4 Tips to Break the Paycheck-to-Paycheck Cycle | St. Johns Bank
Living paycheck to paycheck is very common. While many people have no choice, living this way is sometimes avoidable with a few budgeting and lifestyle changes.
By practicing effective budgeting strategies, you can break free from this cycle, set better financial habits, have more savings in the long-term and be less stressed out in the days leading up to payday. Here are four tips that can help improve the paycheck-to-paycheck lifestyle:
1. Stop the unnecessary spending. Examine your monthly expenses and spending habits to identify where you can cut back. Some simple ways to do this immediately are to cancel unnecessary subscriptions, reduce eating out and stop the impulse purchases.
2. Create a budget. Once you have analyzed your spending habits, you can create a budget. Allocate your income to essential categories like housing, utilities, transportation and groceries, and then set aside a portion to savings, and then, if there is anything left, it can be excess spending, eating out or whatever your splurge choice is.
3. Build an emergency fund. Having an emergency fund is essential to avoid falling back into the paycheck-to-paycheck cycle. Many people don’t have an emergency fund to cover even a few months’ worth of bills, but it’s incredibly important to have some savings to fall back on. Start by saving a small amount from each paycheck until you have at least three to six months’ worth of living expenses saved up. If one month you can’t financially make it to the next paycheck, this emergency fund will be there to help.
4. Automate your savings. Make saving easier by setting up automatic transfers either from your paycheck or from your checking account to your savings on a regular occurrence. This ensures that you’re consistently putting money aside, and you don’t even have to think about it. Soon, you will get used to the smaller deposit in checking and learn to budget with that.
Living paycheck-to-paycheck is an easy trap to fall into, but it is oftentimes avoidable if you practice some basic personal finance strategies! Reach out to us today to learn other tips and to set up your own checking and savings account with us.