Have you ever experienced a situation when you’ve just about managed to scrape through the month without having any money saved for extra expenses or savings? Well a lot of us go through this exact situation every month and it seems like an impossible task to go about life any other way.
There can be many reasons for it – first, you probably just don’t have enough income coming in. Or it could also be that you have enough money but don’t pay attention to utilizing it properly.
If it’s the second case, there are many easy tweaks mentioned further down in this article that you can apply to your spending (and saving) habits to avoid getting into the month to month living cycle. So keep on reading! 🙂
What Does Living Month to Month Mean?
The definition of living month to month, also commonly worded as living paycheck to paycheck, is that you just about get by through the month (or sometimes even in debt) with no money left for savings at the end of it. And the cycle continues over and over again, every month.
Why Is Living Paycheck to Paycheck Bad?
If you just about manage to get through the month, or worse still, take a loan to do so, it can be a disaster waiting to happen. Let me explain –
Suppose somewhere through the middle of the month your car breaks down, or you fall sick (running up some serious hospital bills), or maybe even get fired from your job. In such an unexpected scenario where you’re unable to meet such expenses, it can lead you to make unpleasant decisions like taking on debt or taking any desperate action to arrange for the money.
How to Break Out of the Paycheck to Paycheck Cycle
In the section below, I will list down some practical and useful tips you can apply to your own life to get out of the dreaded month to month living cycle and achieve your financial goals.
1. Learn how to create and follow a budget
The best thing you can do to improve your financial situation (if you don’t already) is to create and follow a budget. A budget, in simple terms, is a way of you telling your money where to go instead of wondering where it went when you need it.
A well-planned budget keeps all your expenses into account and prioritizes your spendings. This way you don’t get your heart racing when an unexpected payment like taxes or car bills pop up. It also helps keep you prepared for things like bill fluctuations (higher summer bills due to air conditioning etc).
2. Track your expenses
One of the first steps in getting out of the living month to month cycle is to track your spending. The main reason behind people just about getting through the month is not really an income problem, it is more about them not being able to track their expenses.
To get started with this step, collect and analyze your bank statements from the past 4 to 6 months. You can use one of the many expense tracking or budgeting apps that are available these days. This will give you a clear idea of all the things that you usually spend most of your money on.
3. Identify and cut back on your spending
Once you’ve identified all the expense categories that you’ve been spending money on, it’s now time to eliminate things that you can really do without. You can make adjustments by removing things from the list of your monthly expenditures completely or cutting down on a few of those things.
You can do this in a lot of ways by doing things like:
- Do things yourself instead of paying others for simple tasks like washing your own car.
- Cook meals at home instead of eating out (more on this later).
- Cancel unnecessary subscriptions like Netflix, Amazon Prime, etc.
- Use free/cheap modes of transport like walking, cycling, or using public transit.
- Avoid impulse buying of things that you may not actually need. This includes online purchases and in shopping malls.
- Use less power (and reduce utility bills) by using less air conditioning or heat at home.
There are many more such actions you can take to cut down on your spendings. Whatever may be the case in your personal situation, just try to get that monthly expense down!
4. Sell your stuff
Now that you’ve figured out ways to cut back on those expenses, it’s time to add some more cash to your bank account. To do this, you can get rid of all the unwanted stuff and belongings that you might have lying around by selling them.
We all have things that we don’t use any longer. This can include things like old video games, baby stuff, clothes, an old bicycle, or even that second car that’s in your garage. The point is, if you can sell something and get some extra cash for it, just do it!
5. Start putting money aside each month
The best way to stop living month to month is by having more money in your bank account. You can do this by putting aside a certain amount from your paycheck or any other form of income every month.
Having a decent amount of money in your savings gives you the cushion of safety in case of any unexpected expenses or emergencies. The idea is to put that money and not touch it for regular expenses.
You can do this by putting this money in a separate savings account or a completely different bank account. Making it difficult for yourself to access that money is the best thing you can do to protect your savings. Whatever it is, just never dip into your savings once you start putting that money aside.
6. Stop using credit cards (and consider shifting to a cash budget)
There can be many hurdles while trying to follow a budget. One of the biggest culprits can be the use of credit cards. With the invention of convenient payment modes like online payments, credit cards, etc., it has become really easy to lose track of your spendings.
Not just that, you do get ripped off by paying higher interest rates. Even though you feel that the rewards are worth it.
To tackle this problem consider moving to a cash-only budget. The best part about it is – you don’t end up spending money that you don’t have. Once the cash is over, that’s it! You wait for the next payment or paycheck to come in. And in the case of unexpected payments (like car repairs), you can always turn to your trusted emergency fund (more on this later).
7. Start a side hustle
When you’ve been struggling with money or have had to depend on friends and family to get through the month, it might be a good time to consider starting a side hustle or getting a temporary new job.
In today’s age, there are many ways you can earn some income on the side. This can include things like doing freelance work in your area of talent/expertise, becoming an online tutor, starting a blog, doing food or other deliveries, or just getting any other part-time job. The options are endless.
It can feel like a lot of hard work and seem daunting at times, but once you get some extra cushioning in the form of cash in your savings account, it will all be well worth it.
8. Get out of debt
Another very important thing to do is to try and get out of debt as soon as possible. This will require you to direct larger sums of payments towards debt while also taking care of your savings.
By having debt you are literally throwing away money in the form of interest. Plus it restricts you from directing your money towards more important things like savings and emergency funds, as it has you paying for things you bought in the past, like that big vacation you took last year!
With companies coming up with sneakier ways of offering debt (like those three easy installments for your new coffee machine), it is getting progressively easier to fall more and more into debt.
Here’s what you need to do – try and pay off your debts from the smallest to the largest to make use of the debt snowball effect. And try not taking up any more loans till you clear off your previous debts.
At the end of the month, the more money you save from not paying debt is how much you can put back into your monthly budget.
9. Start building emergency and sinking funds
Unexpected emergencies and expenses happen and you need to be well prepared for them. Removing a major chunk out of your monthly budget for such situations can completely derail your budget plan. This is where the concept of emergency and sinking funds comes into play.
An emergency fund is exactly what it sounds like, money saved up for unforeseen emergencies. Sinking funds however are different categories of expenses that you systematically save up for. For example, putting aside a certain amount every month for that upcoming insurance payment.
10. Plan your meals
One of the major categories of your budget is going to be food. You need to eat but it can also get out of control easily if you don’t pay attention and plan it properly.
This is where planning your meals well in advance can save you a ton of money. This can prevent you from getting tempted to order takeaway as you will always know what’s for your next meal. It will also help you plan your grocery shopping for the week and prevent food wastage.
It might not seem like a big step but it definitely adds up and frees up space in your monthly budget.
11. Keep yourself motivated
The vicious cycle of living paycheck to paycheck can feel like going round and round without an actual destination with your money. But once you decide to break this cycle and start implementing the tips mentioned above, things can start looking up.
It may seem difficult and hard to follow at times but as with everything, you will start getting into better money habits as you follow these steps more regularly. There might be times when you feel like giving up, but always remind yourself why you started your journey of breaking out of the living month to month cycle in the first place.
No matter what happens – DO NOT QUIT!
You can ask one of your friends or family members to hold you accountable on a regular basis and check if you’ve been following through with your plan. Like did you actually make progress with building that emergency fund? Or have you finally stopped eating out all the time? Do whatever it takes to keep yourself motivated in this journey!
Even though living paycheck to paycheck might be your current situation, it doesn’t always have to be. It might seem almost impossible to break out of the cycle but with consistent small daily actions (which add up rather quickly), you will be able to secure yourself financially.
Make an honest assessment of where you are today and where you’d like to see yourself in the future. And then accordingly, start making amends to your lifestyle gradually.
Take action today! Your future self will certainly thank you!
Did any of the above-mentioned steps work out for you? Or are there any other tips that have helped you to stop living month to month? Let me know in the comments below, I’d love to hear your thoughts!