When COVID-19 started its relentless march across the globe, nearly two-thirds of Americans were forced to live from one paycheck to another. That figure has gotten even worse since last spring as the pandemic has plunged the economy into a recession and caused unemployment rates to skyrocket.
1. Living Paycheck To Paycheck
What’s even worse is that living paycheck to paycheck is not something new as about 44% of respondents of the same study say they were living beyond their means before the pandemic started. 66% regret not having more emergency savings. The bottom line is that the financial squeeze is less about personal choices and more about the rising costs of living.
As a consequence, many Americans are turning to debt to cover their expenses, and about 42% report taking on more debt than they normally would, the consequences of which we will all feel in the years to come as those loans will need to be repaid.
2. How To Get By When Living Paycheck To Paycheck
According to a 2020 study from the Brookings Institution, more than 25 million middle-class American families live paycheck to paycheck, and they pull it off by having a strategy.
In order to know where your money is going, you need to track your expenses. Besides recording your expenses on a daily basis, an excel spreadsheet is also key to know what comes in and what comes out.
Tight finances mean you need to trim the fat. Go through each line of your budget and identify areas where you can save by cutting your gym membership or canceling a magazine subscription.
Learn how to save
As hard as it is, saving even a few dollars a day will add up to a nice financial cushion over time. If you give up smoking and put the money you would spend on cigarettes in a jar, you will be surprised how much you can accumulate within a year.
Become a better version of yourself
Quitting a bad habit and adopting a new one will boost your self-confidence, improve an aspect of your wellbeing, and could result in better money management as happier people tend to need less stuff and aren’t in need of retail therapy’ that drains that bank account.
3. Money-Saving Hacks When You Are Living Paycheck To Paycheck
The good news is that there are plenty of ways to save money, even when you are living paycheck to paycheck. A few small changes in your financial habits can make a huge impact on your savings.
Create a budget and stick to it
Many people mistakenly believe that a budget limits their spending. What a budget does is guide your spending and helps you sleep better at night knowing your living costs will be covered. Budgeting helps you get on top of your finances as opposed to allowing money to have control over you.
Make it your mission to save. Save first, spend after, as opposed to leaving leftovers for savings, which often end up being zero and so do your savings. Start small and you will improve over time when it becomes a habit.
It’s all about the right mindset
If you keep thinking it can’t be done, don’t bother. Your mindset is critical to succeeding any goal. Learn to control your thoughts and don’t let negative thoughts discourage you. As Walt Disney once said: if you can dream it, you can achieve it. Believe you can save money and you will find a way.
Identify where you are overspending
Did it occur to you to compare electric suppliers in your area to find the cheapest rate? Price shopping is key to savings and even Warren Buffet knows that a dollar saved is a dollar earned. Apply this approach to any purchase and all your providers to make sure you are getting the best deal.
It is possible to break the cycle of living paycheck to paycheck but like every change, it takes time and effort. With commitment and the right mindset, you will regain control of your finances.