How to Get Away from Living Paycheck to Paycheck

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A few days ago, I wrote about the 50/20/30 rule of budgeting. For someone who’s never had debt, or who has always had a good paying job, applying this budgeting rule is attainable. After all, if 50% of your take-home pay can cover your needs, then the other half can be saved or spent as you wish. But if you’re living paycheck to paycheck, what can you do?

Budgeting is the foundation of taking control of your money. Budgeting doesn’t fix all money problems, but it does help you identify where you stand financially.

Talk about your money

The majority of the people, coworkers, and friends I talk to are uncomfortable talking about money – especially about their money and personal financial situation. If you include my parents – forget about it. Growing up, they ingrained in us that you should NEVER talk about money, and we were always in the dark regarding their financial status. Now that I’m a parent, I couldn’t disagree more.

Family finances should be communicated regularly with each member of the family. If you have kids, they don’t have to know the details, but they should at least have an idea how much things cost, and how much money comes every month. Your kids should know that their iPad didn’t grow on a tree.

Being honest with your spouse about money is probably one of the most important elements in a happy marriage. Be honest with one another about spending because major spending decisions will have consequences, and if you don’t communicate prior to the major spending decision, there may be ramifications.

Take control of your money

When you’re living paycheck to paycheck, budgeting should be even more critical.

  1. Take control of your money and know EXACTLY where your money is going.
  2. Be frugal with your spending.
  3. Pay down debt. The longer you carry a debt balance, the more expensive the debt becomes. Know what the bank charges you for carrying a balance.
  4. SAVE and don’t spend it! Even if you only start out by saving $20 a month. Pay yourself first by treating your “savings” as a bill that is due on the 1st of the month. Then put it in a savings account that isn’t easy to access so that you are not tempted to transfer it to your spending account.
  5. Be vigilant and stay on track. Spending is easy. Quitting is easy. Saving is harder but it pays off in the end.

Once you have learned the importance of budgeting and taking control of your money, then you will have better control of your life. Money is only a tool of exchange. We work to earn money so we can provide for our families. We save and invest in the hopes of having money available for us in the future. Having more money gives you flexibility. Having enough money gives you peace of mind. Don’t be afraid to talk about money and take control of it.

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