Are You Living Paycheck To Paycheck? Start With These Simple 4 Steps

It’s getting close to the end of the month, funds are tight or non-existent and you tell yourself, “I just need to wait until my next paycheck and I’ll be okay.” Many of us have been there and many are still there. Living paycheck to paycheck can seem like a rollercoaster and groundhog day all rolled into one.

When the next paycheck arrives there can be a feeling of relief that is shortly thereafter followed by dread and worry as the money dwindles. Repeat next month, and the next, and the next. There is a way to get off this paycheck to paycheck carnival ride.

The Statistics

In December 2020, a CNBC article by Megan Leonhardt reported that based on a Highland Solutions survey of roughly 2,000 U.S. adults, 63% of Americans have been living paycheck to paycheck since Covid-19 began. That number was at 47% prior to the pandemic. Additionally, the article stated 64% of millennials reported they are living paycheck to paycheck.

These are alarming statistics. Living paycheck to paycheck is not fun and it is stressful. It also takes up your precious time worrying when your time could much better be spent living your life and pursuing your dreams. So how do we get off this stomach-churning paycheck to paycheck ride?

Start Taking Control of Your Money

Empowering yourself financially is a process. It is often not a quick fix but there are steps you can take immediately. Steps that will help you to start taking control of your personal finances. Once you start on the path to financial wellness you can continue to get more and more financially fit but you have to first get on the path. So let’s start walking together.

1. It Starts With Eyes Wide Open

• List all your monthly expenses – yes, write them down either on a piece of paper or on your computer. There is something about writing down your expenses that makes them materialize more. (If you don’t know everything on which you are spending money- start keeping track daily. Do this for a month. It will be enlightening and worth your time)
• List your monthly income. All sources of income.
• Do the math. Income minus expenses.

This basic accounting of what you earn and what you spend is one of the first steps to understanding your current financial situation. You have to know this in order to move forward. When you take the guesswork out of personal finances you start to take back the control. You are being accountable to yourself.

2. Where Can Adjustments Be Made?

Although it is not the best scenario if your math shows you have more money going out than coming in, at least now you know. Once you have the actual numbers, you can do something about it. First, look at your expenses. Sometimes there are expenses you can cut or eliminate that you really don’t even want or need.

One easy example: I reduced my monthly television bill. I mainly watch Netflix and hardly ever touched a premium television channel, so I switched to a much lower-cost monthly plan. This is just one simple example. There are many ways to cut expenses.

Grocery shopping is another place where if we don’t keep track, the food spending can get out-of-hand. If my monthly budget is running high, groceries and personal care items are one of the places I look to adjust. It’s incredible how much money you can spend at the drug store if you are not paying attention. Just yesterday, I put down a package of cute hair scrunchies. Definitely, a want, not a need- I have a drawer full at home.

Remember, we are going somewhere with this- moving towards financial wellness and ultimately financial freedom. None of this is deprivation or scarcity thinking. It is taking a good look at where you are now and being honest with yourself.

You learn how to be in budget so you can begin to make your money work for you. Scrambling just to make ends meet causes stress not freedom. Becoming aware and taking control of your money situation is where the freedom begins.

3. A Client’s Commitment to Her Budget

Increasing your income is another way to get in budget. In today’s world there are many ways to create multiple streams of income.

I asked one of my young clients, in her early-twenties, if I could share part of her story. Let’s call her Carly.

Carly had recently graduated college and was renting her first apartment. She had a good job but the apartment she wanted to rent was a little more than she could afford.

She came to me to create a budget and figure out how to make this situation work for her. After our first session, it was clear to both of us how much she wanted the apartment. Her expenses were already trimmed, so another option was to get a part-time second job.

The part-time job she acquired was driving children to school before her primary job started. She made a conscious choice to have the more expensive apartment. Carly was willing to do the extra work to make it happen.

Carly did this while still putting money into her 401K plan at her primary job. As the 401K is part of her long-term financial freedom vision. She understood that investing young for retirement is one of the keys to that freedom.

Soon thereafter she got a promotion and the second job was no longer needed. Her commitment at a young age to not go into debt for a want was a smart move.

Today, Carly continues to budget, invest, and grow her emergency fund. She has started the path to financial freedom at a young age and it puts a smile on her face and mine.

4. Let’s Continue To Talk About Money

Paycheck to paycheck living is not only stressful but it doesn’t allow you to have money to create an emergency fund, invest, and save for retirement. Paycheck to paycheck living keeps you stuck. I don’t want you to be stuck, I want you to be financially free.

In the financial responsibility ultimately lies the financial freedom.