycheck-to-paycheck takes dedication, persistence, and patience, often while you’re doing other things like building your credit and paying down debt.
-
Want more tips on how to save money? Read these articles:
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