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Paycheck to Paycheck Budgeting

By Sean Bryant
September 23, 2018

If you find yourself living paycheck to paycheck, you’re not alone. Even with unemployment at its lowest level in more than a decade, 78 percent of American workers say they are living from one paycheck to the next.

If you’ve found yourself in this situation, you know just how difficult this can be. Not only can your debt continue to pile up, but worrying about paying your bills can take an emotional toll on you and the people you care about.

Here’s the good news: no matter what your income is, breaking free from the constant paycheck to paycheck cycle is possible, especially if you commit to it and create a solid budget.

Let’s take a look at how you can set up a budget to help you meet your financial obligations – and maybe even save money, too.

Understand how much you’re spending each month

When creating a budget, it’s important that you start at the beginning by taking a good hard look your expenses. Why? Because understanding exactly how much you spend each month is crucial if you live paycheck to paycheck. By doing this, you’ll get a better picture of where your cash is going and how you can make changes to your overall cash flow.

To get started, begin tracking every expense for a month. To help you get going, you may want to check out one of any number of budgeting apps, including Mint and You Need A Budget. However, if you are a more hands-on person, you may prefer to keep tabs on your spending via an Excel document.

Better yet, if you have a Chime bank account, you can take advantage of numerous automated features. For example, each time you make a transaction with your Chime debit card, you can receive a notification. Then, at the end of the day, you can enter the transactions into your spreadsheet or app of choice. How you end up tracking your spending doesn’t really matter. What matters is that you take the time to do this so you can monitor where each penny is going throughout the entire month.

The results may surprise you.

How much income are you bringing in?

Once you’ve listed out your expenses, it’s time to move onto your income.

If you are a salaried employee, this is going to be pretty simple. You probably already know how much after-tax income you take home each month. However, if you are a freelance worker or have an hourly job with varying hours, it’s going to be a bit more difficult.

So, try to go back through the past six to 12 months and find out what your average income was during this period. You can do this by looking at your bank account or perhaps any accounting app you may use for your side hustle.

Once you determine how much you earn in an average month, you’ll use this figure in your budget.

Start analyzing your financial information

Now that you’ve listed out your expenses and calculated your income, it’s time to dig deeper into the numbers.

Start by subtracting your expenses from your income. This will give you your net income. Is the resultant figure close to zero or lower than you expected? If so, it’s time to get to work by cutting down on your spending to give yourself a little breathing room. So how do you do this?

You can begin by taking a closer look at the expenses you listed out. It may even help to group your monthly costs into categories, like groceries, restaurants, clothing, gas stations, etc. This will help you see whether there is one particular area where you spend more money than you should. From here you can highlight potential areas where you can save money. Do you still have a cable plan with all the premium channels? Are you going out to dinner multiple times a week? Maybe you can cut back here or elsewhere.

The key here is to identify troublesome areas and make changes. If you’re not ready to cut the cord entirely on cable, for example, maybe you can cancel the premium channels. Or, if you eat out everyday at work, maybe you can start by bringing your lunch to work three days a week. Find places you can trim your spending. You’ll be shocked at how much money you can free up.

Start hustling to boost your income

Once you’ve identified the expenses you can eliminate, the next objective is to increase your income. You may be able to take on extra hours at your day job or pick up a second job in the evenings or over the weekends.

With the growing popularity of the gig economy, you may also want to consider starting a side hustle. If you have a reliable car, for example, you can drive for Uber or Lyft. If you love to write, try your hand freelance writing. You get the point.

Allow your budget to guide you in the right direction

By creating a budget, curbing your spending, and increasing your income, you’re giving yourself a way to break the paycheck to paycheck lifestyle. Just remember: this isn’t something you do once and then forget about. You need to constantly monitor your spending throughout the month and develop sounds financial habits.

Eliminating the paycheck to paycheck lifestyle isn’t hard to do, but it takes work. With diligence, perseverance and commitment, you’ll be on your way to living within your budget without worrying about when your next payday will arrive.

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