6 Money Saving Tips that Will Clear Your Path to the Career You WantNov 06, 2021
The numbers can be staggering when it comes to those who live paycheck to paycheck. According to a recent study, 54% of people in the U.S. live paycheck-to-paycheck, with 21% of them struggling to pay their bills.
While it's common to think that this is a problem exclusive to those living in a lower socio-economic class, the truth is 40% of those making over $100,000, 53% of those making between $50,000-$100,000, and 72% of those making less than $50,000 a year are living paycheck to paycheck.
Living paycheck to paycheck can be stressful, and it becomes increasingly difficult to get ahead financially. In fact, you're more likely to be overwhelmed with credit card debt, and you're often $500 away from being wiped out.
When it comes to making a career pivot or change, what keeps people stuck in jobs or careers they don't love is often the thought that they can't afford it. While it may be ideal to go on to greener pastures, the stability of what's currently coming in outweighs the uncertainty of how the move could impact their income.
This line of thinking is often caused by unfounded fear. Our brains don't like uncertainty, so it's prone to fill our heads with worse-case scenarios. For example, if we go after more meaningful and fulfilling work, we're either going to have a gap in income or make significantly less than what we currently make. When you're living paycheck to paycheck, this can feel more like a reality than a fallacy.
While every situation differs, there are some tangible steps you can take to help reduce your financial concerns, add more income to your bottom line, and potentially help give you the confidence to create a clear path to a career or job you want.
1. Assess Your Current Financial State
The first step is figuring out where you are financially. For many, doing so is an eye-opening experience. Here's how to do it. Take out a pen and paper and write down the amounts of money you have in each of your accounts, your wallet, and anywhere else, and then total it up.
The total should reflect all the money you have in the world at this moment. You need to have an idea of this figure at all times. People who experience ongoing financial struggles usually have no idea how much money they actually have.
You'll also want to get clear on your debt, so spend some time totaling everything and everyone you owe, including interest payments. The difference between your current assets and debts will give you a good indicator of whether or not you're living paycheck to paycheck. You'll also want to list your recurring monthly income and payments to get a handle on how money flows in and out of your bank account.
Examining your current financial status is an essential step on your path to economic recovery. Being aware of your assets, your total debt, whether you're living paycheck to paycheck will show you where you can potentially improve your financial life.
2. Cut Back on Excessive Spending
Once you have a handle on the current state of your financial affairs, you can work on finding ways to cut back on any excessive spending. This is not an exercise in deprivation. You want to look for frivolous expenditures, impulse purchases, and those things you could have lived without and still made it through the day, week, or month.
Start by getting rid of at least one recurring monthly expense while lowering at least two others. For example, challenge yourself to spend $10-50 less per week on your favorite coffee spot, manicure, or groceries. Also, look at recurring bills like magazine subscriptions and streaming services. Finally, don't forget to ignore those multiple sales catalogs and email notifications that alert you about "can't miss" sales. Here's a hint: it's ok to miss them!
If you cut back in increments, it is more manageable, and you are more likely to be successful. Instead of completely slashing one category, try reducing spending in several categories by as little as $10 or $20 a month. These extra savings will add up quickly, and you can try to cut back more the next month.
Also, consider removing all credit cards from your wallet, so you're not tempted to spend while you're out. Keep one on you for emergencies but hold on to the one with the lowest interest rate.
Check your expenditures weekly and identify unnecessary spending. Eliminate and slash anything you've determined to be frivolous or unnecessary. You're on the path to financial healing.
3. Start Saving Money
If you're contributing to a 401(k) or other retirement savings plan, that's fantastic. However, don't look at that as your only means of savings. You might be thinking, "How can I save money when I don't have any left after I pay my bills?" Well, there are multiple ways you can start saving. It may not seem like much when you get started, but it can add up to something rather significant over time. As you get good at cutting back, you may find that you have even more to contribute daily or weekly.
It's also good practice to think about what you can save or put away instead of what you have available to spend. This is also a great step and building an emergency fund. It's wise to think about having about three to six months of income on reserve just in case you're hit with a severe unexpected expense.
You can start by just putting extra cash in a cup or jar. Once you've accumulated a lot of money, set up a separate savings account (I'd recommend a different bank that you don't frequent) or a CD. I did this without paying much attention to how much was accumulating in my little jar, and after two months, I had almost $300 in there.
Just be sure not to dip into your savings once you set it. If you'd like to take $25 or $50 out of each paycheck and transfer it to your new savings account, that's an option as well. The key is to develop a habit and mindset of "paying yourself" just like you pay everyone else.
4. Start Paying Off Debt
Now that you've put away your credit cards and stopped using them, start working on paying them off. Eliminating debt is an integral part of liberating yourself financially.
Start by making a list of all your credit cards and the total amounts you owe on each one. You can start paying off the card with the lowest balance and continue paying off all your credit card balances using that method. While some would suggest attacking the higher interest cards, I think it's best to go for low-hanging fruit. Also, once you pay off the low-balance cards, you can then apply that payment to the card with the next highest balance, which will allow you to pay that card off sooner than you think.
Here's the hard part. DO NOT USE YOUR CREDIT CARDS. When you see those balances drop to zero, it will be tempting to think you can make a $100 or $200 purchase convincing yourself you'll pay it off quickly. All this will do is prolong and keep you in debt. Try to get in the habit of NOT spending money you don't have. Credit cards provide the illusion of available funds but see it for what it is...debt.
5. Earn Extra Income
This leads me to number five, looking for ways to earn extra income. As you begin bringing in extra income, you'll find yourself worrying less about bills. You can try several side-hustles to bring in a little extra cash to help pay down debt or increase your savings.
It's a good idea to take all of the money you make from your side-hustle and put it toward paying down your debt. Then, when you're in a better financial situation, you quit your side-hustle or part-time job or depending upon how it's going, it could become an entree to a new job or career.
While I was working as an associate professor and dean, I started a small direct sales business. It was not only a fun outlet; I met some incredible women that have been supportive of my coaching and consulting practice. I learned a lot about myself, gained new skills, and made a significant monthly income ($5,000-$7,500). I also loved my business because it was completely different from my "day job."
Take an inventory of your skills and what you like to do, then explore opportunities to make additional income. For example, you can be a barista, take a holiday sales position, or you can start coaching or consulting. Starting a side-hustle is also a great way to check out other roles you've been interested in or have considered transitioning to.
Don't forget you can also try and negotiate your salary. Make a case for a raise or bonus, or start positioning yourself for that next promotion. You can also use those negotiation skills to lower monthly insurance payments, interest payments, credit card fees, cable service, or other providers you're paying.
6. Design a Budget & Stick to It
Now that you're on the right path to stop living paycheck to paycheck, you'll be more interested in designing a budget that fits your family. Consider your budget to be a workable plan you follow to live life in a financially intelligent way. You don't have to re-invent the wheel. Before leaving the house, keep your budget in mind so you don't succumb to last-minute purchases. Take a list to the store of what you need and stick to it. Write at the bottom of the list DO NOT MAKE UNNECESSARY PURCHASES, particularly if you haven't consulted your budget.
While anyone can create a monthly budget, the challenge can be living by it. You know you're doing it effectively when you can track your spending down to the penny, and you're. not running out of money at the end of every month. This is the big step toward stopping living from paycheck to paycheck.
Find a budget form you like or make up your own but make sure it actually works and has all of your expenses built into it so that there are no surprises when you have to pay your insurance premiums or your kiddos' college tuition. Then watch your spending all month by comparing what you're spending with your projected budget amounts in each expense category. Be ready to make adjustments for things like changes in your water or heating bills.
You truly do have the power to stop living paycheck to paycheck, regardless of what you make. The key is to create a plan and get started!