It’s on SALE now! Let’s go shopping; after all, we’ll get paid on the 15th.
Sounds familiar, right? Living paycheck to paycheck can be difficult because you never feel like you have enough money to pay all of your bills—let alone buy the things you want each month. It’s very impossible to move ahead financially when you live paycheck to paycheck. It may be much more difficult to quit living paycheck to paycheck if you are an employee with a prepaid debit card, but it is possible.
In this post, we’ll discuss how to achieve financial independence and stop living paycheck to paycheck.
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Make a budget.
Budgeting is difficult, but not having one is far more difficult. It’s quite simple to live paycheck to paycheck if you don’t have a budget. Why? Because you don’t have a strategy in place. Right now, you might not even realize how much money you have! You’re not sure if the item you’re paying for is necessary or within your budget. And the uncertainty is difficult to bear.
Stay with us because we’re not going to leave you without informing you on how to make a budget. First, make a list of your monthly earnings (your regular paycheck and any other income). When you budget efficiently, you keep track of your expenses and stop spending when you run out of cash.
Use this easy method to calculate your current net income: Net Income = Total Assets – Total Liabilities
Calculate your monthly cash flows by subtracting last month’s costs from last month’s total income. You’ll be able to track future progress by keeping track of net income and cash flows. In this scenario, if you spent more than you earned the previous month, you can utilize this as a starting point for reducing the deficit.
My favorite tool for budgeting is Quickbooks.
(Image: © Quickbooks)
Stop living with debt
Your debt takes a piece of each paycheck and can prevent you from accomplishing the things you really want to do.
Even if you believe the incentives are worth the credit card, stop using it until you are entirely debt-free. And, logically, if you keep using your credit cards, you’ll never get out of debt.
Are you ready to be debt-free for good? Here’s how to do it: Stop taking on any new debt! Stop using your credit card to pay for stuff. Start concentrating on paying off your debts instead.
Set aside money each month.
Having money in the bank allows you to stop living paycheck to paycheck. You can achieve this by deducting 20% of your pay from each paycheck. For example, if you earn $2,000 net monthly, multiply that by 20% to get $400 monthly — this is your bank savings or emergency money.
You may be wondering why you need to save money right now. What’s this? As you work to get ahead, that initial emergency money will be your closest buddy. This emergency fund will help you avoid using your credit card. When you know it’s going to rain eventually, you should always bring an umbrella with you.
Look for opportunities to cut costs.
“More money… more difficulties.” It doesn’t matter how much money you make; what matters is how much you spend it. Let’s face it, there’s only so much you can save; you can only reduce your expenses to a certain point before it becomes a living hell.
It’s true that when you make more money, it’s tempting to spend more of it, but regardless of how large your raise was, pay attention to and focus on your budget; I understand that you can now purchase things you couldn’t before, and you might start loosening those purse strings.
Cut as many pleasures or needs as you can for this phase, if you actually want to quit living paycheck to paycheck.