According to a new survey conducted for GOBankingRates, 49 percent of all Americans live paycheck to paycheck. And many report having no money set aside to deal with an unexpected expense such as a car repair, medical bill or job loss. This can potentially cause serious financial damage for anyone in this situation.
People end up living paycheck to paycheck for a number of reasons — some attributed to situations outside of their control and others as a result of financial choices. But there is good news…you can get out of the paycheck-to-paycheck cycle!
Here are five tips to help you figure out how to cut back, curb your spending and achieve financial freedom:
- Track your expenses!
Determining how much money is coming in and where it’s going is the only way to improve your finances. Make a list of all monthly necessary expenses such as rent or mortgage, car payment, student loans, medical bills and utilities. Also include what you spend on discretionary items such as entertainment and clothing…and lattes! Track spending habits for three months to see how expenses fluctuate and get the best picture of your financial health.
- Identify costs you can cut.
Review your list of monthly expenses and look for ways to trim costs. Small savings can go a long way! For example, you can save approximately $1,000 a year by simply making your morning coffee at home rather than buying it at a café on the way to work. If cable and cell phone bills come with steep monthly fees, explore other options such as bundle services, prepaid phone plans, or streaming TV services. Shop around for better auto and home insurance rates to shave some money off your current premium. Cancel expensive gym memberships and hop on a bike, hit the park for a run, or search YouTube for free workout videos.
- Build a budget and stick to it.
Once you have a strong handle on all of your expenses and have trimmed where you can, develop a realistic monthly budget. The key to success is sticking to your budget! For extra help, use Google Sheets to create a budget that can be easily shared with other members of your household or a financial advisor. These people can support your efforts to stop living paycheck to paycheck.
- Automate savings.
One of the best ways to save for short and long-term goals is to have a portion of your pay automatically deposited into a savings or retirement account. Paying yourself first should always be built into your budget plan and automatic savings keep you on track to save money faster. Additionally, if your employer offers a retirement plan such as a 401(k), contribute as much as you can afford. The best perk of retirement plans is that contributions are tax-free on most accounts and this reduces taxable income, allowing you to pay less in taxes each year.
- Boost your income.
A solid budget and savings plan can make it easier to break the paycheck-to-paycheck cycle, but sometimes you need a little extra boost. Pursue opportunities for a raise or a job promotion or look for a second job. The money earned from a second job can be earmarked for a specific expense or be the source of your automated savings. If you have a skill such as writing, graphic design, or accounting, look for freelance opportunities on websites such as Upwork.com. And if you don’t have a special skill, there are plenty of part-time positions out there.
We’re here to help! Lakeland Bank offers information on personal banking and financial planning on our website. We also have a team of trusted financial planners to help work through your financial needs. Our Customer Service Team can be reached at 866-224-1379.