The struggle to stay afloat financially is all too real. According to a Harris Poll survey for employment website Careerbuilder, more than three-quarters of American workers are living paycheck to paycheck (a trait more common in women than men). Nearly 3 in 4 workers say they are in debt today, and nearly half don’t see their situation ever changing.
Living on a financial tightrope requires a lot more than good balance. For starters, there’s zero wiggle room in your wallet, so unanticipated expenses (like a trip to the emergency room) can mean you must sacrifice something else from an already tight budget. And saving for the future? That’s tough to do when the bulk of your paycheck goes to daily must-haves. Not to mention that the possibility of slipping into debt can take a serious toll on your mental health.
If you happen to have a temporary financial crisis, options like personal loans can tide you over until you’re back on your feet. But if scraping by paycheck to paycheck is how you’ve always done it, there are steps you can take to stop the cycle and start saving.
Uncovering the root of your personal financial situation usually starts with tracking your expenses.
Tracking your expenses for as little as two weeks can help you understand where your money is going (though you should aim for at least a month). Take note every time money comes in, cash leaves your hand, or you buy on credit. Once you have your log, examine it closely.
Are you simply not earning enough to cover your essential expenses? More than half of minimum wage earners aren’t able to support themselves without holding down a second job. Or could it be you’re overspending on non-essentials? Believe it or not, 9 percent of people with annual incomes of $100,000 consistently live paycheck to paycheck. And a surprising 60 percent of six-figure earners are actually in debt.
After pinning down the reason why you’re living paycheck to paycheck, it’s time to tackle the problem.
If you’re never sure where your money went to at the end of every month, the solution is becoming more mindful about your spending. This means starting with a simple budget to guide your spending choices and reduce your costs. Here are a few simple tips:
> More: Want to slash spending even further? Check out The Simple Dollar’s list of 100 ways you can cut costs.
The problem with your money might very well be that you’re simply not earning enough to cover the basics. Today’s job market includes options for working odd hours, accommodating limited skill sets, or money-making tasks you can do while the kids are in school. From running errands for your elderly neighbor to starting an online business, your options for making extra money are unlimited, as long you have the motivation and the time.
True story: One-quarter of working Americans are not even putting $1 into savings each month.
If you’re among those who believe saving simply isn’t an option, start small—really small. Each pay period, set aside just 1 percent of your take-home pay. Get used to the adjustment. Then stretch yourself further. Save 2 percent of your income. Then shoot for 3 percent, and so on.
Mr. Money Mustache, acclaimed blogger and saver, famously lived on just one-third of his income before retiring at age 30. While it can be done, if setting aside the bulk of your income seems far-fetched, try harnessing the power of automation to take the sting out of saving in these other ways:
With a few changes to your spending habits and some thoughtful planning, you can stop living paycheck to paycheck and learn how to start saving money, get ahead of your money, and start saving for your future.