Nearly 78% of workers find themselves living paycheck to paycheck every month. Most struggle to make ends meet every month and have to rely on alternative financial assistance such as an auto title loan or a loan from a relative. Often, those who live paycheck to paycheck will not even be able to afford a $200 emergency if it came up unexpectedly.
If you find yourself struggling to stay on top of your finances every month, it may be time to implement a practical budget in order to save money and avoid stress! While it may seem impossible, there are a few practical tips that can make budgeting simpler, and help you reach your financial goals.
1. Implement a Realistic and Practical Budget
Where most budgeters go wrong is by starting with an unrealistic budget. These types of budgets can cause discouragement, as they do not allow for positive encouragement and motivation. However, realistic budgets can allow for milestone goals, such as meeting all your financial obligations for the month, or not using a credit card for the entire month.
Budgets need to be realistic and accurate. When creating your budget, you’ll need to start simple by estimating your expenses per month. One of the easiest ways to start budgeting is by separating your expenses into two categories:
- Variable Expenses
- Fixed Expenses
Your fixed expenses are those that don’t change during the month. These expenses usually include car payments, rent or mortgage, and utility bills. These expenses should be your highest priority, and they should be what you aim for when you are creating a practical budget. Living paycheck to paycheck can make this seem impossible, but it can be done! If you are on top of your payments, and you learn to manage your bills within a budget, your financial situation will improve over time.
Your variable expenses are those that do change during the month. These expenses can be those that differ based on your choices, such as gas, takeout, and entertainment. Generally, these are the expenditures that can be adjusted the most when you are looking to create a realistic budget.
Sometimes, your fixed expenses and your variable expenses have you locked into a lifestyle that you cannot afford. The general financial rules that you should abide by include ensuring that at least 10% of your income be designated to your savings, and no more than 30% be dedicated to your household expenses. One of the perks about budgeting is that it may help you pinpoint where you need to downsize, whether it be with your home or your vehicle.
2. Track Your Budget and Stick to It
After establishing your expenses, compare them to your income. Your outgoing expenses per month should not exceed your income. But if it does, it’s time to start cutting back where you can. Your expenses should be separated into different categories, and you should track the dates of your expected payments and paydays.
This establishes your practical budget and helps give you a better idea of how much you are spending throughout the month. A budget will also help diagnose where you have been overspending.
The biggest course of action you can take to stop living paycheck to paycheck is to stick to the budget you have made. Your budget can be maintained through a physical record book or an app, but it should be kept with you wherever you go in order to document your budget effectively.
A budget that works is one that has all your expenses on it, so your annual and monthly subscriptions or anticipated expenses should be factored in as well. These can include things like annual insurance payments or registration dues.
Living by your budget and simply creating one are two different lifestyles, and it is important to make your budget a priority if you want to stop living paycheck to paycheck!
3. Change Your Spending Habits
Once your budget is created, one of the biggest perks is that it will help you diagnose where your spending habits are unhealthy. Having bad spending habits is common, but you’ll be surprised just how easy it is to take back control of your money once you address your spending! Financial responsibility is one of the key components to learning how to not live paycheck to paycheck and rely on credit to get by.
One of the most prominent bad spending behaviors can be found with food. If you’ve seen one too many cucumbers go rotten because you’ve ordered takeout again, it may be time to start addressing your food spending. Once you become aware of this habit, one of the easiest ways to combat it is to throw away all your takeout menus and start meal prepping.
This will force you to become more responsible of your meals, as you will not have a backup plan. Limiting your takeout budget can help you learn how to cook and prepare food. By doing this, you could save upwards of $140 per month! In addition to food, another expense that most overlook is coffee. If you are going out for coffee every day, the expense can add up to over $30 a week! This is an easy habit to correct, as it can be adjusted simply by preparing your coffee at home every day.
Another common spending habit that most have can be found through entertainment or bills. How many online subscriptions do you have? Do you need cable if you have Hulu and Netflix? These are important questions you might need to ask yourself when you are cutting back on your spending. Another additional way you can cut back is through your bills. Are you overpaying for any services? Go through your phone bills and see if your provider is giving you the best deal. Changing your expense habits may seem daunting, but it’s simpler than most expect!
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