Thought to have originated from the French phrase “joindre les deux bouts de l’an” — which means to make both ends of the year meet — doing so financially is the goal of every household budget ever crafted.
Meanwhile, the rising prices of goods and services seem to continually outpace increases in salaries and wages. Thus, “making ends meet” is becoming more and more difficult for a lot of people to do with each passing year
However, it does remain a possibility.
With that in mind, here’s how to stop living paycheck to paycheck.
- Craft a Spending Plan
Hiding from reality doesn’t make it go away; it just makes the problems you fear worse. Too many people spend without paying attention, only to be surprised when the money runs out.
Stop right now and total up your monthly expenses.
Start with the necessities: food, shelter, utilities and transportation. Then add in all of the below-the-fold expenses, such as new clothes, entertainment and the like.
Next, tally up all of your sources of income to get an idea of how much money you’ll have coming in each month. Ideally, your income will exceed your expenditures. If it doesn’t, you’ll need to start looking for ways to cut back as well as ways to bring in more money.
- Avoid Lifestyle Creep
Human beings are remarkably adaptable. This can be both good and bad. When we’re making little money, we do the best we can to make it work for us. However, when an increase in pay comes, we’ll expand our spending to encompass that new income level. This is a mistake. Known as lifestyle creep, it can keep us living paycheck to paycheck, even as we make ever more money.
The smart play is to funnel a significant portion of that increase into paying off debt and feeding it into savings to create an emergency fund. Once you’ve accomplished those goals, expand into saving for other future needs and wants. Get good at doing that, you’ll be able to live mostly without credit cards. This is an exceptionally worthy goal, as these Freedom Debt Relief reviews will illustrate.
- Eradicate Your Debt
Yeah, this sounds like a difficult thing to do when money is tight. However, part of the problem could be the way you’re servicing your debt. If you’re paying all of your credit accounts a proportional amount each month, you’re making those accounts harder to pay off.
A faster method is to make minimum payments on all except the one with the lowest balance — or the one with the highest interest rate. Then, hit that one with all of the money left over after making the minimum payments.
Let’s say you have five accounts on which you’re paying $300 monthly each and their minimum payments are $100. Paying $100 each on four of them leaves you $1100 to put toward the other one. Doing this until it is paid off gives you $1200 a month with which to pay down the next one, $1300 for the one after that, $1400 for the succeeding one and $1500 for the last one — all of which will also have been being paid down slightly in the interim.
Attacking the ones with the lowest balances first will give you an early win, which can encourage you to continue. Going after the ones with the highest interest rates first will cost you less overall, however it might also take longer to see accounts begin to fall away.
- Automate Your Savings
Having money set to the side before you get it will help you achieve your savings goals with minimal effort. Yes, it means less money will be available to spend freely each month. However, when you take this into consideration as part of your spending plan, you’ll find ways to work around it.
Ultimately, learning how to stop living paycheck-to-paycheck is simply a matter of — well — spending less and/or earning more. However, you do have to be smart about the way you use the money that gives you to derive the fullest benefit from it.