How to stop living paycheck to paycheck
Living paycheck to paycheck, it’s a vicious cycle. Once you start doing it, it’s hard to break. Sadly, nearly half of Canadian families live on the financial edge and find themselves one paycheck away from financial difficulty. How do you escape this bad habit? Here are four simple ways to get your spending in line.
Creating a budget
It’s hard to know where your money is going if you don’t a budget. With impulse purchases literally at our fingertips, from our smartphones to the remote control on our TV set, it harder than ever to control our spending.
A budget acts a road map for our finances. With a budget, you’ll know exactly how much you can afford to spend on the necessities like mortgage or rent, food and transportation, and fun spending categories like restaurants and vacation. This will help ensure you have some money left at the end of the month, and you’re not always strapped for cash.
Tracking your spending
While a budget helps, it won’t stop you living paycheck to paycheck on its own. A budget allocates your money to various spending categories, but it doesn’t stop you from overspending. That’s why it’s important to track your spending.
Tracking your spending doesn’t have to be an onerous task. There are phone apps that make keeping track of where your money’s going a breeze. Some credit cards even group your spending together by category. Find the method that works for you and watch where your money is going to make sure you have some of it left at the end of the month.
Paying yourself first
Paying yourself is a phrase made famous by financial guru and best-selling author David Chilton, who wrote the Wealthy Barber. When you pay yourself first, you make savings a priority. How do you do this? By setting up a preauthorized savings plan with your bank, or having part of your pay deposited directly into your savings account. When the money is in your savings account, it’s out of sight, out of mind, and you’re less tempted to spend it than if it was in your checking account.
Setting goals
Last but not least is goal setting. When you set yourself short and long-term goals, you have something to work toward. Common goals include paying down debt and saving for a vacation or the down payment of a home.
When you have a goal, it gives you a purpose in life. You’ll be less likely to experience “FOMO,” short for “fear of missing out.” You won’t be tempted to keep up with the Joneses. When you see your friends posting photos on Facebook and Instagram of all the fun they’re having, you’ll still be able to stay focused on your goals without going into debt to live a life you can’t truly afford.