Living from paycheck to paycheck means that you spend every penny you earn.
The days prior to getting your next paycheck may be fraught with anxiety as you pray that an unexpected expense won’t force you to overdraw on your bank account.
With no savings to fall back on, you’re disempowered.
You’ve dropped the reins of control over your financial security. You’ve become easy prey for high-interest lenders and a downward spiral on your credit card balance lurks in the background.
It’s time to get back in the driver’s seat and break the cycle of living from one paycheck to the next.
Fortunately, there are many things you can do to circumvent having to stretch one paycheck to the next.
Here are six tips to help you alleviate the situation, and find some peace of mind with regard to your finances.
1. Make changes in your current lifestyle
Do you spend every single ringgit you earn? Or worse, do you spend more than you earn? Occasional splurges are fine, but continuously living beyond your means is not.
Look at your spending patterns and figure out where you can cut back. The first categories to look at are your discretionary expenses. Avoid the temptation to shop for things you want but do not need.
However, if your discretionary expenses are already very low, take a moment to look at your fixed expenses. Do you need to find a more affordable apartment? Do you need to switch to a cheaper means of transportation?
Adjusting your fixed expenses usually requires major lifestyle changes. It may seem challenging at first, but downsizing can help you better your financial situation and eventually improve the level of your lifestyle without having to break the bank.
2. Pretend you earn less than you do
Living slightly below your means can help you stash away money in a savings account.
By automatically setting aside a portion of what you earn, you can force yourself to spend less than what’s written on your paycheck and build a healthy savings account.
Once you begin to notice a significant amount of money left in your bank account every month, you can start stashing away even more into an emergency fund.
Try to set aside at least 10% of your paycheck for unexpected expenses such illnesses, accidents and repairs. To help you stick to this system, set up monthly automatic bank transfers to your savings account.
3. Establish a spending plan
In order to consistently live below your means, you’ll need some realistic guidelines.
Start by checking what your money is currently spent on. Then tweak the amount you allocate to each of the other categories every month.
Google offers a number of spreadsheet templates that you can use to make budgeting easier and more convenient.
4. Pay your debts
Large monthly loan payment obligations may be one of the many reasons that some are destined to live paycheck to paycheck.
To remedy this, commit to getting out of debt as soon as you can. For example, try to make more than the minimum payment every month.
5. Look for ways to increase your income
In addition to cutting costs, come up with ideas on how to bring in more money into your account.
For example, you may try to negotiate for a salary raise or apply for a promotion at work. If you have the time and energy, you might even look for a part-time job.
Do you have a hobby that you can turn into a small but profitable part-time business? Maybe you can explore this option.
Do you have a lot of clothes, furniture or knick-knacks you no longer want? Maybe you can de-clutter your home and sell the things you don’t need.
6. Invest for the future
By investing, you can help the growth of the money that’s stashed away in your savings account outrun inflation.
There are various types of investments available. These include bonds, unit trusts, shares, real estate investment trusts, structured deposits, and investment-linked insurance policies.
Seek help from a financial advisor or educate yourself on these basic types of investments and the importance of diversifying your investment activities.
This article first appeared in thenewsavvy.com
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