The month comes to an end, you get your paycheck, you buy groceries, you pay bills etc & boom, you’re left with nothing and now you await the next paycheck. More than 75% of adults, high or low earners, live from paycheck to paycheck. This vicious cycle can be very crippling & it stifles any personal financial advancement. This aspect of only making ends meet is very stressful; debt either leads to this or can actually result from this. Spending more than one earns i.e. living beyond one’s means is the trigger that sets off this vicious cycle. Fortunately, this cycle can be broken if one is diligent enough to identify the root causes & takes steps to address them. Understand this though, going down that road is not easy but it’s worth it.
Get Rid Of Any Present Debts
Debts make it very difficult to make any financial progress as you literally remain stagnant for as long as you still have debts that need to be offset. Clearing any current debts must be the priority before one can then institute measures that bolster personal financial growth. It is obvious that as you do this you ought not to continue incurring more debts.
Effectively Formulate A Budget & Stick to It
The road to financial freedom requires that one track & regularizes their spending. This is difficult to do if you don’t have a point of reference, which is your budget. Make sure you include all the expenses you shall incur; don’t make the mistake of leaving out small expenses that are seemingly negligible since they make a huge difference. When you start executing the budget ensure that you document every purchase since this is precedential to effective evaluation & planning for future budgets.
Police Your Spending Habits
The principle here is to pretend as if you earn less than you do. Teach yourself to categorize your expenditure as either necessary or optional. Identify bad spending habits & get rid of them; this requires discipline & honesty with oneself. Note that you mustn’t be drastic in this endeavour as that might demoralize you and make you quit. Take gradual & incremental steps as you address aspects of your spending habits.
Build A Savings Chest
This is what some could term an emergency fund. This entails monthly setting aside money from your earnings, for instance, you could set aside anything between 10% & 20% of your income. To discipline yourself in this regard, make sure that those savings aren’t easily & readily accessible. Never use them unless absolutely necessary i.e. access them only during emergencies. The working principle here must be: save before spending not what’s left after spending since more often than not nothing ever remains after spending.
By All Means Borrowing Must Be Alien to You
Borrowing is a tempting & microwave option in addressing financial issues; it is very addictive and once started it becomes an unending cycle. Debt has a snowballing effect i.e. it continues growing since circumstances requiring debt exponentially arise due to the chain reaction borrowing sets in motion. Thus, one must stay away from buying things on credit, borrowing money, taking loans etc.
Thoroughly Review Your Fixed Expenses
Here I’m talking about rentals, bills, transport etc. The reason you are living from paycheck to paycheck is because you probably are already hamstrung by living a lifestyle you can’t afford. Housing-related expenses usually exceed other expenses. Some experts say that housing expenses shouldn’t exceed 30% of your net income. Basically, what I’m saying here is, if your fixed expenses are too high consider making some downsizing changes. For instance, if driving to work is expensive consider commuting, if rentals are too high consider relocating to a cheaper place, if electricity bill is too high consider using other power sources for high power consumers such as cooking.
Be Accountable & Answerable To Someone
Instituting personal discipline alone can be very hard. You need someone to help you do all these things I’m discussing in this article. You must have someone who will hold you to account on how you are handling your finances; an accountability partner. This could be in the form of an adviser, a sibling, a relative, a spouse or a trusted friend.
Evaluate How Much You Are Actually Making Every Month
The reality might be that what you are getting monthly in the form of a paycheck is not actually enough to cater for your needs. If probably you had gotten used to borrowing you could have been deluded into thinking all is well. Therefore you might want to consider doing more income-generating initiatives other than just your job. Building multiple income streams will most definitely break the vicious cycle of living from paycheck to paycheck.
Honestly Identify & Eliminate Bad Money Habits
There are a lot of bad money habits people engage in without even giving it enough thought. Things like impulse buying, competing with other people, creating false facades of being well-off or wealthy etc are bad money habits. This all drives one into living beyond one’s means. The other thing is people live as if all the money they receive is meant to be spent; not all money you get is supposed to be spent.
Make Financial Investments
It is more beneficial to invest your savings rather than having them sit somewhere idle. When doing this be cautious & shrewd to avoid regrets. Talk to professional financial advisers who can guide you effectively to make investments that have good returns. Good returns match your goals and circumstance. If you have significant amounts in your savings, investing in real estate is quite noble as it actually guarantees inter-generational wealth. There a host of other investment opportunities such as paper assets, business, commodities and which you pursue will depend on any factors.
If you’ve been living pay check to pay check this article will help you grasp the basics and start the process of breaking out. Want to see ore content like this? Subscribe to receive or posts.