Every month you receive a paycheck and every month that
paycheck is gone before you know it. You have not managed to put anything
toward savings, and it takes all you can earn just to keep from sliding further
into debt. How do you break this cycle and stop living paycheck-to-paycheck? We
do not mean to be flippant, but the only true way to savings and getting out of
a paycheck-to-paycheck living situation is to control your spending. Even if
your paycheck increases, without control of your spending habits, you are just
going to spend the excess and be no better off than you were. Here are some
suggested steps to help you initiate a savings program and achieve fiscal
Your Mindset – You have to get past this first step for any of the
following steps to work. Make savings a priority. Otherwise, there will always
be a reason to spend your money and something on which to spend it.
Expenses – Do you know where all your money goes? You would probably
be shocked at the answer. Either use the old school method of writing down
every expense in a notebook, or find an app to do the same thing on your
smartphone. Include all the seemingly trivial items like vending machine candy
bars, subway fares, and random sodas or cups of coffee. Do not forget to
include any automatic payments that you have set up through your bank account.
At the end of the month, total and categorize the expenses to find out where
the majority of your money is going.
Your Spending – Start by isolating the necessary spending, such as
rent, from your other purchases (“needs” vs. “wants”). How many of your larger
sources of spending fall into the wants category? Take a closer look at your
needs category and see if some of them are really wants. For example, do you
really “need” to eat out once a week? Move anything over that is not really a
need, and then prioritize again within your wants category. This will give you
an idea of which spending to cut.
- Set a
Realistic Budget – Apportion your income toward all your needs first
and then set aside a certain amount for savings. Even if it is $100 or just
$20, it is a good start toward the savings mindset. Use another portion to pay
extra against any high-interest debt like credit card balances, then take
whatever money is left and decide how to divide it among your wants. It is
important that your budget be realistic. If you have nothing left for any wants
or if your savings goals are unattainable, you probably will not stick with the
Credit – A long-term key to controlling spending is to slow credit
card use. Try not to put any more on your credit card than you can pay every
month, and pay your balances promptly. However, do not cancel the account —
that will hurt your credit rating.
- Look for
Savings Opportunities – Consider coupons and restaurant offers that
you may have ignored in the past. Buy non-perishables in bulk. Sign up for
loyalty discount programs. Look around your home for potential areas of energy
waste. Every little thing contributes to the overall mindset of savings, even
if the savings are small. However, keep savings in perspective — do not buy
things that you do not need just because they are on sale.
- Look for
Extra Income – Consider part-time jobs, or selling unwanted items as a
way to cut down your debts and the corresponding interest. However, it is
important you take care of the spending part of the equation first.
Otherwise…poof, your savings are gone in an instant. (That is why this tip is
last in the list.)
These are not easy steps, but they are necessary ones in
order to succeed. However, as we mentioned, the first step is the most important.
Are you ready to make some sacrifices for long-term gain? If so,
congratulations! If not, go ahead, whip out that credit card, and head off to
the mall. However, the next time you try to control your spending, we guarantee
it is going to be more difficult.
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article on CNN Money.