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The paycheck-to-paycheck cycle is one that so many Americans are trapped in. Unfortunately, this is a seemingly inevitable part of how many people live their lives. Too much money is going out and not enough is coming in.
The statistics say that 63% of Americans are only $1,000 away from financial ruin. One emergency or one lost job could spell the end for many people’s financial lives as they know it. However, you can make sure you don’t fall into this category by breaking the paycheck-to-paycheck cycle.
Start Saving Through Budgeting
What’s probably even more startling than the number of Americans who are so close to financial ruin is the number of households who save nothing at all. This spells disaster, and so many Americans are finding themselves in situations where they cannot escape their paycheck-to-paycheck lifestyle.
Begin by saving through budgeting. This is where you track incomes and expenses to reveal where your money is going. Take a closer look at this and look at where you can make changes. Start small and gradually increase your savings.
Once you have a clear financial snapshot, you can easily figure out ways to save money.
Use the Time You Have
If you have the problem of not having enough money, then saving can only do so much for you. What can you do if you want to make more money?
Use the time you have to make some extra money. Think about much time you waste sitting in front of the TV or doing mindless things on the computer every day. This is a chance to change your future. You could get a side job or work on a personal project, for example.
Here are some of the ideas some people have used:
- Start studying. Take a part-time course in an effort to get a promotion.
- Start your own business from home. Begin with a part-time company and see whether it takes off.
- Take a part-time job. Many people have taken second or even third jobs.
Time really is money and if you use it wisely there’s no reason why you can’t stop living paycheck-to-paycheck.
How Can You Move to the Next Level?
The biggest reason people live from paycheck-to-paycheck is that their current jobs don’t pay them enough. If this is you, it’s time to consider how you can possibly move to the next level. Don’t wait for a promotion. Ask your boss how you can advance your career.
Most bosses have no problem revealing what they are looking for in someone they want to promote. In the event that there is no chance of advancing any further in your current job, you may have to start thinking about changing careers.
Too many people don’t have the confidence or the initiative to inquire how to better their incomes.
Is it Time to Downsize?
Believe it or not, there are many middle class Americans who are living from paycheck-to-paycheck. They live in huge houses and have two cars, yet they are barely making enough to cover their expenses. People in this position need to consider downsizing.
It seems entirely against the American mindset, but downsizing can free up some much needed capital. Consider whether you really need those two cars and whether you really need those spare bedrooms.
So many people don’t see this as a viable option, and that is where they are falling down.
Breaking Down Debt
Some debts are inevitable, such as student loan debt and your mortgage, but there are many types of debt that are simply draining your bank balance. Credit card debt is an example of this, as are payday loans.
To get rid of debt, consider paying it off as part of one lump sum. You should also consider consolidating any existing loans. In some cases, your lenders may be willing to negotiate lowering the interest rates.
While some debt is inevitable, it’s best not to get into debt in the first place. Get out of the habit of putting everything on the card and pay with cash instead. If you do pay with plastic, pay off the debt before the interest rates can begin to kick in.
Living from paycheck to paycheck is an unhappy reality for so many Americans. Nevertheless, you don’t have to join this unfortunate group. You can drag yourself out of this scenario by budgeting and changing the way you take on debt. A complete lifestyle change may be what you need to reclaim your financial independence and give you peace of mind.
Author: Jeff Gitlen, CEPF®