Most of us have been there. You get your pay on a regular basis. And then you start spending money to pay bills, entertainment expenses, restaurants, and other things that are deemed “necessary.” To top it off, you find that you’ve spent your entire pay without even noticing.
How did it disappear so fast?
Some of these questions get unanswered and we shrug it aside for another day. Until we realize that we are living paycheck to paycheck, we will fail to acknowledge our inability to save and invest.
Here are some ways to start thinking about how to stop living paycheck to paycheck.
Change Your Mental Picture
The most important part of this starts with the mind. I know we’ve all heard about living below your means. However, we might agree with this saying, but do nothing about it.
It all starts within the head. The mind is where we can take control over the game by being more conscious about savings and overspending.
Changing Your Habits
Part of our mindset is that we get stuck; we don’t make checking your personal finances a habit. Thoughts about checking your bank account balance or credit card statements could be pushed aside. You find yourself saying I’ll handle that later. Or, now isn’t the right time. Maybe it’s too painful to look at your own personal finances?
Make it habit and practice to check your balances on a regular basis. You can do a quick look at the bank account and credit cards every morning. It’s a relatively simple process as it only takes a few minutes. Do this every day and you can understand your overall balance and expenses. This would lead to a more conscious awareness of budgeting throughout the day.
Another habit is compulsive spending. This could include the “treat yourself mentality” that results in overspending, or shopper’s addiction. Try to take yourself outside of the temptations and think about your long term goals. Instead of buying the item, add it to a wish list. You might find that you don’t need it after a number of days.
Things that Make Us Happy Isn’t Always about money
I used to think that buying things would make me happy. There are items that I find very useful and worthwhile. But for others, there are things that wear out in terms of interest.
Take for example souvenirs through travel and experience. When we first see the trinket, they seem to have an instant effect on our mind. Buying souvenirs allow us to reminisce on vacations.
For us, souvenirs pile up. What became something important at the time of purchase, became an object that took up space.
Physical attachment isn’t always necessary to remind us of our experiences. For example, your pictures could be a great way to remind yourself of your time at a vacation spot. In fact, you can store pictures and videos digitally and not worry about spending for physical items.
Understanding Delayed Gratification
More importantly, we don’t see the long term effects of the spending. We think short term when we buy the latest toys or clothing to keep us stimulated. Instead of being fixated on immediate gratification, think about how this is going to affect you long term. Every dollar counts and if you purchase this product will it provide enough satisfaction for the long term?
By placing yourself in a longer-term mindset, you could recognize that frivolous spending can be determinantal to your financial goals. The money you could have saved may give you a better retirement, opportunities for a great investment, or a sound mind when it comes to having emergency money set aside for rainy days.
Remove Or Limit Your Credit
Some of my friends I know are living on credit card debt. In fact, I know some with over $10,000 in debt. Shockingly, I’ve even read that some cardholders have astronomical $100,000+ debts.
Interestingly, it’s not as hard to get to high debt. If you’ve ever had an emergency such as house repairs, it can add up pretty quickly. Sometimes it’s easy to not to notice the purchases you make while shopping or eating at a restaurant. With credit cards, you may not check your transactions as frequently as your bank account.
How Do You Prevent Credit Debt?
The simplest way is to monitor your credit card accounts on a frequent basis. This could be daily, weekly, or something more than your normal rate of checking.
If you pay down your credit card every month, you can set a budget for the card. During the month, check if you’re likely to fall within the budget. You can always reshuffle your priorities and cut expenses from other items if you feel you will go over budget. Sometimes I forecast on a spreadsheet what I will buy for the month. I can tally up the sum and make sure I stick to the budget.
If you’re the type that keeps a credit card balance, consider ditching your credit card. One of the best ways to not go overboard in debt is to use strictly cash. Cash reminds us that there’s a finite amount of money that we can have. Credit cards do not since there’s nothing to remind us of the limit.
Another option is to ask to lower your credit limit. By doing so, you’re placing a hard ceiling on your spend. Careful with this method since lowering your credit score can affect your overall credit utilization.
Escape The Rat Race
What’s astonishing is that no matter the income, anyone can fall into this cycle of lifestyle comparison. For example, seeing that your neighbors bought a new car entices you to buy a new car as well. You start buying nice things so that you can show the world that you’re keeping up with the Jones. Call it the Rat Race.
By knowing that you’re in this, you can decide to not buy the things to merely show off. Take a look at your banking account or credit card statement and look for items that you have purchased and determine if they count as “rat race” purchases.
Consider what really matters in spending. Look for the true quality of life purchases or things that matter most. These could be experiences or events that would truly change your life. Think about pets, online dating subscription, or a sleep tracker.
Sometimes spending can be triggered by social pressure. Friends may want to indulge in an expensive vacation or head to a trendy restaurant.
Try to curb the spending habit by saying no to the expensive proposals. Friends would understand and would be open to other suggestions. For restaurants, you can pick and choose what you want to order, so no need to overspend even at a nice venue.
Not every social activity has to be about spending money. Think about socializing at home or at the park. Locations such as these don’t require spending.
Saving for retirement or for other reasons helps our mindset to focus on goals. When you save, you become more in tune with the bigger picture. Your efforts also make you more aware of your current budget and, more importantly, you save for a rainy day.
Build a Saving Plan for Emergencies
One of the biggest budget busters is emergency spending. Events like a roof leak, furnace shutting down, or car repair can adversely affect your personal finances.
So what are the best ways to combat emergencies?
For me, the most effective method has been a separate bank account. For each paycheck, I allocate a specific amount to another bank account. Think of it as a tax to yourself.
It’s easy to set up a new bank account. You can find fee-free bank accounts that allow you to link your main bank account. Or, if your payroll is flexible enough, your company take a part of your paycheck and have them forward it to the new bank account. For every paycheck, schedule a portion, say, 10% of the amount to be automatically transferred to this new bank account.
What this does is that it keeps money for emergencies separate. You may not check your alternate accounts as often as your main account, and this may help you build a savings account that is not as readily available.
End Shopping Addiction
Like a kid with a shiny new toy, the pressure to show and tell may cause us to buy things that we don’t need. I know, and as an Apple fan, I used to regularly line up and grab the latest products to show my friends.
Some studies have concluded that shopping addiction is a disorder. For some, it might be attributable to low self-esteem or a need for material stimulus.
Regardless of the psychological perspectives, I believe we’ve all been there. Sometimes we can’t help spending because it makes us feel good.
Find other Activities to Change Your Mood
The most important step is to know that this is a problem in the head. If you buy for the sole purpose of improving your mood, think of other alternatives that can uplift your mood and feelings. It could be meditation, a walk in the park, listening to your favorite music, or anything that could help you feel great. Free social activities, like hanging out with friends, could also get you out of the mindset.
Stop Thinking about What Other people Think about You
Sometimes we spend because we think we can get validation from our friends or family. It’s interesting, as I reflect on the many times I’ve bought items, I think about what others would think about me when I buy stuff.
But keep in mind that our friends are your friends because they appreciate who you are in the inside, not the outside. Don’t get in habit of thinking buying stuff will help you get closer to your friends and have them feed into your ego.
If you’re one of the many people who are truly affected by a shopping addiction, seek professional help. And if you can’t find professional help or can’t afford it, consider at least talking with your friends and family.
Here are some great resources on how to get started.
Debtor’s Anonymous – A non-profit group that helps people from all backgrounds to recover from debt.
Spender’s Anonymous – A source for self-help groups to help you to curb your spending.
Shopping Addiction Support Group – An online support group to help people suffering from shopping addiction.
Can I Borrow Or Rent?
Another option for paycheck to paycheck budgeting is thinking about other options: renting and borrowing. Especially if you’re spending on a high-priced item, you may not need to have the item long term. A lot of shoppers feel the need to purchase a new product for even stuff that they won’t use regularly.
For people who know if a product will be used regularly, you should consider renting. Renting gives you important options like returning the product when it’s not needed. Think about high priced items like tools. Home Depot has a good tool rental service that allows you to rent high priced tools for a mere fraction of the cost. In the past, we rented sanders and other power tools for small home improvement projects.
Borrowing From Friends and Family
One of the best use of your resources is through family and friends. I’m sure some of you have done this already. Prior to purchase, make it a habit to think about your friends and family; they can lend you something that may not require any purchase. Besides home improvement tools, you can borrow kitchen appliances, computers, books, and luggage. The list can go on, but keep thinking about what you can borrow.
These are just a few of stop living paycheck to paycheck tips. I’m sure you find more things you can do to cut down expenses. Incidentally, I do have an article that focuses on cutting expenses. Check it out for more ideas and suggestions for budgeting.
If you’re a person who could use technological help, check out the top ten best apps and programs to budget.