Paychecks are the helping hands of people who need the dough for expenses. But for those who live solely off it, the paycheck is their ultimate salvation.
Some people in the “paycheck to paycheck situation” think it’s just an everyday slice of life, — and the best they can do is accept it. Countless surveys reveal that a number of employees generally live from paycheck to paycheck and they are good with it.
Or so they think.
The Reality of Paycheck Living
Living from one paycheck to another refers to the situation in which people are barely able to meet their financial needs due to limited income or lack of savings. They depend on each paycheck to pay their bills and meet other financial obligations. In most cases, it means the individual is one paycheck away from living without electricity, a home, or a car. They also do not have enough funds for luxuries or emergencies. It is a situation in which an individual is just scraping by.
Obviously, it’s a worst-case scenario – a very plausible worst-case scenario.
With an unstable financial situation, it makes one wonder: how can a person plan for important bills and events? The answer is simple: they can’t.
The reality of paycheck to paycheck living’s consequences isn’t meant to scare people with such a lifestyle. People in such situations should not think of this as a threat. Instead, it should serve as motivation to re-evaluate their financial outlook.
Nobody wants to live on the edge. Fortunately, everyone has the opportunity to move away from that edge.
Re-Check: How Much Do You Have?
To stop this cycle of paycheck to paycheck, one should live below their means. While some people are satisfied with breaking even each month, it’s a case-to-case basis. If they don’t have the extra income, achieving goals will be more difficult.
Start with something simple: a financial checkup.
Personalmoneystore.com, a finance expert, recommends going through recent bank statements, receipts, and credit card statements and writing down EVERYTHING. Monthly expenses such as groceries, the electric bills, and miscellaneous items should also be included in the calculation.
Comparison of the total figure and the take home pay begs the question: “Is it equal, or do you spend more than you earn?”
If the latter is the case, it’s time to trim costs.
Trim the Fat
The next step involves cutting down on your expenses. At this point, it’s not just about the wants. Trimming fat from your spending involves focusing on the needs and removing unnecessary expenses, such as the following:
• Take-out lunches/dinners
• Gym memberships
• Subscription services
• Grabbing custom or specialty coffee
Initially, these do not seem like a lot, but cutting down on these expenses will save you a lot more than you think. It also gives the budget more leg room, and increases one’s disposable income.
Breaking Free from Debt
Borrowing money is essential in some cases, but regularly borrowing and failing to pay is detrimental. Debt robs the individual of their extra income. Managing debts, however, makes a big difference.
Experts recommend taking the money saved from trimming unnecessary expenses and using this to pay off the debt. The approach does not matter as long as all balances are paid.
Living paycheck to paycheck is a life reality that may work for others, but it does not work for everyone. Not all people can handle the stress and pressure that comes with this type of set-up. Instead of living in uncertainty, it’s best to get a better grasp with finances through wise decisions.