When you’re living paycheck to paycheck, it feels like there is no escape. You might wonder how you can save money when you barely have enough to cover the bills and necessities.
Living for your next payday isn’t just annoying, it’s dangerous. What if an emergency happened, and you had no money to pay for it? Would you have to go without food? Shut off your lights? Put it all on credit and worsen your situation?
Building a savings is vital not only for emergencies, but to be able to afford the things you want out of life.
It’s no easy feat, but you can, and should, stop this cycle. Here’s the steps to take to find freedom and stop living paycheck to paycheck.
Set savings goals
Decide what it is you want to save for. A vacation? A house? Sending the kids to college? Decide what your goals are and calculate how much money you need to save.
One mandatory savings goal – an emergency fund. I know, it’s not anything exciting. But building an emergency fund gives you insurance. If something goes wrong, which things always do, you will have insured yourself because you can pay for emergencies.
Ideally, you would have an emergency fund worth 3-6 months of expenses. But start small. Right now, you may only be able to save $1,000. And that’s okay.
One great tool for saving money quickly and automatically is the Capital One 360 online savings account. This is what I personally use because it is easy and I get better interest than at a bank!
Create a budget
Now that you have some goals to work towards, it’s time to create a budget to make your dreams become a reality.
What can you cut? Can you cancel cable, subscription services, the grocery budget, or social expenses? Can you live minimally for a while to build up your savings?
Add savings to your budget as a fixed cost. Remember – you aren’t saving every month to blow it on trips to the mall, fancy dinners, or vacations. You are saving for your future, not for the present.
Automate your savings
The easiest way to build savings quickly is to automate it. By automating it, you never see it and have less incentive to spend it instead of savings.
Many banks now offer this feature. Put it into a separate account so you don’t confuse your savings with spending money.
Increase your income to increase your savings
If you aren’t saving as quickly as you like, you can look at two things. First, how much have you cut out of your budget? Can you control your spending anymore? If you’re already at a bare budget, you may need to look at increasing your income.
Increasing your income doesn’t have to be as complicated as it sounds. It might take some reevaluation of your goals and your time management. Can you ask for a raise? Apply for a higher paying job? Start a side hustle?
Side hustles are a great way to increase your income on the side if you aren’t able to increase your full-time income. A side hustle is anything you do outside of your 9-5 to earn money, whether it’s babysitting, blogging, freelance writing, or starting a business.
Not only do side hustles increase your income, but they increase your skills and motivation. Often, people who side hustle experience a boost in their 9-5 careers as well.
No matter your circumstances, you have the power to change your finances and your life. By committing to switch your habits, you can escape living paycheck to paycheck and start living for the future.