Fridays are awesome.
They are super awesome for some people because that means they are getting paid which means they get to buy the stuff the wanted from the previous week. You can’t buy anything until Friday because that’s when you get paid.
Does this sound familiar? Then you might be living paycheck to paycheck.
What if you could buy whatever you want whenever you want because you aren’t dependent on your paycheck arriving?
Sounds like a dream?
Well, it isn’t. All you need to do is set yourself down the path of financial freedom.
Table of Contents
It’s Not Easy
This blog post isn’t going to sugarcoat things. Sometimes you are so deep in a hole that you can’t even see the sky anymore.
“Financial freedom” might as well be two words that never have a chance of seeing each other. But no matter the situation there is always a way. Just because you are living paycheck to paycheck now, doesn’t mean you always will.
A lot of the time we have financial difficulties because we were never taught HOW to manage our money. Maybe our parents weren’t good with money or (like mine) didn’t like to talk about money.
It’s not your fault if you don’t understand fiances, so much sure you take the time to educate yourself. Check out these Best 5 Financial Planning Books (you can request them all at your local library).
It’s similar to trying to put together one of those massive 1,000 piece puzzles. Initially, it can be very overwhelming and damn near impossible. But over time, you start to see a little bit of progress until the picture becomes clear. Some people are lucky to work with puzzles that only have 10 pieces while others might be dealing with a million piece puzzle.
Either way, the steps are going to be the same.
10 Steps to Stop Living Paycheck to Paycheck
There are going to be some tough pills to swallow in this list.
If this process was easy then everybody would do it but some people just don’t want to get a better understanding of their situation.
Ignorance is bliss and all that.
But you want to figure things out once and for all so you can STOP LIVING PAYCHECK TO PAYCHECK! Let’s get cracking.
1. Add Up All of Your Debt
You can’t tackle your debt unless you can see the big picture.
It might feel like you’re only paying a bill every once in a while but 6 credit cards, rent, car payment, phone bill, water, gas, and student loans can all add up.
Write it all down. Even the $50 you owe your mom for that sweater.
2. Where Is Your Money Going?
Next, you need to figure out where your money is going. Hopefully, some of it is going to the debt you uncovered in step 1 but where is the extra going?
Is it going to essential food or $7 coffees from Starbucks?
The only chance you have of making a solid dent in all of this is getting control of the extra money.
The extra money is the money left over after you’re done paying the essential bills (rent, car, student loans, etc.). Even if it’s only $10 that is something. Track where every penny is spent.
You might not know this right away. Try to spend a month writing everything down to see where things are going. You might be surprised to see that those trips to the vending machine can quickly add up.
3. Are You Making Enough?
This one is important.
After you’re done with Step 2 and see how much extra money you have is it enough?
Do you even have any?
If you don’t have any extra money or you think the number is too low then you need to reconsider how you’re spending your money.
For example, if you’re bringing home $1,000 a month after taxes and $800 of it is going to essential debt and the other $200 is going towards fast food and bars, then you might want to reconsider how you’re spending the money.
Food can be a huge expense for people that aren’t careful. If you plan your meals and do a little bit of cooking you’d be surprised by how relatively cheap it is.
What happens if you aren’t making enough no matter how frugal you get? Then it’s time to either look for a second job or side hustle.
The goal is to get you out of this situation and sometimes that means doing more work.
4. Figure Out Your Bad Habits
Each of us has a money mindset and that can quickly determine how we treat money.
For example, some people feel uncomfortable having money saved up so they spend it without realizing why they are doing it.
Are you the type that instantly spends money the second they get it or do you let it sit for a bit before deciding the best course of action?
Are you an impulsive buyer?
These are things you need to look out for so you can fight against them and finally stop living paycheck to paycheck.
Whenever you get ready to spend money ask yourself what is making you spend this money? Over time you want to learn to cultivate good money habits.
5. Budget Time
You need a budget.
Even rich people need a budget.
It’s important you understand where you can spend your money and what your situation is at any moment.
Don’t have money to go out with friends this month? Then either try to change the plans to something within your budget or see what you can do next month.
I like a website called Mint.com. It let’s you see all your bills, money and loans in one place! It’s super easy to set up and has some great budgeting features.
6. Start Hitting the Debt
This might be the most painful step starting off because you are “spending” money that you’ll never get to see.
However, if you don’t start attacking your debt now, it will linger with you always.
The less money that goes towards debt two years from now, the more it goes towards more fun stuff.
7. Introducing the Emergency Fund
For some, having an emergency fund sounds like a pipe dream but it really isn’t. Once you’ve got a handle of your finances then it’s time to start saving up a little bit.
Having an emergency fund is vital to your long term financial success. Imagine that you’ve managed to pay off all your debt, but then your heating system breaks and you need to pay $500 to fix it. Will that push you back into debt that you worked so hard to get out of?
You don’t need to aim for $100,000 but it’s nice to have some extra cash for those times you do need to fix your car or pay a vet bill.
8. Build a Buffer
Steps 7 & 8 are pretty similar. An emergency fund is only supposed to be used for emergencies while a buffer in your bank account is for those times you have to spend a small amount that you didn’t plan for.
Maybe your friends want to grab $2 wine on Friday. Well, you have $10 of buffer in your bank account so you can get 5 wines!
9. Put Your Money to Work
It’s great to have money saved up but you are really missing out if you aren’t letting that money go to work for you.
What this means is that you should find ways to have the money turn into more money without having to do anything.
You have a number of options when it comes to this:
- Savings account
- 401k
- IRA
- Investment funds
Initially, you shouldn’t expect to make big returns on the money but you’ll quickly see that over time things begin to add up.
10. Living Paycheck to Paycheck Isn’t Easy
Besides always trying to figure out if you have enough for your next adventure, living paycheck to paycheck can put undue stress on you that can affect other areas of your life.
Getting out of this vicious cycle is not easy without making sacrifices and some people aren’t willing to go the extra mile to make it happen.
However, you never know when life is going to throw a wrench into your plans so it’s best to be prepared now so your life is just a little bit smoother later on.
