How To Stop Living From Paycheck To Paycheck

This is a guest post from George Gallagher.   George is a financial advice and education blogger.  He is currently helping students with their private educational loans.

Due to the state of the economy, more and more people are living from paycheck to paycheck. A large majority of the population is only one paycheck away from being homeless. There are ways to break free from this stressful situation.

Figures Don’t Lie

Gather your bank statements and credit card statements from the past month. You’ll also need a notebook, a pen and a calculator. Label each page with a different title to include House Payments, Utilities, Food, Cars, Clothing and Personal Expenses, Credit Card Payments, Medical and Entertainment.

Starting with the bank statement, go over each and every entry. Put the dollar amount that was spent into the correct category. Add as many categories that you need but be sure to group the expenses. For example, all money spent at the grocery store, restaurants and fast food establishments should be under the food category. Utilities should include electric, heating oil or gas, water, sewer, trash pickup and cable bills. The Car category should include any car payments, auto insurance costs, repairs and fuel expenses. Clothing purchases, haircuts, manicures and the like should be placed in the Clothing and Personal Expenses category. Credit Card Payments and Medical are self-explanatory as is Entertainment.

Go over all of your charges on each of your credit card statements. Add those purchases to the lists. If you made any purchases with cash, try to include those as well. Total each of the categories and you will see exactly how much you have spent in the previous month.

The Truth Hurt

Seriously look at the figures in each category. Are they all necessary purchases? It’s a rarity to find a household that doesn’t have unnecessary expenditures so don’t feel bad. This can be rectified with diligence and will-power over time.

Can’t Touch That

Unfortunately, there are certain areas that cannot be pared down. Your house payments will not change unless you refinance or pay off the mortgage. Utilities rarely change unless you cut down on your usage or get rid of cable service. Medical and dental costs are just something that cannot be avoided.

Cutting The Fat Out Of Your Food Bill

Scrutinize the Food category. This is where most people spend unnecessarily. The quick stops at the fast food restaurant are usually the biggest budget killer. Do a quick analysis of how much money was spent on lunches and eating away from home. Most people are quite shocked to see how much they have spent.

All of that money could have been in your bank account. Changing your habits can be difficult but certainly worth the effort. Consider bringing your lunch with you to work. Most people spend about eight dollars a day on lunches while at work. Figuring on a five day work week, this totals up to a whopping $160.00 monthly. That’s a lot of money that could have been put toward your bills or paying down your debt.

You can also save a ton of money by using coupons while shopping. Many people don’t bother using coupons but that is silly. Manufacturers and grocery stores put the coupons out there to entice you to buy their products or patronize their stores. Personally, I would never shop without coupons and can purchase hundreds of dollars of groceries and pay less than $5.00 out of my pocket. This isn’t hard to do and takes only about an hour or two of your time. If you save two hundred dollars, you are actually earning about one hundred dollars per hour! That money can be put toward other debt, in a savings account for emergencies, college funds or to pay down the principal on your mortgage.

Drive Your Way To Savings

In this day and age, personal transportation is a must. However, it doesn’t have to be a top of the line car. If you have a vehicle that is financed, you might want to consider selling it to pay off the loan. You can then purchase a good, used car with any leftover proceeds. This will not only eliminate the monthly payments but cut down on your insurance costs. Financed vehicles must have collision insurance on them which is costly. Used cars can be insured with liability insurance only. This could save you around one thousand dollars each year.

Be sure to do all of your errands at once or do some while on your lunch break. This will cut down on your fuel costs which at this time are astronomical. You should also check out local news station websites that have gas price comparisons to find the closest station with the cheapest fuel price.


Evaluating Your Personal Expenditures

Trimming your expenses in the Clothing and Personal Expenses category is tough for some people to do. Many people feel that they have to have designer suits and expensive shoes. You need to seriously think about making such purchases before you actually buy an item. It is best to ask yourself which is more important, paying down your debt or having that item. It really should be a no brainer.

You can save a significant amount of money by eliminating manicures and pedicures. Many people feel that this is a necessity but truly, these are luxuries. Pretty hands aren’t as important as being financially stable.

Hide Those Cards

Not only is it essential to start paying down all of your credit card debt but you must also stop using the cards as well. It doesn’t make sense to continue using cards when you need to get out of debt. Never keep the credit cards in your wallet. Hide them in the freezer or under the mattress. Hide them anywhere that you think is safe but never, ever carry them. Once you have made the decision to pay down your debt and become financially stable, using your credit cards should be for emergencies only.

Budget Your Money

Too many people wind up living paycheck to paycheck because they don’t start out with a simple budget. A budget is simply a plan detailing exactly where every penny of your income will be spent or saved for later. You must learn to stick to the plan and diligently pay down all of your debt. Only then, can you truly begin to be financially stable.