WANT TO STOP LIVING PAYCHECK TO PAYCHECK?
“Do not save what is left after spending; instead spend what is left after saving.”
Did you know that over 60% of Bahamians are living "paycheck to paycheck"? What does this mean? Living paycheck to paycheck describes the condition of an individual who survives off exactly what they have earned, with little or no savings cushion. This can be very stressful because every month you risk the chances of running out of money before your next paycheck. Sound familiar? Don't worry. Get Money Smart help is on its way!
ARE YOU LIVING PAYCHECK TO PAYCHECK?
Answer the following questions:
- Are you purchasing luxury items with money you know should be used for paying your bills?
- How about swiping your credit card to buy things you can’t afford?
- Are you constantly asking for a salary advance?
- Is your household budget realistic? Do you have a household budget?
- Do you use borrowed money, such as credit cards, to make payments on items you have already financed?
- Do you lie to yourself about your financial reality?
- Do you run out of money before your next payday?
- Do you only make the minimum payment on your credit card?
- Are you constantly stressed about your finances?
If you've given any of these questions more than a second of thought, you’re probably living paycheck to paycheck.
HOW TO STOP LIVING PAYCHECK TO PAYCHECK
When you're living paycheck to paycheck, getting out of debt and starting a successful budget may seem impossible, but it’s not. You can start your journey to Get Money Smart today, if you commit to living within your means, and putting something aside for a rainy day. Here are five tips to help break the cycle of living paycheck to paycheck:
Tip #1: STICK TO A BUDGET
Take the following challenge... For one month write down what you spend. This will show you clearly where your money goes and how much you should allocate to each category. Each payday, separate your money into different envelopes for your different responsibilities - Mortgage/Rent, Gas, Light, Cable, Groceries, Water, Electricity, School fees etc. A basic budget guideline should look like: 60% bills (living expenses), 10% regular savings, 5% pension savings, 10% fitness/charity/church and 15% enjoyment/luxuries. The use of envelopes limits you to using that fixed amount and not dipping into savings.
TIP #2: SET (REALISTIC) FINANCIAL GOALS
We all want to be millionaires but how many of us have planned what it takes to be one? Separate your goals into 3 types: long-term, medium-term and short-term and then plan how you are going to achieve them. Perhaps you want to buy a car? If so, what type of vehicle do you want and can you afford it? Can you really afford a new car or would you be better off getting a used one? (**insert calculator tool here) Do you want to stop paying rent and own a home? If so, how much do you need to save towards a downpayment and how long will this take? Setting realistic, achievable goals is key to Getting Money Smart!
“It’s not your salary that makes you rich, it’s your spending habits. ”
TIP #3: WATCH YOUR SPENDING HABITS
There's a simple equation: If your spending exceeds your income, you are digging yourself into debt. So in other words: Excessive spending + Low savings = Debt. There's also a simple question that will help with overspending: Do I really need it? To avoid overspending, make a detailed plan for shopping trips instead of impulse shopping; if you use a credit card, make sure that you have the cash available to pay off the full balance each month. Controlling your spending habits is key to taking control of your finances and Getting Money Smart!
TIP #4: SAVE FOR A RAINY DAY
Many of our parents or grandparents had cash stashed around the house “in case of an emergency.” It might have been kept in an old cookie tin or under the mattress. Wherever it was kept, the lesson is the same; save money and keep it somewhere - in a bank, shoebox or investment fund. One day you will be glad you did. To avoid living paycheck to paycheck, you should have at least three months of living expenses in your savings.
TIP #5: EXPLORE OTHER WAYS TO MAKE $$$
There's nothing wrong with wanting to make more money! In fact, the average millionaire has about seven forms of income. Do you dream of being an entrepreneur or do you prefer to work for a company? What other skills do you have that could translate into money? Ever thought of renting out your place on Airbnb? Taking a weekend job? Growing your own vegetables? Which path is right for you and where are you headed? Having more than one income is a great way to break the paycheck to paycheck cycle and head towards financial freedom.
GET MONEY SMART
Financial literacy is the language of money. And like any language, it allows you to communicate and thrive in that particular environment. So if you want to make money, you need to speak money!
Use these and upcoming tips to Get Money Smart and start your journey towards financial literacy today.