Making Ends Meet
It’s payday. I’m never getting ahead and just making ends meet each month. I need a plan to get off this never-ending cycle and stop living paycheck to paycheck. The mortgage payment is due and the car payment is a week late. The kids need money for school supplies, and doesn’t the dog have a grooming appointment this week? So much for that paycheck. It’s gone before you even see the direct-deposit in your bank account. There has to be a way to stop this endless cycle of living paycheck to paycheck. But how?
How to stop living paycheck to paycheck? You will need to learn how to budget, get rid of debt, begin saving, and start investing in the future. It may seem like an impossibility, but you can regain control of your finances. Read on to learn how to be a better budgeter and put money in your pocket every payday.
Have a Reason
Before you even consider changing your financial life, you need a reason to start. It’s like quitting any habit—you have to want to, and you have to commit to it.
Yes, that’s right. If you truly want to change your paycheck-to-paycheck habit, you need an unshakeable commitment. Find your reason to commit and get started. Below are some examples of the reasons to change:
- You’re tired of living this way
- You want to save for a down payment on a car
- You need funds for a mortgage down payment
- You’re close to retirement age, but you have nothing saved
- You have house repairs
- You’re want to travel
These are just a few examples to inspire your own ideas. When you know your reason, write it down. Write it where you’ll see it every day. If you need to write it in several places, do it.
If you’re saving for a new car, put a sticky note somewhere in your current beat-up car, like in the center of your steering wheel, where it’s always visible. If you’re saving for a down payment on a mortgage for a new home, put a reminder on the inside of your front door so that every time you leave for work, you’ll be reminded of what you’re working towards.
What you want to be certain of is that your reason is attainable. You don’t want something so outlandish that you lose interest or hope; and you don’t want something with unrealistic timelines that could expire before reaching your savings goal, leaving you tempted to spend your savings.
Plan carefully and reasonably. If you’re someone who simply wants to have a nest egg, that’s great. If you’re committed, you won’t need to spackle your home with sticky notes.
Let’s take a look at some of the ways to gain financial freedom.
Step 1: Learn to Budget, then Live the Budget
It’s so easy to write out a budget, but it’s another thing to live it.
A piece of paper and a pen or pencil is all you really need to write a budget. These days you can simply type it out on your computer or tap it out on your phone in any number of available budgeting apps. We’ll talk more about those in a bit.
Creating a budget is the easy part. It probably took you less than 30 minutes. Better yet, it probably looks great and it might even be doable.
That is until you actually attempt to put it into practice.
So much for the $20 per week you budgeted for the emergency fund. That $20 got chewed up when you realized you forgot to reimburse a coworker for the borrowed lunch money. Your discretionary fund quickly turned into the “late car payment interest fund,” and, well, it looks like it’s tuna-in-a-pouch lunches for the next week.
You don’t understand how you’re always so broke despite your decent salary. Then you’re reminded of an old adage that sums it up: “You can’t spend a dime if you only earn a nickel.”
So, how do you get yourself out of this never-ending rut? Not only do you need to compose your budget, but you also need to figure out how to stick to it, no matter how hard it is. You need to take back full control of your money and not let it control you.
Learning to take control of your finances takes discipline and lots of it. Unless you’re in a dire situation and need to stray from your planned disbursements, it’s crucial you hold firm and stick to it. Things will be tight for a while, but when you learn to live within your means, you might be pleasantly surprised to know you can save a few dollars every pay period and treat yourself to tuna-free lunches.
According to Forbes, almost 78% of Americans of all income levels live paycheck to paycheck. It doesn’t matter if income is $10,000 or $100,000, far too many people are dangling on the precipice of financial disaster.
If this sounds like you, it’s time to rope yourself in. Read on to learn how you can have both feet planted firmly on financial ground.
This is a great youtube video with Dave Ramsey on budgeting. I greatly enjoy his talks on finances and I love hearing the people celebrate with their debt-free screams. One of his most famous books that made an impact on me was The Total Money Makeover. I had to look at myself and take full responsibility for where I was in life. Everything in my life, including my financial situation, was from all the decisions that I made. Thanks, Dave!
Step 2: Get Rid of Debt
If you’re like many Americans, you’re carrying some credit card debt. The more debt you have, the more likely (and longer) you’ll find yourself living paycheck to paycheck.
To free yourself from the shackles of credit card companies, start paying off those debts. You’ll want to begin by paying off the credit cards with the smallest balances. As each small card is paid off, allocate the small card payments to the cards with larger balances.
Eventually, as you successfully pay off your credit card balances, you’ll be pleasantly surprised by the increasing amount of money in your pocket each month. Now, select just one credit card to keep in your wallet or purse and put the others away, preferably in a spot that you can’t easily access every day. Better yet, leave them at home when you go shopping.
You’ll find you’re far more discerning about what you buy and how much you spend when you don’t have the means on hand to tempt you. And what you can’t buy will likely be items you really don’t need in the first place. This will help you to realize just how much you’ve been spending frivolously.
Step 3: Pay Yourself First
It may seem like you can’t afford it, but you need to save a little money every payday. Even if you start with $10 a week, that’s $520 a year that you don’t have right now. That’s $520 a year for emergency car repairs or new clothes dryer. You’ll have more than $1000 if you double that amount to $20 a week!
This is what it means to pay yourself first. Whatever amount you can spare as painlessly as possible goes to you first. On your budget, this pay-yourself-first money is subtracted from your net salary.
How you save it doesn’t matter. You can have your employer deposit it into a savings account, 401(k), or any other investment account. If you want to tuck it under your mattress, so be it. Just keep your hands off.
I have another post that covers everything you need to know about paying yourself first. In there I recommend one of my favorite books on the topic The Richest Man in Babylon.
Convert to Coins
Try this clever tip: To avoid the temptation of spending that extra $20 burning a hole in your wallet or purse, take it to any bank and convert it into coins. Quarters, dimes, nickels; it doesn’t matter. Take it home and pour these coins into a mason jar or one of those big blue purified water jugs, and place it out of sight. You can also buy a cute piggy bank from your favorite online stores or take a walk to the store and buy an inexpensive plastic container. It doesn’t need to be elaborate or expensive; it just needs to hold your weekly “pay yourself first” allocation of converted coins.
I thought one of these would be a good idea to get started!
Out of Sight, Out of Mind
When you’ve determined how you’re going to save, it’s critical to keep your savings out of sight and forget that money even exists.
That means when you open a savings account, say no to a companion debit card. A debit card is a temptation to spend and to withdraw.
To reduce the temptation to spend, you want to make it as difficult as possible to access your savings. It’s too easy to tell yourself that $10 here and $20 there doesn’t matter or won’t make too much of a dent, or the biggest lie in personal saving—that you’ll put it back the next day or the next week, when in reality you’ll be lucky if you put it back in the next decade.
Let’s face it. We’ve all borrowed money from ourselves and have yet to pay it back. Think about it, and you’ll surely come up with at least one instance of an unpaid self-loan.
This is where you need to let commitment overrule temptation. Remember that you have a commitment to yourself. Remember that you have a financial goal. Remind yourself that you don’t want to be separated from your paycheck after a mere 3.5 seconds…the length of time it takes to look at the direct deposit in your bank account.
Now that you have some ideas for paying yourself first, let’s look at a great way to stay on track.
Step 4: Play the “Do I Really Need It” Game
Sure, those $120 ASICS sneakers are perfect for your morning runs. You want them, you need them, and you already convinced yourself that you must have them.
But wait! Why are you letting “convince” triumph over “commit”? Remember “commit”?
We get it! You want comfortable running shoes. Maybe you don’t run, you’re just stylish. Is it really worth $120? Or are you trying to keep up with the Joneses or your fashion-forward neighbors the Zalinski’s?
Ask yourself, “Do I really need to spend $120 on sneakers?” Of course, you don’t! You can find comparable sneakers for far less, and no one will look at your reasonably priced shoes and wonder why you didn’t cough up another 50 bucks to look good for them!
Each time you feel drawn to your favorite store because you’re feeling the itch to buy something, take a pause and ask yourself if you really need it. If you actually do need it, look for it elsewhere at a lower price. Find a coupon, try an alternative, find out if it’s going on sale in the near future, or ask to borrow it from a friend or relative.
You want to be absolutely certain that each purchase is one you truly must make, and that you’re paying the least amount of money to make it.
Don’t be swayed by popular brands. You’re really paying for them to use you as their advertising billboards. Nike has millions of advertising surfaces walking around for them every day. Shirts and hoodies, jogging pants and leggings, sneakers and sandals, coats and hats. This is why they don’t need to make huge multi-media advertising buys. Their customers are doing it for them!
A $10 non-branded hat can keep your head just as warm as a $50 hat. A logo doesn’t add warmth, so keep that in mind when you’re shopping for attire. The money you didn’t spend (a.k.a., saved) can go directly into your savings account.
Step 5: You Didn’t Really Get a Raise
Well okay. Maybe you did. Congratulations! But if you want to commit to breaking your paycheck-to-paycheck habit, you need to pretend you didn’t get a raise and save that extra money instead.
A raise in salary is exciting. But it can quickly send you directly into a spending spree. It’s only natural to want to reward yourself…just this once. “It won’t hurt,” you tell yourself. Except it does hurt because then you’ll justify a reward on every payday.
If you’re up-to-date with all of your financial commitments, then you should put that raise money away in your designated savings.
If you want to use a raise to pay down credit or retail card debt, dedicate only a portion of it, about half, for that purpose and save the rest.
As long as you commit a percentage of your raise to savings,
you’ll reach financial freedom much quicker. The same goes for a work bonus.
Treat it the same as a raise, even though it’s a one-time deal. Don’t think of
it as ”found” money and spend it frivolously. The day will come when you can do
that, but that day is not today.
Tips, Tricks, and Extra Help
Now that we’ve gone through the five steps to stop living paycheck to paycheck, let’s look at some of the options to help you get there.
Apps Are Where It’s At
Mobile device apps are great when you need help budgeting your money. Here are some of the most popular budgeting apps to try:
Level Money (iOS/Android): free
It tracks your spending and lets you know how you’re doing. The app works best for those who have relatively linear financial lives. If you’re looking for something simple and easy to use and understand, this is your best bet.
Mint (iOS/Android): free
It helps you create a budget and track your spending. The app also monitors your credit score. Other interesting features include watching for fraud in your bank account and credit card transactions and providing various transaction-based alerts. You can sign up for free on their website. To avoid potential fraud and theft, make sure your phone is secure by using a passcode and fingerprint ID.
Budget Boss (iOS only): $1.00, plus optional in-app purchases
It uses graphs and charts to track your budget and financial goals. If you’re a visual person, you’ll love this app. You can see your spending habits and your growth progress.
HomeBudget (iOS only): $4.99
You can manage account balances, budgets, and bills. You can this app among other Apple devices. A nice feature related to this is the ability to sync the app with iPhones belonging to others in your household. This allows you to work with other members of your family so that you can stay within a budget.
All of these apps are useful if you want to have quick access to your budget at any time. As mentioned, remember to secure your phone with a passcode and/or fingerprint. This is the best way to protect yourself from theft and subsequent fraud on your finances.
It Takes Two to Tango
Okay, so you’re not literally dancing, but you are doing a financial two-step. If you aren’t self-disciplined, then perhaps it’s time to bring in some backup—a spouse, relative, trusted friend, or if you can afford it, a financial advisor or accountant. Having another person assist you will increase your chances of success.
You don’t have to turn over your entire financial portfolio to just anyone, but you can get help with your budget and work with someone who will see to it that you stick stay committed to it.
Not only can a financial buddy increase your chance of success, but they can also expedite your success.
None of us likes to admit we aren’t the best custodians of our own money, but sometimes we need a little self-reflection before confronting our weaknesses, especially when it comes to finances.
Of course, you’ll want to choose someone you trust completely to assist you. If you decide to use a financial planner or accountant, be sure you vet their qualifications thoroughly. Don’t rely on social media reviews. Check with your local chamber of commerce or business development center, and ask friends and relatives for referrals. It’s your money, and you want to safeguard it.
Side Hustles and Cash-Back
A “side hustle” is just another trendy way term for a side job or a second job. Plenty of people have side hustles for any number of reasons. For the purpose of this article, side hustles are best started if your debt is getting out of hand or you’re serious about saving but finding it difficult to reach your goal. The extra side hustle cash can help.
The type of side hustle you start will depend largely on your career commitment (there’s that “C” word again). But even if you can devote an hour or two each day, or several hours on the weekend, it can make a big difference in helping you get out of debt and/or building your savings just a little faster.
A side hustle can be anything, and there are some great videos on YouTube for advice and inspiration.
Not only can a side hustle help you to get out of your seemingly endless cycle of living paycheck to paycheck, it can also provide you with a bit of disposable income wiggle room for an occasional night out or fancy non-tuna lunch, while your primary income source works to pay your living expenses and contribute to your savings.
If you have commitments that require you to be home when you aren’t at a job, such as having kids at home, you can find plenty of legitimate work-from-home opportunities by searching the Internet. You’ll want to make certain the companies offering the positions are reputable.
Companies like Upwork and Fiverr offer plenty of work-from-home opportunities. You can also offer your services to your friends and coworkers. Perhaps they need someone to watch their kids when they’re out, or they need a pet sitter during an extended vacation.
There’s always work to be had, and you might have to trade some of your free time while you pay off debt and gain financial freedom. But it’ll be worth the sacrifice when you can deposit all or most of your paycheck into a savings or investment account.
You might be thinking, “Like that could ever happen!” Rest assured, it can and it will if you have the motivation, mindset, and commitment to make it happen.
If you don’t have the time for a side hustle, you can always sign up for the apps that give you cashback for buying certain items or for taking surveys. There are plenty of very legitimate apps that offer cash back or pay you for your opinions. Ask your family and friends to save their store purchase receipts so you can scan them into one of the cash-back apps.
Of course, when choosing the best credit card to keep, you’ll want to select the one that gives you the most in return. Citibank’s rewards card gives you cashback or you can use it for purchases at Amazon and other stores. Be sure to carefully review all of the perks for all the cards you have, and go with the one with the best perks.
It can be easy to procrastinate when it comes to finding a side hustle or cash-back benefits. It takes commitment. (We love that word!) By now, you’ve noticed the word commitment has been used frequently. That’s because to be freed from your paycheck-to-paycheck lifestyle, it takes true dedication and commitment. It’s too easy to fall off the wagon if you don’t honor the commitment you made to yourself.
Apply the 30-Day Rule
The 30-day rules state that you must wait 30 days before making any major purchases. Why wait? Because it gives you time to consider or reconsider your decision…or find another way to satisfy what you’re hoping to gain by said major purchase.
Impulse purchases are incredibly harmful to our wallets. We’re not just talking about the small stuff. It’s the large purchases that really eat into our finances.
Whether it’s a new car, a new dishwasher, a remodeled kitchen, driveway resurfacing, rebuilt deck, or the newest $1000 iPhone, you need to pump the breaks on your purchase and think about your true need.
If your mechanic has confirmed your car is on its last legs, take the 30 days (if your car will last that long) to research your options. Ask yourself if you really need every last fancy option a dealer is throwing at you. Can you live without the beefed-up surround-sound system or the leather-wrapped steering wheel? Remember all the other expenses related to owning a car: gas, maintenance, insurance.
When shopping for appliances, such as a refrigerator, carefully consider if you really need the super-duper ice maker that produces 100 cubes per hour. Can you make do with ice cube trays? These fancy features all add up, and they also subtract from your bank accounts.
Whether it’s a new car or a new dishwasher, these are the things you need to consider. Use the 30-day rule to think carefully and to shake off the euphoria related to buying shiny new and expensive stuff.
If after 30-days you still need the big-ticket item, don’t cave to sales pressure. Don’t fall for the “I can only give you this price today,” spiel because you know you’ll hear the same thing the next day and the next.
There’s always going to be choices, and there’s always going to be alternatives. The 30-day rule will give you time to make those choices without pressure.
Have Patience
Depending on how deeply you’ve fallen into debt, climbing out of the paycheck-to-paycheck abyss can take time. Don’t expect overnight miracles. It takes patience (and commitment!). If you don’t have that, you’re liable to feel as though you’re just spinning your wheels, but getting nowhere.
Keep a positive attitude, and remember that there is a light
at the end of the tunnel.
Related Questions
Question: I really want to buy a house, and I’ve been saving for a while now but seem to be getting nowhere. How can I realistically save the money I need to have a down payment?
Answer: There are several steps you can take to increase your savings. If time permits, you can take on extra work at your job (if working overtime is available) or find a side hustle. Dedicate that money to your down payment fund.
When your income tax refund arrives, bank it. As tempting as it is to spend some of it, you need to assume that money is untouchable and commit the entire refund to your savings account.
When was the last time you looked at your auto and life insurance rates? Shop around to make sure you’re getting the best deal. Often, we’ve held onto our policies for so long that we don’t think to check out other companies.
Review all of your memberships. Gym, associations, streaming services, etc. can add up each month. Determine what you can live without or reduce until you have enough saved. Don’t forget to review your utility bills as well.
Review all of your cash output, and you’ll find the less obvious places to save. This will help you to eliminate or reduce what truly isn’t needed.
Question: Realistically, how much of my weekly pay should I be saving?
Answer: That’s a good question, and there’s no set amount or written rule to follow. Financial experts recommend you save 20% of your net income each week. If you earn, for instance, $1000 per week, your savings allocation is $200, but saving $800-$1000 each month might be somewhat too ambitious when you’re also trying to pay your bills and reduce your debt. The best advice is to save an amount you’re comfortable with. If you can swing 20% of your pay, that’s great. If you can only manage 5% or 10%, that’s okay too. At