If there’s anything I have learned till date about financial well-being, it’s the fact that having to live paycheck to paycheck is the most terrifying situation to be in. If I am continuously living paycheck to paycheck and not holding anything in my savings account, it certainly means that I am making no financial progress which is detrimental to my financial health.
The idea of living paycheck to paycheck might not sound that serious if you are able to pay all your monthly expenses and are living a pretty comfortable life with whatever money you are earning per month. But let’s be real here. Living paycheck to paycheck is not at all practical in the long run and can even be a cause of financial stress and frustration. There is a whole lot of what-ifs attached and you sure don’t want to be unprepared for any sudden financial emergency.
At first, things look fine when the salary gets credited to your bank account and you think that you will be able to get through the month easily. But if only life was that easy. There are a lot of things that can go wrong during the month only to leave you burdened with loans. If you own a car, there’s a possibility it might need repair calling for a huge chunk of your paycheck. Or there may arrive a medical emergency which, in no way, can be ignored. Life is too unpredictable to be unprepared which is why it is important that you recognize the need to put a stop to your situation of having to live paycheck to paycheck.
But here’s the good part. This doesn’t have to be a permanent situation and you can easily work towards being better-off financially. All you need to have is the will to break out of the cycle and work towards building some good financial habits. Once you are able to come face to face with the fact that living paycheck to paycheck is not at all a healthy situation to be in, there’s nothing that can stop you.
Here are 10 reasons why you have been living paycheck to paycheck, and how you can put a stop to it once and for all:
1. You don’t have a financial plan: A financial plan acts as a road-map to financial success in the long run. It becomes easy to manage your finances when you know where your money needs to go. Creating an emergency fund for the unexpected situations should be the very first part of your financial plan. Your emergency fund should provide a cushion for at-least 6 months of your monthly household expenses including food and rent. Also, you must have a savings plan in place to make way for your future needs. A certain percentage of your paycheck should directly go to your savings account every month and should be used only for the purpose it has been created for. Create a proper budget to manage your income and expenses and monitor it regularly to make way for any changes in your financial situation.
2. You don’t track your expenses: It can be easy to lose track of your expenses if you are not keeping a check on it. You are regularly buying coffee outside, spending a big chunk on laundry and eating out way more than you should. Habits like these are bound to make you go frustrated over the fact that despite making enough money in your day job, you have been living paycheck to paycheck. If so is your situation, start tracking your expenses from today and you will be surprised to learn how much of your money is being spent on the extravagance that could have been avoided in the first place.
3. You love your credit card: Credit card is a bane when it comes to modern generation since it allows you to spend the money that you actually don’t have. It’s easy to go out of the way when all you have to do is swipe a card to buy something in the store. If you really want to put a stop to the situation of living paycheck to paycheck, your credit card is the first thing you need to get rid of.
4. You are trying to keep up with others’ lifestyle: If you are constantly comparing your lifestyle with that of your friends and colleagues, you are bound to come across a set of differences that will force you to catch up with them. A distant cousin of yours is holidaying in France and you suddenly want to go on a holiday. A colleague of yours has rented a 3-BHK sea-view apartment and your own house suddenly seems non-spacious to you. Comparison will only harm your finances in the long run and will force you to spend the money you don’t have. Instead of focusing on what you don’t have, focus on building your savings and retirement fund. Save up for the things that will matter in future and you will be glad that you didn’t try to ‘keep up with the Joneses’.
5. Your income is low: If your income is the reason that you have been living paycheck to paycheck, you might want to look into the idea of starting a side hustle to build a second stream of income. There are a number of home business ideas that you can explore to increase your income so that you are able to save up every month. Moving to a better paying job can be another option that can help you change the situation.
6. You are drowning in debt: If you are buried under debt and have a certain amount of interest payment obligation every month, it’s obvious for you to be living paycheck to paycheck. It’s not just the principal amount that you are supposed to repay but also the interest obligation that keeps piling up if you don’t have a proper debt repayment plan in place. Debt repayment, in such a situation, should be your number one priority if you want to save up for your future needs.
7. You are not being resourceful: Being resourceful is important to be able to stop being broke all the time. There are certain habits that you need to ditch in order to be resourceful in life. Some of these bad money habits are:
– Not trying to save money when you can.
– Buying things from the stores when they are available at home like water, coffee, etc.
– Wasting food and not doing a proper meal planning.
– Buying food from the outside instead of cooking at home.
8. You buy everything on impulse: You see a nice pair of jeans in a store while buying some household item and you can’t resist buying it. You buy things you don’t need simply because you have money in your wallet and you have a habit of spending money on things only because they are visually appealing. Impulse buying can be extremely bad for you and your finances and it needs to be curbed if you want to stop living paycheck to paycheck.
9. You’re not investing anything: Investing is a habit that you must form the day you start making money. Investing helps you make money from money and keeps you financially secure. Rather than spending your money on things that aren’t important, invest in stocks and other assets. If you are a little averse to risk, you can invest in real estate and fixed investment options.
10. You don’t have a savings plan in place: No matter how much money you are making, savings should be your number one goal. If you don’t have a savings plan in place, your finances will get out of control and you will soon find yourself going frustrated thinking why you are broke. A proper savings plan essentially requires you to put a certain part of your income into your savings account every month. You can also automate your savings to ease the process.
Living paycheck to paycheck is a dreadful situation to be in but doesn’t have to be permanent. With serious intent and a proper plan in place, you can fix the situation and be able to start saving up for your dreams.