Look at money differently and stop living paycheck to paycheckJune 12, 2019
Living paycheck by paycheck is not a comfortable feeling. If anything skips a beat you could be in big trouble. Stop spending all that you earn. Change the way you look at things and your spending habits right now. Here are a few lifestyle changes to stop living paycheck to paycheck.
First, sit down and get real. Figure out how much money you really need to cover your necessities like housing, food, utilities, health insurance. Then look at how much you are spending on wants, like eating out, getting coffee, electronics and so on. Focus on needs, not wants. Make sure you have a clear distinction. Once you figure out how much you really need to live on, then you will see how much you’ve got in extra money.
Now take that extra money and save it painlessly. Meaning, have money automatically deducted weekly or monthly. Start saving right now! My math equation is put away 10% of take-home pay as a minimum. Let’s say you are right out of college and you get a job paying just $27,000 a year. After taxes, your take-home is $20,000. You put away 10% of that which comes out to $200 a month or $50 a week. Either way, let’s say you put that amount away for 10 years in a savings account that earns 2.5% annually in compound interest (What does compound interest mean? Click here to understand how much more you can earn with a compound savings account). In 10 years that comes out to $27,196.12. That could be enough to put a down payment on your new home.
In my opinion, the most important thing is how you look at your overall money situation. Have you ever been to a car dealer and they ask you the question, “What monthly payment can you afford?” Well, never ever look at things that way. If you do, you most likely will be living paycheck to paycheck because your financial goals are just to meet your monthly bills. Instead, you need to be looking at the overall picture of how much debt you’re in and how soon can you pay it all off. If you do that, trust me, you will by default manage your money differently. Your outlook will be more about the overall financial situation. Financing a car won’t be of interest if you look at things in that manner. A car dealer who wants to finance the deal will entice you by saying this car will only cost you $450 a month. In 60 months you will end up paying $27,026 for a car that would have cost you $25,000 if you had paid cash. If you operate with the staying-out-of-debt frame of mind, you probably wouldn’t consider buying a new car because you would more likely buy that same car that is slightly used at 2 years old, still under factory warranty and for $15,000 in cash. Why? Because you are looking at your finances in its entirety. Think: stay out of debt because it stinks having your paycheck already taken before you even get it. It starts to take the pleasure out of why you work so hard. If you’re in debt, get out of it. Start paying it down and doing with less until you deserve it.
Another thing, which applies to anything in life, be consistent. Stay focused on your financial goals, and if you don’t have any, make some. Give your savings and frugailityness purpose.