You know the drill. The paycheck finally arrives, which means you can finally get on top of those mounting bills, and (hopefully) live a little – albeit momentarily – before the bank balance is back to bleak again as you count the days until the next paycheck. Is there a way to get out of this vicious cycle? Sure there is. The ingredients to make this happen is; have a plan, commit to it, sacrifice a certain period of discomfort and start by doing the following perhaps:
Start a Budget.
The first step toward breaking the paycheck-to-paycheck cycle is setting some time aside to gain a clear understanding of how you are spending your money. Track every single expenditure – even the smallest ones – for a month. Create a list of monthly expenses, compare it to your income and determine ways to keep your spending levels as far below your income as possible. You can use a spreadsheet, or download a budgeting app(easily found online), such as Level Money or Mint, to streamline the process and keep spending in check for you.
Needs Vs Wants.
Consider what you can live without, and remove any services you don’t really need. For instance, could you switch to a cheaper phone plan, or can you bundle your phone and Internet services. Do you actually use that gym membership? Perhaps there’s a cheaper gym you could join instead. Is the RM11 morning Starbucks coffee a must, or could you whip up a coffee at home as a cheaper alternative? How about cutting back on the entertainment one night a week, and putting that cash toward a bill? And savings from discount coupons are nothing to be sneezed at. It can be surprising how much a little here and there can add up to across the financial board.
Save for Self-improvement.
Quitting a vice, such as cigarettes, can save hundreds over the course of a year. Instead of buying another pack, put the money in a savings jar. You’ll not only save your health; you may even put enough away to pay off that credit card or take a vacation as a deserved reward.
Increase sources of income.
Explore ways to supplement your paycheck with additional income streams. There are a number of ways to make some extra pocket money online these days. All you have to do is look. Sell items you no longer need on eBay or Carousel or setup an online store on Qoo10. If possible, take on an extra part-time gig or channel your talents into a manageable sideline business venture. Put any supplementary income toward your bills, or add it to your savings. You can easily make a dramatic overall impact to your budget. And while you’re channeling energy into making money, you’re less likely to face temptation to spend it.
Prepare for an emergency fund.
The problem with paycheck to paycheck is that there’s generally no cash available to fund an emergency should one arise. However, every budgeting plan should include an emergency fund in the event of an unforeseen life mishap, like a health scare or sudden unemployment. Determine a safe emergency fund balance (enough to cover six months of overall expenses is generally recommended); and when savings exceed that figure, you can channel them into something else, such as a reward for your savings efforts, or a deposit into an account for an eventual house down payment.
Invest
Once you’re able to gather an excess pool of funds; invest. Equip yourself with investment knowledge. Hang out and network with seasoned investors. Learn how they build passive income for themselves. If need be; you may want to sign up a course somewhere to get into this circle of like-minded people. Absorb and learn the strategies they use and take baby steps to grow from there on understanding what’s right vs wrong in investing. However, do remember to start slow and mistakes may happen along the way and you may not want to burn your hard-earn savings in one mistake. Nevertheless, once you get your plans and strategies right; it could be a means for your financial freedom.
In a nutshell
Escaping the paycheck-to-paycheck cycle is ultimately a matter of choice. Do you genuinely want to break from the cycle and expand your financial horizons? Then consciously do something about it, because your financial situation is not going to magically fix itself. Establish a sound budget; uncover ways to minimize expenses, boost income and save…and take action on these every day. The tangible results will emerge pretty swiftly, as will the peace of mind knowing it is you who has control of your life – not your paycheck.
