If you’re reading this, chances are that you may have burnt through most of your salary on bills, food, debts, and so on. You’re wondering, “where on earth did my money go?!” This is what living paycheck to paycheck looks like.
That feeling of hopelessness gets much worse when your last paycheck was just a few days ago and you’re already in this situation. You’re down to less than 20%/30% of your entire salary with many days left till your next paycheck. It’s about to be another long month.
Does this sound familiar to you? Do you know anyone in a similar situation? You will see why you need to share this with them by the time you are done reading.
As a young person starting out in your career or maybe with a few years in, you’re not alone in this paycheck to paycheck struggle.
Experienced finance and accounting consultant, Eno Esitikot, described living paycheck to paycheck as “spending all of one’s earnings before the next paycheck is received”. “One of the primary reasons for this situation is a lack of proper financial planning”, the former head of finance added.
Many disagree with the ‘lack of proper financial planning’ part. The usual response is “I’m not paid enough!” While that may be true, you’ll come to learn that money has principles. If you don’t obey these principles, you’ll always be waiting for the next paycheck even when you earn three times as much as what you currently earn. If I was to guess, you probably have as many money issues right now, as you did when you were earning three times less than what you currently earn.
The good news is that you don’t have to stay stuck in this cycle forever. With a little bit of effort and a lot of discipline, you can take control of your finances and build a stable financial future.
In this guide, we’ll be discussing 5 practical steps you can take to manage your salary better and break the cycle of living paycheck to paycheck. From tracking your spending to negotiating with service providers, we’ve got you covered. So sit back, relax, and get ready to take the first step towards financial freedom.
The first step to managing your salary and breaking the cycle of living paycheck to paycheck is to track your spending. This might sound like a daunting task, but it’s essential if you want to gain control over your finances.
Here’s how to do it:
Write down all your monthly expenses, including rent, bills, food, transportation, and entertainment. Be sure to include any debts you’re currently paying off. More on this in our next blog post.
You can do this manually by writing down every purchase you make in a notebook or using an app like Mint or Personal Capital to track your expenses automatically. You can also get your bank statements at the end of the month and review what you did with your money.
Look for areas where you might be overspending and see if there are any expenses you can cut back on. For example, you might be spending too much money on takeout or subscriptions you don’t use or need.
Also, by tracking your spending, you’ll get a clearer picture of where your money is going each month. This will allow you to make more informed decisions about your spending and identify areas where you can cut back.
Remember, tracking your spending isn’t a one-time task. You’ll need to do it regularly to make sure you’re staying within your budget and making progress towards your financial goals.
Once you’ve tracked your spending and identified areas where you might be overspending, it’s time to start cutting back on expenses. Here are some tips to help you do this:
Eating out can be expensive, especially if you’re doing it regularly. By cooking at home, you can save money and also eat healthier.
Many of us have subscriptions we don’t even use or need. A popular example is movie streaming services. See, you can Netflix and chill to stupor when you are more financially stable, but focus on saving yourself from this financial crisis for now. Take a look at your monthly expenses and see if there are any subscriptions you can cancel. Once you identify them, go ahead and cancel them.
You’re still taking Uber and Bolt? Who are you trying to impress? Enter a commercial bus my friend! But seriously, if you’re spending a lot of money on transportation consider substituting your transportation means with public transport. This can save you a whole lot of money.
Before making any big purchases, be sure to shop around and compare prices. You might be able to find a better deal by looking online or waiting for a sale. Yes, it’s okay to be an ‘alaroro‘ sometimes – desperate time calls for desperate measures.
When shopping online or in-store, be sure to use coupons and promo codes to save money. You can find these online or by signing up for newsletters from your favourite retailers.
By cutting back on expenses, you’ll have more money available to put towards savings or paying off debt. It might be tough to make some of these changes at first, but they’ll be worth it in the long run.
Another important step to managing your salary and breaking the cycle of living paycheck to paycheck is to build an emergency fund. This is a fund that you set aside specifically for unexpected expenses, such as car repairs or medical bills.
Here’s how to build an emergency fund:
Experts recommend saving at least three to six months’ worth of living expenses.
Set up a separate savings account and start putting money aside each month. You can automate this process by setting up automatic transfers to your savings account.
Treat your emergency fund like any other bill and make sure you’re contributing to it regularly. If you have trouble sticking to your savings plan, try setting up a budget or finding ways to increase your income.
Having an emergency fund can help you avoid going into debt when unexpected expenses arise. It can also give you peace of mind knowing that you have a cushion to fall back on in case of an emergency.
If you’re still struggling to make ends meet even after cutting back on expenses and building an emergency fund, it might be time to consider increasing your income. Here are some ways to do this:
If you’ve been with your employer for a while and feel like you’re due for a raise, it might be time to ask for one. Prepare a list of your accomplishments and why you deserve a raise, and schedule a meeting with your boss to discuss it.
There are plenty of side hustles you can do in your spare time to earn extra money, such as freelance writing or selling goods online. Think about your skills and interests and see if there’s a side hustle that might be a good fit for you.
If you have an entrepreneurial spirit, starting a business can be a great way to increase your income. Consider starting a business in an area that you’re passionate about or that fills a need in your community.
Sometimes increasing your income requires additional education or training. Consider taking classes or earning a certification that will allow you to advance in your career or switch to a higher-paying field.
By increasing your income, you’ll have more money available to put towards savings, paying off debt, or just improving your quality of life. It might take some extra effort, but the rewards can be significant.
If you have debt, it’s important to make paying it off a priority. Here are some tips for prioritizing debt repayment:
Include the balance, interest rate, and minimum payment for each one.
High-interest debt is a loan to be repaid at a high rate of interest. This type of debt can quickly spiral out of control if you don’t pay it off quickly. Focus on paying off these debts first to save money on interest charges.
If you have multiple debts with high-interest rates, it might make sense to consolidate them into one loan with a lower interest rate. This can make it easier to manage your debt and save you money on interest charges.
If you have extra money available, put it towards your debt to pay it off faster. This can help you get out of debt more quickly and save you money in the long run.
While you’re working on paying off your current debt, it’s important to avoid taking on new debt. This can make it harder to get out of debt and keep you stuck in the paycheck-to-paycheck cycle.
By prioritizing debt repayment, you’ll be taking an important step towards financial stability and freedom. It might take some time and effort, but the peace of mind that comes with being debt-free is well worth it.
Living paycheck to paycheck can be a stressful and challenging situation, but it doesn’t have to be a permanent one. Taking the five steps above will help you take control of your finances and work towards a more stable future.
Remember, managing your salary is an ongoing process, and it takes time and effort to make lasting changes. But by taking small steps and staying committed to your goals, you can achieve financial stability and freedom.
At NotchHR, we believe in empowering individuals and organizations to take control of their finances. Our free HR software offers a range of tools and resources to help you manage your salary and benefits, track your expenses, and plan for the future.
Does your HR know about the leading free HR software, NotchHR? This is the point where you visit NotchHR website and share with your HR.