Too many Americans live paycheck to paycheck. Each week when payday comes around you owe out most of what’s coming in. It’s a terrible situation that many people can’t seem to escape. The good news is that you can put an end to living paycheck to paycheck. Listed below are several tips to start you on your way towards financial freedom.
Why Budgeting?
Budgeting gives you insight to where your money goes. It also helps you identify poor spending habits, track your money, and set both short and long term financial goals. Creating a household budget is not complicated. It’s something that anyone can do. The hard part is sticking to it. To get started, list all of your bills and monthly expenses. Once you have a comprehensive list, take that total and deduct that figure from your net income. If you prefer to fill-in the blanks, budgeting software is available. You can use the extra money to fund future projects and establish a nest egg.
What Bad Credit Really Means
When you live paycheck to paycheck sometimes you must put a bill on the back burner. Unfortunately, making any late payments can have a negative impact on your credit score. A poor score can make it difficult to get a mortgage, a car loan or a credit card. Bad credit will cost you more across the board. You’ll pay additional fees in the form of a deposit for utilities and cable service and security for a rental. It can become so frustrating that you ask yourself where can I get an emergency loan with bad credit? The good news is that there are some unconventional lenders out there. A small loan with an affordable monthly payment allows you to stabilize your expenses and move forward.
Live Beneath Your Means
As recent history shows, anything can happen when you are the most vulnerable. It’s fairly easy to get in over your head and take on too much debt. You need things and don’t have the cash available so you put it on a credit card. You buy a home at the top of your price range and a brand new car. A year or so later and suddenly the money you make is no longer yours, you owe it all out. Going forward, it’s critical to stay not just within your means, but beneath your means. This will ensure that for the most part, whatever life throws your way, you’ll be in a better financial position. It also makes it easier to take a risk and find a new career or venture out on your own.
Live Comfortably While Reducing Costs
With a budget in place, you understand your areas of weakness. You also create a system of checks and balances, putting you back in control of your finances. You budget for current items on your wishlist like a home and a family, as well as for college and retirement. You now forego buying lunch at the office and limit dining out to once a month. You bundle home, auto and life insurance, and cable and television services with the same carrier. Upgrading the thermostat, lowering the temp on the hot water heater, and using only energy-efficient light bulbs are all ways to increase your savings.
Pay Down Debt
As stated earlier, accumulating excessive debt is relatively easy. However, once it progresses to tens of thousands, eliminating it will take time. Thankfully, there are a few ways to tackle your debt problem. If you own a home and have equity, you can refinance. If that isn’t an option you can work on the credit cards first. Start with the one that has either the highest interest rate or the highest balance and apply more than the minimum amount due. Once you pay it off then start on the next one until all cards have a zero balance.
Living paycheck to paycheck is not a desirable lifestyle. You’re always just one paycheck away from poverty. Take the necessary steps now and pay down debt, cut expenses and learn how to live below your means to achieve financial freedom.
