How to Stop Living Paycheck to Paycheck
Simplifying your finances can be an effective way to break the living paycheck to paycheck cycle.
One step that has been helpful for us is tracking our spending. With so many accounts, bills, and goals, it can be easy to not know where the money is going.
Easy Way to Track Your Money
Keeping tabs on where each of your dollars may seem overwhelming, but there are free tools that help you quickly see what's going on.
My favorites are Personal Capital and Mint; we've used them for years.
Let me show you how Personal Capital can help you get more control over your money without having to spend a ton of time on them.
When you look at your finances you really need to be able to see the big picture and the small details.
After all, you need context on your spending to see if something is truly a money leak a simply a short term/special expense.
Once you've linked your accounts to Personal Capital, you can do both.
Here's how the big picture cash flow view looks like:
Love how you can instantly see in your dashboard if you're spending less than you earn. Once you've
How to Find and Fix Your Biggest Money Leaks
If you have money leaks, you're going to see them in your transactions.
Joe Saul-Sehy, the host and founder of Stacking Benjamins, noted that some of the biggest money leaks for families were:
- entertainment – hardly anyone has a budget for it
- eating out – we can easily overestimate our spending
You may be different, but for us, this hit the nail on the head.
When we were first trying to get an idea of our budget, we had no idea how much we were really spending on dinners out. Sure we were getting some good deals, but that didn't offset that fact that we had budgeted less.
We decided to increase our spending to a more realistic number (taking that money from another area in the budget we weren't using much) and go out less overall.
Do you have a similar situation? My suggestion is to try and cut back incrementally. It's better to move in the right direction slowly, then make sudden changes and get frustarted enough to quit.
Simplifying Still Means Engaging
As much as automating can simplify the process,it doesn't mean you can just walk away from your budget. Take a few minutes every weekly to review.
My husband I have little money dates where we can check-in with one another and see if our finances are working.
The Budget for People Who Hate Budgets
The reality is that most times we don't want to count the pennies. So what's the solution?If you're that group, then the 50/20/30 budget might be the perfect starting place for you.
You take your net income and divide it into three ‘buckets’.
- 50% Essentials: This covers your ‘needs’ like rent/mortgage, food, utilities, and necessary transportation.
- 20% Financial Priorities: This money is allocated for your future such as investing for retirement and taking care of important money goals now like having an emergency fund and paying off your debt.
- 30% Wants: These are your lifestyle choices. What do you enjoy? Travel, shoes, tech – these all go in here.
While you may be working to simplify your life and will most likely reduce your wants, that doesn't mean they go away. (As that number decreases, you can redirect those to retire early.)
Having those expenses accounted for makes it more likely you'll keep to your spending plan – a huge win.
Thoughts on Living Paycheck to Paycheck
Have you ever dealt with trying to find some wiggle room in your budget so you can get out of debt or just have some savings?
What helped you to break the paycheck to paycheck cycle?
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Finding leaks is astonishing, even as someone who budgets regularly I can find myself buying just one beer for a get together because it’s been so long and then do the same thing two, three more times down the road. If I didn’t add up my spending at the end of each month I could be seeing quite a few dollar slip through my fingers.
Us too! I think it’s part of human nature to underestimate some of our money links. Having some system to look at the numbers can be a helpful eye-opener.