Living Paycheck to Paycheck without having any money in a savings account can be a risky way to live and even more dangerous in the age of the covid-19 pandemic.
High inflation means that the cost of consumer products has risen exponentially. Nowadays, people are paying more for everything from petrol to utilities to groceries. This is difficult if you don’t have a financial cushion to fall back on. You might even find yourself ending up in unhealthy debt if an unplanned bill comes your way, or if consumer prices rise even more.
If you are currently living paycheck to paycheck you certainly aren’t alone in this experience. However, it is super important to pull yourself out of that situation as quickly as you possibly can.
Here are some tips.
Set Up A Budget
Following a well-organised budget is one of the most effective ways to track how much money you are spending and gain more control of your finances. If you haven’t created a budget yet, go through your bank and credit card statements from the past 6 to 12 months and figure out what your various bills consist of. After you have done this, aim to figure out what they cost you on average while you might pay a set $900 a month on rent, things like your grocery and utility bills may vary.
While you can create your budget using a spreadsheet (or even with pen and paper), there are different budgeting apps are worth looking into to help you stay on track so that you can remain disciplined enough to achieve your goals.
Try to Find New Ways to Reduce Your Spending
To build some cash reserves, you'll need to not deplete your entire paycheck every month. That could mean having to make some tough choices about the things you spend money on.
Once you have your budget in place, analyse it and see which expense categories you have the potential to cut back in. You may not be able to lower your auto loan or rent payment, but if you spend $80 a month on Foxtel that's an expense you may be able to eliminate temporarily, or at least replace with a less expensive alternative, like a streaming service that would cost only $15 a month.
Get A Side Hustle
You may only have a few expenses in your budget that you are able to reduce and eliminate. In that case, your ticket to building some savings could boil down to getting a side hustle. The money you earn from that second job can go into the bank so it's there for you when you need it.
If you are not sure how to find a side hustle, think about what your schedule looks like. If it's intense, you may need to find a gig with flexible hours, like doing web design or data entry from home. Otherwise, you might manage to secure a steady second income stream by working evening and weekend shifts at a local restaurant or in retail.