How to Stop the Cycle of Living Paycheck-to-Paycheck

I am passionate about empowering people through financial education.  Money is major source of stress. One of the biggest complaints I hear is when people are living paycheck-to-paycheck.  They start to experience physical symptoms of stress the days prior to payday. Will they have enough in their checking account to float them until their deposit hits?

 

I received this question form a beautiful young 21-year old lady.  

 

I want to learn more about saving money.  Do you have any tips? I’m living paycheck to paycheck right now.  It doesn’t feel good.

 

I was thrilled that she asked this at the age of 20!  It’s not just a question and answer for young people. Most of us avoid asking this question for a few decades.  

 

The good news is, regardless of your age, it’s never too late to fix the habit of living paycheck-to-paycheck.

 

Here are some tips for you.

 

#1. Never use a credit card 

 

It develops a habit of over-spending.  

 

Many people will tell you to get a credit card to establish a credit history.  This is good if you want to buy a car or buy a house. Are you planning on doing either of those things?  

 

If so, a responsible payment history with a credit card will help.  The trouble is, it’s easy to trip up with credit card usage and wrack up credit card debt.  It happens in the blink of an eye.

 

If support you if you decide to open a credit card, just be certain to pay it off in full at the end of the month.

 

#2. set up an automatic contribution into a savings account 

 

Check to see if your bank offers fee-free savings accounts.  Is there a minimum balance? Can you set up an automatic transfer from your checking to your savings account?

 

If there is too much red tape in answering these basic questions, switch banks.

 

Then, set up automatic transfers of +/- $50/month from your checking to savings account. 


Start with something manageable.  Don’t make it too insignificant, that it won’t feel like you’re gaining much ground.  Don’t make it too high that you freak out and call it quits.

 

#3. Budget the remaining amount out for the month

 

If money is tight at the end of that process, you need to cut back on going out to eat or shopping.  Or, find a way to earn more money (my preferred method).

 

WHAT NEXT?

 

This may seem oversimplified, but that’s it.  Just stick to those three steps. It will take about 90 days to form this new habit.  It will take longer to grow an emergency fund to 3-6 months worth of non-discretionary expenses.  

 

Once you mastered this level, then you can advance on to the FUN parts of financial planning.  Investments & saving for retirement.

2019-07-08T21:53:58+00:00