Break Free of Living Paycheck to Paycheck

Living paycheck to paycheck is far more widespread than one might imagine.

Just over half (54 percent) of Americans live paycheck to paycheck. And it’s not just the lower-income groups either. It includes 51 percent of those who earn $50,000 to $100,000 per year. 

There is a way out if you’re committed to the process. It’s possible to build a financial cushion and remove most of your financial stress, even if you don’t have a high-paying job.

Gain financial freedom by taking control of your finances:

1.    Get excited. If you’ve been living paycheck to paycheck, it’s most likely been going on for quite some time. Make a list of the advantages of getting out of this cycle. Pay special attention to how you would feel.

•    You would be able to handle any financial emergencies, such as a broken furnace or the periodontist for your children.

•    You’d sleep better.

•    You could take a nice vacation.

2.    Pay yourself first. Read The Richest Man in Babylon – it’s a short read and will give you a new perspective on paying yourself first. Consider your savings account to be a monthly bill that must be paid regardless of the circumstances. It’s not the last bill. It’s the first. No exceptions.

3.    Get a handle on your spending. Everyone should have a budget. There are countless resources covering the topic of setting and sticking to a budget. In addition:

•    Make a list of all your purchases and review them at the end of each day. Every candy bar, magazine, and soft drink are included. Even if it only cost a cent, write it down.

•    Avoid making big purchases without a waiting period. The urge to spend a lot of money will often pass after a couple of days.

•    Create a decision-making process before purchasing anything you don’t need. This can be as simple as asking yourself a couple of questions: 1. Do I need this? 2. Is this helping or hurting my goal of breaking free from my paycheck-to-paycheck lifestyle? Then remind yourself how great you’ll feel when your financial situation is better.

•    Eliminate unnecessary expenses. If it doesn’t help to keep you alive or employed, reconsider it.

4.    Earn more. There’s a limit to how much you can cut your expenses, but there’s no limit on how much you can earn. Most financial gurus only focus on the expense side of the equation, but your options are ultimately limited. If you’ve been in your current position for at least two years, apply for something more lucrative.

•    Find a way to earn some money on the side. With the popularity of the internet, there are ways to earn extra money without leaving home.

5.    Tough it out. It’s not easy to get excited if you’re only saving $100 each month, but it’s a start. It will take time to accumulate enough change to make a significant difference. Celebrate your progress, no matter how small.

Knowing that half of Americana, even those with good jobs, are living paycheck-to-paycheck, should tell you that it’s not the paycheck that’s causing the problem. And it should motivate you to make the necessary changes.

Just a couple of weeks without a paycheck could spell disaster. Though it seems like a long journey to break free of this cycle, it’s worth the time and effort. Not worrying about your bills or what the future may hold is a worthy goal.

“Once you break the cycle and build up your savings, you can set the next goal of achieving financial freedom,” says Darren Nomberg, Senior Vice President Investments at David Lerner Associates.

 
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. 
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
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David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC