How to Stop Living from Paycheck to Paycheck - Policy Advice

Living from paycheck to paycheck is about more than just having the monthly income used for regular expenses. It usually means not having ... Home> Insurance HowToStopLivingFromPaycheckToPaycheck By:SmiljanicStasha Lastmodified:Sep29,2022 Doyoustruggletomakeendsmeet?Doestimebetweenpaydaysseemtostretchendlessly? 63%ofAmericans willanswer“Yes”.Areyoureadytochangethat?  Areyouwillingtosay,“I’mtiredoflivingpaychecktopaycheck!”andtakeaction?Ofcourse,youare-youfoundthisarticle,didn’tyou?Readontolearnhowtostoplivingpaychecktopaycheckandsecureyourfinancialfuture.  WhatisLivingfromPaychecktoPaycheck? Livingfrompaychecktopaycheckisaboutmorethanjusthavingthemonthlyincomeusedforregularexpenses.Itusuallymeansnothavingsufficientsavingsforemergencies.Whensomethingunforeseenhappens,itthrowsthefamily’sfinancesintochaos.   Next,youhavetogetaloanoruseexpensivecreditcarddebt.Thedebtrepaymentsaddtoyourproblems,andyou’requicklytrappedinaseeminglyunendingcycle.  Feelalone?Don’t.40%ofAmericanscannotaffordanunforeseenexpenseof$400.  Whynot?Debtrepayments.  Accordingtopaychecktopaycheckstatistics,44%ofAmericanswerealreadylivingbeyondtheirmeansbeforeCOVID-19hit. Doesitsurpriseyouhowmanylivepaychecktopaycheck? Areyouwaitingforthepandemictoendsothatthingscangobacktonormal?  Hangonaminute-COVID-19doesn’tdeservethecredithere.ThepercentageofAmericanslivingpaychecktopaycheckhitahighof78%in2019,longbeforethevirusstarted.   Thisfrustratingissueissomethingthat’snotonlymorecommonthanyouthinkbutalsoreasonablynormal.FouroutoftenAmericansarelivingpaychecktopaycheckwithnosavingsandwouldbefinanciallycrippledbymissingonemonth’swork.  And,whilethere’salotoffocusonupliftinglow-incomeearners,it’stheupper-middle-incomeearnerswhomaybemoreatrisk.Thoseearningbettersalariesareconsideredprimetargetsformarketers.  They’relikelytoqualifyformorecreditandbeunderpressuretomaintainalifestylethatreflectstheirstatus.Theirsalariesarehigher,butsoaretheirdebtburdens. SurprisedbyhowmanyAmericanslivepaychecktopaycheck?Itisshocking,butit’salsoeasytogetyourselfintothissituation.Whileitseemslikethenorm,therearegoodreasonstosacrificeandbreakthepaycheck-to-paycheckcycle.  Whatarethemostcommonrisksoflivingfrompaychecktopaycheck? Evenwhenyou’reearningagoodincome,thislifestyledecimatesyourfinancialsecurity.You’retiedintothecyclebecauseyoukeepgettingpaidonceamonth.Atthemoment,that’sfine,becauseyouenjoyyourjob.Whathappenswhenyou’retiredofworkingforaliving? Whathappensifsomeoneinyourfamilyneedsurgentmedicaltreatment?Orifyouloseyourjob?  Livingfromonepaychecktothenextmeans:  Havingnoprotectioninchallengingfinancialtimes Potentiallybeingunabletorepayyourdebt Damagingyourcreditscorethroughover-utilizationofdebtandlatepayments Facingbankruptcyifyouloseyourjob  Okay,that’senoughdoomandgloom.You’retiredoflivingpaychecktopaycheck,andyouwanttoknowhowtobreakthecycle.Let'sdiverightin.  HowtoStopLivingPaychecktoPaycheck WorkOutWhatYouSpendYourMoneyOn Whenyou’relivingfrompaychecktopaycheck,youfeelyoudon’thavesparecash.Youprobablyhavemorewiggleroomthanyouthinkyoudo.Forthenextmonth,recordeverythingthatyouspendyourmoneyon.  Createapaychecktopaycheckbudgetplannerlistofeverythingyoupayfor,includingdebtandrental.Lookuphowmuchinterestyoupayonyourdebtandyouroutstandingbalance.Recordtheseinseparatecolumns.  StartPaycheckBudgeting Younowhavealistofeverythingyoupayinamonthandanideaofhowyouspendyourmoney.Identifyanyunnecessaryspendingandcutitout.Howmuchdoesthatsaveyouamonth?  Arethereotherwaystosave?Canyoumovetoasmallerhome?Canyougetabetterdealonyourutilitybillsorinsurance?Getcreativeandseehowmuchyoucanstretchthesavings.  Payallyouressentialsandtheminimumamountforeachdebtorfirst.Allotyourselfalittlemoneyfordiscretionaryspending.Useanythingleftovertocreateanemergencyfund.Youshouldbuildupsavingsofatleastthreemonth’ssalary.  Viewanybonusesyougetasincomeyoucannotspend.Usethemtoincreaseyouremergencyfund,paydowndebt,orinvest.  ReviewYourInsurance Homeandautoinsurancecanbealifesaverifsomethinggoeswrong.Repairingorreplacingyourhome,car,orappliancesmayotherwisebeimpossibleifyoulivepaychecktopaycheckinAmerica. 32%ofAmericanshavemedicaldebt.For43%ofthosewithmedicalbills,theamountisatleast$5,000.Healthinsuranceisn’taluxurypurchase;it’saninvestmentinyourwell-being.  Finally,considertakingoutpetinsurance-wemadeadetailedlistofthebestpetinsuranceproviders.Vetbillscanaddupasquicklyasmedicalbillsforhumans.  Includeessentialinsurancewhenyoubudgetbypaycheckforpeaceofmind.  BeCarefulofPayingDebtWithDebt Whenyou’reinabindfinancially,it’stemptingtotakeoutanotherloan.Aconsolidationloanshouldonlybeconsideredontheunderstandingthatyou’llpayinahigherinstallment.  Whilethelowerinstallmentisattractive,itmeansthatyou’llstretchoutyourrepaymentperiod.You’llenduppayingfarmoreinterestinthelong-term.  PayExtraMoneyIntoYourDebt Tostoplivingfrompaychecktopaycheck,youmustgetahandleonthecredityouuse.Alwayspaytheminimuminstallment,andthenpayextramoneyintoonedebt.Whenthatispaidoff,targetthenextdebtonthelist.Prioritizeyourdebtsinoneoftwoways:  TheSnowballMethod:Targetthedebtwiththesmallestbalancefirstandsettleit.Thisismotivatingbecauseyouseeyournumberofbillsdecrease. TheAvalancheMethod:Thismethodsavesyouthemostinterest.Prioritizethedebtswiththehighestinterestrates,irrespectiveofbalance,firstandpaythemoff.  EarnExtraIncome Youcansoonbeonyourwayto6figureincomesifyou: Makeahomeinventoryandsellitemsthatyounolongeruseifthey’reingoodcondition. Getapart-timejob. Startaside-hustleusingyouruniqueskillset. Worktowardsimprovingyourqualificationsandearnapromotionorgetabetter-paidjob.  Considerworkingasafreelancerinyoursparetime.WebsitessuchasUpworkregularlypost.jobsinwriting,programming,andmanyotherfields. Researchwhatothersinyourfieldearn,andcompareittoyoursalary.Ifyoucanmakeagoodbusinesscaseforaraise,youshouldtry. Buildapassiveincomethroughinvesting.ForegothatdailylatteandputthemoneyintoanETForgoodinvestmentopportunity.  Lookoutforusefultipsonhowtoliveonyourownandsavemoneyatthesametime. InConclusion Younowknowhowtostoplivingpaychecktopaycheck.Startbyreevaluatingyourspending,reducingyourexpenses,andshiftingyourfocustosavings.Byfocusingonthefuture,youcanmakethesacrificesnecessarytopaydownyourdebtandsecureyourfinancialfreedom.    FAQ HowcanIgetoutofdebtifIlivepaychecktopaycheck? Itmayseemcomplicated,butyouhavetwooptions-cutbackexpenses,orbringinmoreincome.Acombinationofthetwoisevenbetter.This“extra”moneyisnotforspendingonluxuries.Wherepossible,don’tevencountitintoyourincome.  Instead,useittopaydowndebtorbolsteryouremergencyfund.Inapinch,youcanuseittobuyessentialsifyouronlyalternativeistobuyoncredit.Thedangerofviewingitaspartofyournewincomeisthatyou’llincreaseyourspendingleveltomatch.  Ifyouwanttogetoutofdebt,puteverydollaryoucanspareintoyouraccounts.  Whatisthe30-dayrule? The30-dayrulerelatestochangingyourhabits.Yourcurrentmonetarybehaviorsdon’tserveyou,sochangethem.The30-dayrulehelpsyoudothisbymakingitmoremanageable.  Committobeingmorefinanciallyresponsibleforthenext30-days.Maybeyoucandecidenottobuytake-outorspendmoneyonclothes.Perhapsyoucanmakeyourworkforluncheveryday.Intellectually,takingonsmallchangesforamonthisaloteasierthancommittingtosomethingfortherestofyourlife.  Theupsideisthat30daysisenoughtimetoengrainthenewhabit.  Whatisagoodpercentagetosavefromyourpaycheck? Expertsrecommendsavingatleast20%ofyourpaycheckeverymonth.Moreisbetter,butmakesurethatyouleaveyourselfadiscretionarybudgetaswell.Thatisyourmadmoney,andyoucanuseitforwhatyoulike.  It’sgoodtohavesomediscretionaryspendingbecauseithelpstomotivateyou.Ifyoudon’tspendsomethingonyourself,you’llstarttoquestionwhyyou’reworkingatall.  If20%istoohighforyouatthemoment,savewhatyoucanafford.Evenputtingawayadollaramonthisastart.Ithelpsyoucreateasavinghabit,and,asyouseethebalancegrow,you’llfeelmoremotivated.  ^ PolicyAdviceisawebsitedevotedtohelpingeverydaypeople make,save,andgrowmoney.Whileourteamiscomprisedofpersonalfinanceproswithvariousareasofexpertise,nothingcanreplaceprofessionalfinancial,tax,or legaladvice. 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