Living paycheck to paycheck is no fun, but with the exception of a lucky few born into privilege we have all done it at some point, or several points in our lives. Unfortunately a lot of us get so used to living that way that we come to view it as “normal”, and in doing so forget to consider or aspire to a better financial lifestyle.
For most people, their attitude towards money was forged mainly through their upbringing and mostly subconsciously. Too few parents ever talk to their kids about money in an effective way, or from a young enough age that there is still hope of making an impression. Schools certainly don’t teach children anything as important as financial planning, so it’s no wonder that the majority of people fumble through and make mistake after mistake, living in a stave of happy oblivion until one day they realize they are living under a mountain of debt.
So how can you stop living paycheck to paycheck and just start living?
- Realize that you have a choice. Living paycheck to paycheck is normal right? Well like most things that are ‘normal’, it is only normal because most people do it. But just because most people do it doesn’t mean you should. Accept that normal is not the same as ‘right’ or ‘good’, and make a conscious decision to make a change for the better.
- Pay yourself first. Many people here those words, and their brains, programmed by consumerist culture interpret them to mean, “go out and buy something to make yourself happy before you pay the bills”. Well such ambiguous words could certainly be interpreted that way, so if you though that’s what they meant, you are forgiven. What it actually means, however, is to consider your financial well-being just as important as your phone bill, or your cable bill, or your car payment, and that a clear, regular contribution to your savings should be considered as non negotiable as any of the others. So every month you should set aside a certain amount of money for your savings, just as you set aside money for bills and food and, yes, shopping!
- Make a plan. Decide how much you can afford to save and make a commitment to save it every month without exception. If you can`t trust yourself to stick to a plan then set up an automatic transfer from your checking account into a savings account of your choice.
- Put your money in the right place! Don`t just save in a checking account. Not only will this make it too easy for your to dip into your savings in a weak moment, it will mean losing out on huge amounts of free money! Consider a high interest savings account at the very least, and after you have accumulated a few thousand start transferring some of it into mutual funds or stocks. To demonstrate why you need your money in an interest bearing (or other growth) account, consider this. If you save $100.00 a month in your checking account, at the end of five years you will have $6000.00, or exactly as much as you put in. If however you earn a very modest 5% return, you would have $6962.00. That’s almost a thousand bucks in free cash!
- Don’t deprive yourself. Make saving a priority, but don’t sacrifice your quality of life today. Never stop saving money, and always aim to increase your net worth every year, but don’t get so carried away with saving every penny that you don’t take a vacation or don’t ever eat out. Balance is key. Spend money, just save more than you spend, and be happy.