HOW TO STOP LIVING FROM PAYCHECK TO PAYCHECK

paycheck

HOW TO STOP LIVING FROM TO PAYCHECK


Picture this; it’s time to collect your paycheck, you’re so happy. A couple of days later, you’ve paid bills and have no savings, you even owe some , how do you get out of this? How do you stop living from paycheck to paycheck?
I have 7 steps I think can help with that:

RECOGNIZING THAT THERE IS A PROBLEM:

The first step to solving any problem is knowing that the problem exists. You need this step to ask yourself what to do to solve the problem. I am going to assume that you’ve gone through this step and that is why you clicked on the link to read this.

WHAT IS YOUR CURRENT STATUS?

Since the beginning of the year, I have been running my finances like a business, recording expenses and tracking income. Just as every business needs a balance sheet, you need one. The first thing to do is an audit, get a pen and paper and write down your assets and your liabilities. When you’re done, calculate your net worth using; {Net worth = Assets – Liabilities}. Then do a monthly cashflow sheet or use my Monthly Budgeting template to see where you stand. If your Net worth is negative, it means your liabilities are more than your assets, which is bad and if it’s positive, your assets are more than your liabilities, which is good.

SET REASONABLE GOALS:

So, now we know there is a problem, we’ve analyzed it and we know where we are, the next step is to set a goal for where we want to be. Earlier this year I set a goal of Twelve months (short term goal) and another one for five years (long term goal). You should also set some “reasonable” and “achievable” financial goals for yourself. Please be realistic, make sure they are attainable goals.


DEFEND YOUR FINANCES:

After completing the different steps, it’s time to see what’s making your expenses more and look for a way to cut rampant costs. I’d say start with the big three; Housing, Transportation and Feeding. Maybe you decide to cut the $4 Starbucks coffee or the $1 Iced Tea, while it will save you a little bit, it won’t be as significant as focusing on the big three. If you live alone and pay $1500; consider roommates, if you live in a city and own a car, consider other means of getting around. Consider cooking at home instead of eating out. Look for a way to cut the big costs.

GO ON THE OFFENCE:

Having a good defence is a great thing but there’s no way you can win playing on the defence at all times, you need some form of offence. Find a way to increase your income; pick up a second job, get a side hustle or a high-income skill job. You play defence by cutting cost and play offence by making more; Focus on both.

BUILD GOOD CREDIT :

I am mostly against any form of borrowing especially when you’re struggling with your finances (Credit card, Auto loans, payday loans). Get a good grasp on your finances before going for any form of credit. I’m not saying don’t use credit cards, just make sure you know what you’re getting into before you do. I use one; for gas in my car and I’m able to build good credit with it.

INVEST IN FINANCIAL EDUCATION

This step is super important for you to continue growing. You need to read books, listen to audiobooks and watch videos. Most importantly always do your Due Diligence (DD) before you make any financial decision.

All views expressed are that of the author, please do not take them as financial facts. They are the steps I am currently employing for my financial freedom. Check out my other post on 7 Money-Saving Tips. Here’s a link to my monthly budgeting template and don’t forget to leave comments and send me a message using the Contact me page.

Leave a Reply