In January of 2019, data showed that nearly 80% of U.S. workers live paycheck to paycheck. This was highlighted by the government shutdown, but once the spotlight was shed it was hard to avert our collective eyes. To make matters worse, the tax reform that was put into place only a couple of years ago is now starting to affect workers in new and less desirable ways, causing many to have a lower tax refund amount than they’ve seen in many years. So how is it even possible to create a budget to stay on financial track when you’re living from paycheck to paycheck?
Build a Habit of Saving
Regardless of how much you make, start a habit of saving money. Many financial professionals suggest you pay yourself first. So even if it’s only a dollar a week or however much you can afford, put some aside.
You can open a savings account with your bank to have a place to deposit this money with each paycheck. It may not get you a lot of interest, but it will start building the habit for you to save more. And as time goes on, you will start to see the fruits of your labor.
Pick Up a Side Hustle
A trend that seems synonymous with millennials is the side hustle. That is to say you can make some extra money on the side with your hobbies. For example, do you like to knit in your downtime as a way to relax? Sell your scarves on Etsy. Online is definitely the place to be when it comes to side hustles, just read Hustle Life to find out why it’s the ideal platform for that extra income scheme.
Whatever it is that you’re passionate about, chances are someone is willing to pay for the end product. This could be a physical creation or something you own but no longer use that you could find a buyer for on LeoList, or maybe even starting a vlog or podcast that can generate a few extra dollars per month.
Use Zero Based Budgeting
Here’s an idea that seems to work but most people don’t think about. It’s a trend known as Zero Based Budgeting. This means that you earmark every penny you make each month to go toward something specific.
It starts with determining what your monthly expenses are, including any debts. Create a goal to pay a certain amount to credit cards or student loans to ensure that you can use this method to help you make headway financially.
Cut Your Expenses
Next, take some time to look at what you’re spending and find ways to cut out additional costs. For example, if you are paying for cable you may be able to cut the cord and watch television through less expensive streaming services.
Or maybe you have a subscription to magazines or monthly food boxes. You can look at the extra costs you have per month and determine what is and isn’t entirely necessary and make those cuts.
Avoid or Renegotiate Credit
One of the biggest challenges for those living paycheck to paycheck is the risk of growing debt through credit cards. If you already have credit cards that have high-interest rates or are maxed out, consider alternatives. You can use Credit cards to build credit if you pay them off each month. Paying the minimum payment required is a bit useless so pay off as much as you can if not all of it in one go.
You can do a balance transfer to a card with no interest rates. Or you can work with your bank to do a loan consolidation payment plan that will reduce the interest rate and help you pay off your debt faster. How you do this will depend on your specific situation.
Living paycheck to paycheck doesn’t need to be uncomfortable. You can do all right, save some money, and even start to pay back debt with a little creative financial planning.