For some of you starting your net worth based financial journey, your first step may be to end the cycle of living paycheck-to-check. You’re not alone! There are many people currently or who have previously been stuck in that exhausting cycle of earning and paying bills with little to nothing to show for it at the end of the month. Great news! There is a way out if you’re committed to the process.
It’s possible to build a financial cushion and reduce your financial stress even if you don’t have a high-paying job. It starts with you making a decision that you want to gain financial freedom and take control of your finances. Once you’re committed, here are some steps you can take towards your financial goals:
Ignite Your Motivation
1. Get excited. If you’ve been living paycheck to paycheck, it’s most likely been going on for a significant amount of time. Take a moment to reflect. Why is it still happening? If you were already highly motivated to change, it probably would have already happened! No shade. Just being honest.
Today is different though. It’s decision day. So to help you get really motivated to break this pattern once and for all, make a list of all the advantages of getting out of this cycle. I mean this literally…like open up a notes app, or grab a pen and paper, and then write it down. After you finish, read the list. Pay special attention to how you would feel.
· You would be able to handle any financial emergencies, such as a broken water heater or orthodontist for your children.
· You’d sleep better.
· You could take a nice vacation without coming back to debt.
· What else can you think of?
Prioritize Yourself
2. Pay yourself first. It’s difficult to save any money if you don’t make paying yourself a priority. Consider your savings account to be a monthly bill that must be paid regardless of the circumstances. It’s not the last bill. It’s the first. No exceptions. With expenses rising all around us, this may definitely be much easier said than done. However, this is both an important habit and mindset shift.
So, even if your first monthly “savings bill” is $25/month, start there. Then, be true to putting that amount into a savings account each month and then (drum roll) leaving it there. Unless of course, there is a true financial emergency…emphasis on true. Game changing hint: getting an invite out to eat or a great sale at your favorite shop do not count as financial emergencies (wink).
Leave that money alone. This savings account over time should become your emergency fund. An emergency fund is a safety net that can protect you from unexpected financial setbacks. At the start of your financial journey, you may set an initial goal to build this fund to $500, then $1,000, and then one month of expenses.
Master Your Spending
3. Get a handle on your spending. Everyone should have a budget. Do you? There are countless resources covering the topic of setting and sticking to a budget. Use them. In addition:
· Make a list of all your purchases and review them at the end of each day. Every candy bar, magazine, and soft drink are included. Even if it only costs one cent, write it down.
· Avoid making big purchases without a waiting period. The urge to spend a lot of money will often pass after a couple of days.
· Create a decision-making process before purchasing anything you don’t need. This can be as simple as asking yourself a couple of questions: 1. Do I need this? 2. Is this helping or hurting my goal of breaking free from my paycheck-to-paycheck lifestyle? Then remind yourself how great you’ll feel when your financial situation is better.
· Eliminate unnecessary expenses. If it doesn’t help to keep you alive or employed, reconsider it. Seriously.
Boost Your Income
4. Earn more. There’s a limit to how much you can cut your expenses, but there’s no limit on how much you can earn. It’s easy to get stuck focused solely on the expense side of the equation, but your options are ultimately limited. For example, consider documenting your contributions to your company and using this evidence to negotiate a higher salary. If you’ve been in your current position for at least a year or two, perhaps apply for something more lucrative. If you’re self employed, that may mean adding an additional service or product to generate additional revenue.
· Add an additional income stream. We are currently living in “side-hustle nation”. Take a look at your skills, hobbies, interests and identify a way to earn some money on the side. With all that is offered on the internet, there are even ways to earn extra money without leaving home.
Persevere and Celebrate
5. Tough it out. It’s not easy to get excited if you’re only saving $10, $25, $50, $100 each month, but it’s a start. There’s likely a lot of inertia to overcome in your personal finances. It will take time to accumulate enough change to make a significant difference. But stick with it and celebrate along the way. It’s important to be pleased with your progress, no matter how small.
Most Americans are stuck in a cycle of living paycheck to paycheck. Even those with well-paying jobs are at risk. Just a couple of weeks without a paycheck would spell disaster.
Breaking free from the paycheck-to-paycheck cycle and building wealth is a journey that requires discipline, knowledge, and support. If you’re fed up with this cycle and want additional resources and support, we’re happy to help create a customized plan for you through our one-on-one coaching services. We are also launching a brand new online program for black wealth building this fall that will provide education, accountability, and community. Contact us and let us know if you’re interested in getting updates on that program launch.
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