Even folks earning six-figure salaries can end up live paycheck to paycheck, so RelayRides blogger Grayson Bell explains how avoid this vicious financial cycle.
When you are living paycheck to paycheck, it is extremely difficult to live your life without accumulating debt. If you don’t make enough money to buy food, drive a car, heat your home, or even afford decent living accommodations, then it is time to make a change. There is no other way to stop living paycheck to paycheck without completely changing your lifestyle. If you currently live paycheck to paycheck, then here are some ways to change your financial outcome.
Have you ever created a budget? Budgeting is a very important process of money management. Without a functional budget, one can not understand where their money is going. A budget gives you an idea of how much you can spend in each of your designated spending categories, along with how much you are spending overall. If you go over, you need to understand why. This is the most often overlooked part of money management. Budgets can change each month, but without one, you are controlling your money with no direction. You are flying blind. If you need to create your budget, then you can use one of the many budget calculators.
Once you have a budget created, you should focus on cutting your expenses. You should look over all of your expenses and see which ones are absolutely necessary. Do you need a full cable package? Can you switch to a different cell phone company? What about insurance? One of the easiest ways to reduce expenses is to compare services you receive from one company to another. You should continue this practice every year to make sure you are getting the best deal. Comparing services doesn’t take much time, but it can really save you money.
Make Extra Money
One of the best ways to get out of debt and stop living paycheck to paycheck is to earn more money. This is easier said than done in most cases, but we are not just talking about getting a raise. When most people hear about making more money, they think of changing jobs. That is not always necessary. There are many ways to earn extra money on the side that many people don’t even think about. You can even rent out your car through RelayRides to earn extra money. The average member earns $250 a month! It doesn’t matter if you change jobs or add a side job, either way it will make a difference.
Expand Your Knowledge
One of the biggest reasons for people living paycheck to paycheck is because they are in a low wage job. There is no possibility for growth and they might not have the skillset to change careers. The only way to get out of a low wage job is to expand your knowledge. Everyone assumes that you have to get a degree in order to switch jobs, but that is not true. There are many great and cheap ways to learn a new skill without having to go back to school. You can take some vocational classes or even learn a skill through apprenticeships.
Wants Vs. Needs
Everyone has a different mentality about their money and what it can do. One of the biggest issues some have when it comes to their money is differentiating between wants and needs. There are really only a few basic needs that should be taken care of, which are food, shelter, and clothing. You can even include sanitation, education, and healthcare. After these have been taken care of, all the rest are technically wants. The only way to spend less money is to understand what your purchases are. Are you purchasing your wants or your needs?
Living paycheck to paycheck is a hard place to be in, but it doesn’t mean that is the only place. In order to change your financial situation, you have to change your mentality. It takes time to remove yourself from the situation, but once you figure out the tactics to handle your finances, you will be better off.