Living paycheck to paycheck is a struggle to make ends meet. It’s a stressful lifestyle, and unfortunately, it’s common among us millennials.
What does it mean by living paycheck to paycheck? Why is it often called a rat race cycle? This is why…
You are a rat in a wheel.
You wake up early and scurry to work.
You work fiercely as you can.
You drag your feet back home.
You crash in bed.
And then do it ALL again the next day. And with each passing day, you’re feeling more and more drained.
When your paycheck comes, you find it hard to save. You run out of money. You worry about having enough money to cover both your daily needs and wants and try to stretch your paycheck long enough to make it to the next payday. Your savings never increase. You can’t afford to invest in your retirement. Sometimes, you resort to charging credit cards, taking in salary loans or fall back to your parents, either for basic living expenses or one-time emergencies because you can’t afford to set money aside for savings.
Basically, you have no more money until the next paycheck.
Unless you really want to stay in this rat race, you SERIOUSLY need to stop living paycheck to paycheck. To help you get started, I came up with this plan. Take a look, take some action, and free yourself from your rat’s wheel once and for all.
STEP 1: Learn to Budget Effectively
You need to be proactive to stick to a budget plan that effectively works for you. Start off by looking at how you are spending your money. This way, it will be easier to see where your money is going and make any necessary adjustments to your spending habits. Cut out some of your frivolous spending. Are you shopping or eating out too much? Have you tried cutting back on groceries? Is there a way to reduce transportation costs? Can you get a cheaper phone plan? Figure out which expenses really don’t matter to you and trim them out of your spending plan and commit to living with less than what you earn.
STEP 2: Pay Yourself First
You might find it difficult to set aside a certain amount of money each month. However, it’s important to get started even with a small amount. Even a few pesos at a time will make a difference. If you are able to find ways to cut back on your expenses, it’s important to direct some of that money into savings so that you don’t get into debt the next time you need money. One great way to do this is to open a new bank account and set up an automatic withdrawal so that a small percentage of your salary goes into your (emergency) savings account.
STEP 3: Avoid Debt or Borrowing Money
If you are living paycheck to paycheck, avoid getting into loans especially credit card debt. Instead, pay for things with cash. If you have many debt accounts like salary loans or credit cards, make a plan to pay off your debt immediately. Look into consolidating those loans to reduce your monthly payment and interest. Interest payments is a huge waste of money and simply consolidating or transferring those balances to a 0% balance can save you huge amounts of money over time.
STEP 4: Plan for the Worst and Be Ready for Emergencies
Create an emergency fund. An emergency fund is basically a pool of money you can use in case of emergencies. Instead of getting into a terrible loan option, you can simply use your emergency fund to keep your financial situation on track. For bigger emergencies, you can avail of insurance products to protect you like health insurance, car insurance, critical illness insurance, home insurance, etc. Realize that it only takes a major hospital expense or household expense to wipe your hard-earned savings.
STEP 5: Increase your Income Sources
If even after decreasing your expenses there is still no room for you to save much money, the only other option is to find ways to make more money. There are countless ways to do this. Ask your employer for a raise or get a part-time job on your days off. Sell items from your home that you don’t use or need anymore. You can start your own business that does not require much money to start. You can either promote products or your skills through free platforms like Facebook, Instagram and Twitter. Look for passive income sources. Get creative about your side hustles.
OK. That’s it. Above, are my 5 steps to help you get started today. I hope this helps you. I know saving money is not easy, but neither is living pay check to check with nothing left over. We all have to face the reality that we cannot work forever. Saving money gives you that peace of mind and level of comfort that living paycheck to paycheck simply cannot compete with.
If you have any questions you would like to ask me feel free to comment below. Have you been able to escape living paycheck to paycheck? What strategies did you use?