Ending the Paycheck to Paycheck Way of Life

    Having too much debt can cause you to become cash poor. You earn a good salary, however, at the end of each month, you have nothing left. Living paycheck to paycheck also causes enormous amounts of stress. Listed below are several tips to end this way of life.

    Creating a Budget

    Creating a budget is easy. However, it won’t work unless you stick to it. On a sheet of paper or using a budgeting app, list all of your monthly expenses. Then deduct the figure from your total net income. You should have money left over that you can use for things such as building an emergency fund, vacations, and your retirement. Since some of your bills vary from month to month, make figure out what the average cost is for the year. If you own a home and taxes are not included with the mortgage, make sure to add those in as well.

    Relying on Credit Cards

    Excessive amounts of credit card debt is a sure way to remain cash poor. Credit cards only work for you if you use them properly. For example, you have money in your checking to cover your vacation. However, if you use a credit card that offers rewards like airline miles that lead to discounted or free flights, you should use that credit card to book the vacation. When the bill comes in, you pay it off completely. If instead, you use them as an additional source of income and keep a high running balance, you’ll pay two to three times more for items than necessary.

    Reducing Debt

    While some debt is good, most debt will not offer any benefits. For instance, in most cases, a mortgage for a home is good debt. When you retire or the market benefits the seller, you can turn a profit if you choose to sell. Car loans and personal loans don’t provide any benefit other than the convenience of purchasing items you otherwise can’t afford. Paying off debt sooner rather than later will save you interest fees and free up money you can use to live. Some companies specialize in providing lower-interest consolidation loans spread out over a year or more.

    Smart with Your Money

    You earn enough money, however, debt is preventing you from living. Getting smart with your money is crucial. Buying things on credit is not good practice. Instead, if there’s something you want, save up for it. There are several benefits. First, you won’t add on additional debt. Secondly, you’ll pay only the original sticker price. Third, you’ll learn how to save money, resulting in purchases made with careful thought.

    Trimming the Fat

    Once you list everything you owe out and need to pay monthly, you see exactly what you spend money on. This lets you take a hard look at your spending habits and trim the fat. Coffee on the way to work, dining out, and gym memberships may suddenly seem unnecessary. Your cable bill and cell phone service that costs more than a few hundred each month are also under review. You clearly see the amount you waste and find ways to pay less.

    Keeping Up With the Joneses

    Some people buy things because they want to compete with others. This is a dangerous practice that can lead to financial ruin. Instead, buy large ticket items when the time is right for you, not for another. A car can last far longer than two or three years. Once you pay it off, why not enjoy a few years free from payments? That’s money you can put into savings to fund a nice vacation or a large down payment on a new car when you’re ready.

    Save For Emergencies

    What do you do if you have a plumbing problem, your kids need money for a class trip, or you take a paycut at work? If you don’t have any money set aside, chances are you don’t have many options. Of course, there’s the advantage of bad credit loans you can use to tide you over, but in times when the issue is bigger or you can’t repay the loan, you need a backup plan.

    Start setting aside money each week into an account. Don’t touch those funds unless you’re having an emergency that can’t be resolved any other way. The goal is to try to get at least three to six months of income in an account for rainy days.

    When you live paycheck to paycheck you don’t have money set aside for emergencies. Thankfully, you can end the cycle by creating a household budget, eliminating bad debt, and reducing your reliance on credit.

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