Living paycheck to paycheck can be stressful.
For an increasing number of people, money leaves their bank account as quickly as it comes in, and it seems like there's never anything left over. At least one in three people report they have no money remaining after paying bills, according to a few different surveys.
While it can feel impossible to break out of this cycle, there are things you can do. Here are four steps you can take to make your money stretch a little bit more this year:
1. Do your research. If you've ever wondered where all your money goes, it's time to find out!
For one month, track every single expense and categorize them into these categories:
- fixed expenses (rent, insurance and loan payments)
- essentials (food, transportation and utilities)
- wants (restaurants, subscriptions, entertainment)
- unplanned purchases (impulse purchases like that afternoon snack).
Short on time? You don't have to track a full month in real time to get the same picture. Pull up your last 30 (or even 60 or 90) days of bank and credit card statements and sort those transactions into the same four categories. It's a faster way to see exactly where your money has already been going.
2. Assess and reduce your spending. Once you know where the money goes, take a close look at all of those categories and start taking action! Here are a few suggestions:
- Call your insurance company and see if there are any discounts you're missing out on or what you can do to lower your costs. (Or, shop around!) Do the same with your home internet and with your cell phone plan.
- Find ways to save on transportation. You can download free cash-back apps like Upside or enroll in savings programs from your favorite gas station.)
- Look at your subscriptions and cancel any that you aren't using.
- Make sure you're taking full advantage of customer loyalty programs and savings opportunities, especially at your local grocery store. Downloading your grocery store's app can unlock more savings.
- Resolve to start bringing your lunch to work, making coffee in the office break room and find other ways to reduce what you spend on restaurants and impulse purchases. (Sometimes taking out a certain amount of cash every month and only using that for unplanned expenses can help. When that cash is gone, stop spending until the next month.)
3. Try to increase your income. While reducing spending can help a lot, increasing your income can also help. Seek out more money at your current job by asking for more hours or asking for a raise based on your accomplishments. You can also consider picking up a side gig or selling unused or unwanted items online. Even an extra $200 per month can help a lot.
4. Start saving for emergencies and future wants. Now that there's a little bit of breathing room, make sure you save as much as you can. Money from that side gig or from selling items can go into a savings account. If you're making more money at your day job, set up automatic transfers from your checking account to a savings account to start building up an emergency fund. Once you have a solid emergency fund, move some of that monthly savings into an investment account for longer-term needs.
You don't have to figure it out alone.
CommonWealth One offers free financial counseling to members — one-on-one support with budgeting, finding extra money in your monthly spending and building a strategy to pay down debt faster. It's a judgment-free space to get a plan that fits your actual life.
Breaking out of the paycheck-to-paycheck cycle can do a lot to reduce your stress and make you financially more secure. Whether you start by tracking your spending, sit down with a free financial counselor, or grab a seat at our next workshop, every step moves you closer to breathing room in your budget.
