If you’re stressing about your finances and living paycheck to paycheck — for yet another month — it’s time to set some new limits on your spending. No matter how much you earn, understanding how to manage those dollars will get you further than simply earning more. It’s one reason why some lottery winners find themselves facing bankruptcy within a few short years — those millionaires didn’t adjust to their new lifestyles by living within their means.
Fortunately, you don’t have to be the next financial tragedy. Here are some things you can do to break the paycheck-to-paycheck cycle, starting this month.
[See: 6 Ways to Treat Yourself on a Budget.]
1. Assess your resources. You need to have a clear idea of exactly how much money you have access to each month. This does not include access to credit. Make sure you are working with estimated earnings only, whether that’s from one or more paychecks, passive income or side business income. If you are earning passive income or extra cash on the side, take an average of the last six or 12 months so you have a realistic idea of how much is hitting your bank account each month.
2. Track your spending. This should be a no-brainer, but you’ll be surprised by how many people don’t track their spending until they are already in trouble. Get into the habit of tracking every dollar spent using the Mint smartphone app or other budgeting apps, such as You Need a Budget or PocketGuard that make it easy to log those expenditures in real time. You can keep a running tally and review everything in detail every few days or at the end of the week. This will make it that much easier to cut out wasteful or mindless spending.
[See: 12 Ways to Be a More Mindful Spender.]
3. Pay one month’s bills ahead of time. This may not be realistic for you if you don’t have any savings right now or are still waiting to get paid. However, if you have the cash available, this is one of the smartest ways to stay ahead of the financial game. Paying all of your bills early — or at least updating your budget as if those dollars are out of your hands — can help you feel more secure that your bills are covered and allow you to shift your focus to earning money for next month all month long. If you work on a commission basis or are earning money with a side job, this can motivate you to earn more so you can take care of next month’s bills and enjoy the surplus, or stash that away in another savings account.
4. Set realistic spending limits. If you’re having a hard time staying within budget, maybe your spending limits are too strict. Like with dieting, depriving yourself of spending money on things you enjoy can trigger a spending spree or justify spending more on something unplanned. Be realistic when creating your grocery budget, entertainment budget, clothing budget and other spending categories so you aren’t sabotaging yourself just to reach your goals.
[See: 10 Money Leaks to Shut Down Now.]
5. Become a bargain hunter. You don’t have to be cheap to be frugal but you do have to be frugal to save money. Make bargain hunting fun, so you don’t feel like you’re missing out just because you’re spending less these days. Seek out deals on daily deal sites, such as Groupon and LivingSocial, so you can try new restaurants at a discount or snag deals on tickets to area events. Subscribe to email newsletters from your favorite stores so you get updates about upcoming sales and can take advantage of online-only specials. Save money on groceries by keeping up with in-store specials and limiting the number of trips to the store each week. Every trip can be temptation to spend more than you planned, so consolidating those trips can help you save on food (and gas).
6. Be savvy with credit cards. Eliminating a dependency on credit cards will always get you ahead financially and if you find yourself living paycheck to paycheck, now is a great time to break the habit. However, if you’re making use of rewards credit cards or credit cards with cash back incentives, don’t be afraid to take care of bills, groceries and other expenses using those cards to earn points and cash. Just remember to treat your credit card charges as a short-term loan that you need to pay back every month. This way, you’ll keep your cash flow status current, earn your rewards and avoid the burden of interest charges or late fees.
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6 Ways to Break the Paycheck-to-Paycheck Lifestyle originally appeared on usnews.com
