The statistics are sobering: 62 percent of Americans reported having less than $1,000 in savings. A full 20 percent have no savings accounts at all. And 78 percent of full-time workers indicate they are living paycheck to paycheck.
Living paycheck to paycheck is a frustrating reality that many Americans feel trapped by, but it doesnâ€™t have to last a lifetime. Analyzing your current financial situation, tracking your spending and taking small steps right now, it is possible to break the paycheck-to-paycheck cycle.
Tally Your Debts
One of the biggest reasons 71 percent of American workers find themselves trapped in the paycheck to paycheck rut is debt. When a portion of your paycheck is already earmarked for something else, it is hard to get ahead. That is why it is essential to understand how much debt you owe.
To tally debt properly, calculate the running balance on every single credit card, even store cards you may not use regularly. Then, add in any outstanding loans, whether they are student loans, car loans, lines of credit or mortgages. Some people argue mortgages are good debt and others may not even think of it as debt at all. The truth is mortgage payments are generally one of the largest payments individuals make each month, making it essential to include them in debt calculations.
Track Your Spending
Aside from debt, mindless spending is another reason why your wallet may be emptier than you think. While it is relatively easy to afford the occasional treat – whether it is a lunch out or a latte, it is important to make mindful choices when it comes to spending. If you do not actually know how much money you are spending and what you are spending it on, you might be shocked to find out the grand total for the month. A notebook, a spreadsheet or an app can help you get a better picture of your spending. Before you try to make any adjustments to your money habits, record where you are spending for at least one month. The clearer the picture, the easier it will be to make improvements.
With 49 percent of workers reporting feeling concerned, anxious or fearful about their money situation, it is understandable some people feel frozen by fear or completely overwhelmed by the thought of getting started. While making financial sense out of a money mess can be a monumental undertaking, starting small will net significant results. In fact, there is a lot of low-hanging fruit when it comes to saving money. These options should be relatively apparent after tracking purchases. After these leaks in your budget have been identified, it is time to act.
From brown bagging lunch to brewing coffee at home, the savings can add up faster than you think. After making one small tweak to your weekly routine for several weeks, add another. Then go after other changes like swapping cell phone carriers and reducing or eliminating cable. It is even worthwhile to call providers to ask if you are, in fact, receiving the best deal they can offer. As you make these small changes, keep track of what you are saving each month. Even though you may not be able to save a sizeable chunk of your paycheck right away, putting even 5 percent into a dedicated savings account is enough to grow an emergency fund. It also helps build momentum to inspire you to continue to combat the paycheck-to-paycheck cycle.
Donâ€™t wait for a new week, a new month or a new year. While we all dream of the day we get a raise, score a bonus or a land a better-paying job, theÂ best time to get started than now. The biggest secret to money success isnâ€™t a trick or a skill. Itâ€™s time. The more time your savings has to grow and the more quickly you can pay off your debts, the more money you will have.
There are few financial feelings more frustrating than the realization your paycheck is stretched so thin that you are already counting on the next one. By getting a clearer picture of your financial status through tallying debt and tracking spending, you can make small money moves today that will help break the paycheck-to-paycheck cycle.
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