Living paycheck to paycheck is extremely difficult, yet many Americans know no other life. Even the smallest problem can throw your entire life into loop. According to a survey from Schwab, 59% of Americans live this way and it’s extremely stressful. This article will take a look at several ways in which you can break the cycle and help gain some financial independence.
Strategy #1: Put Together a Budget
Sadly, a lot of Americans don’t even take the time to budget their finances. In reality, if this sounds all too real for you, then you should know how extremely difficult it’s going to be to be financially responsible if you don’t budget. You’ll have no idea what’s coming in or what’s going out. This forces a lot of people into a big-time jam.
You need to know exactly what your spending money on. You sit down at the table and write it all out. Gather all your bills and financial statements. Then, start putting everything into categories. Set yourself a budget for what you’re going to spend. Look at how much money you spend on groceries and determine exactly how much you’re going to spend every month.
Strategy #2: Start Cutting Some Expenses
The only way you’re going to become financially independent is by living below your means. We don’t like to do this. This is why we don’t mind maxing out our credit card. We often want things that we can afford but still try to find a way to pay for, even if that means using credit. This is how we rack up thousands of dollars in debt and get behind on her bills.
When you put your budget together, look for things you can cut. You notice that your family doesn’t watch as much TV anymore? Cut the cable and go to Hulu and Netflix. Can you sell a car and still live comfortably? That’s less money that you have to spend on insurance and gas every month. Take public transportation if you have to until you get settled.
Strategy #3: Have an Emergency Fund
Once you start looking for things to cut and realize you pay for a lot of things you don’t really need or use, you start stashing away that cash into your savings account. There will definitely come a day when you’ll need some emergency money. Not because the next greatest thing is about to come out, but because a legitimate emergency will arise.
When emergencies happen, this is when a lot of people go into bankruptcy. They simply can’t afford the additional medical bills or car repair. What if you lose your job? You have to be prepared for when the situations occur. The best advice is to save up at least six months’ worth of living expenses in the event you lose your job in the time to find a new one.
Strategy #4: Improve Your Income Situation
If you’re having a difficult time socking away money, maybe it’s time to get a second job or side hustle for a little while. You still need to find ways to cut your spending, getting a second job to bring in an additional source of income will go a long way in gaining more financial independence. This can also help you pay off any debts that you have.
Paying off your debt as soon as possible is a great way to solve your problem. There is often interest tacked on to anything you buy with credit. That means you can spend many thousands of dollars extra on a loan or hundreds of dollars a year paying interest on credit cards. Make the smart choice and pay off those debts so you can be free.