Quote of the Week: “The art of living easily as to money is to pitch your scale of living one degree below your means.” ~ Sir Henry Taylor.
Every now and then we all go through a rough patch financially which results in having to live from paycheck to paycheck. This can often lead to a vicious cycle. Consistently running out of money before your next paycheck arrives and not saving prevents you from never truly getting ahead. It stops you from achieving financial freedom.
While climbing out of this endless debt cycle is not easy, it can be done. Accumulating a nest egg or even saving for a rainy day gets overlooked by many who find themselves just trying to get by. However, you can break out of the paycheck-to-paycheck routine in a few easy steps.
- Create A Budget (Or Fix A Broken One)
A budget helps you figure out how to make the most of your income. Since you make a budget before you actually spend your money, you will know ahead of time whether you make enough money to make ends meet. If all your expenses fit within your budget, then your income is enough, but if you find yourself living paycheck to paycheck then you might be spending more money than you should be. A good budget will ensure you don’t have to rely on soft loans in the second half of the month.
- Track Your Spending
Once you have a budget, it is important to keep track of it. Particularly the expenses. A good budget should have expenses that are less than your income, in other words, live within your means. If you follow this simple budgeting rule, you will always be okay.
Track what you are spending to figure out where your money is going. As you track your expenses, make note of where you are spending the most money. For example, if a large part of your income is going toward dining out, start eating in and taking your lunch to work more often.
- Build an Emergency Fund
One emergency can affect all your plans even when you have a budget, and even lead you into debt. One emergence can start the cycle of living from paycheck to paycheck. That is not the case if you have an emergency fund.
Although it may seem difficult to save, savings can save you. A smart budget will have a provision to save. You should be able to put a little bit of money aside each month for the proverbial rainy day. Put that money in a separate account. Somewhere the money will grow without the risk of losing it, like the Zimele Savings Plan.
Conclusion
It is not impossible to stop living from paycheck to paycheck. You can do it. All you have to do is ensure you live within your means and put part of your income where it will earn interest competitively. If you have debt, focus on paying it up. All these strategies can be summarized in one word; budget. If you create a smart budget using strategies like the 50/20/30 budget or the 70-20-10 budget discussed here, you will enjoy financial wellness.