How to Save Money When Living Paycheck to Paycheck: The Key is to Pay Yourself First
Payday is a week away and you’ve decided to pop into the grocery store to pick up some ingredients for tonight’s dinner and tomorrow’s lunch. You’re in line to check out and you swipe your debit card. DECLINED. You pull out your credit card and swipe that one. You just made the minimum payment a week earlier, so you know you’ve got at least some leeway. Hopefully.
This is a scenario too many people go through all the time: too much month at the end of the money. It’s a never ending cycle for so many people who really would like to get ahead. You scrimp and you cut back as much as you think is possible, but you never get anywhere.
All you want to know is how to save money when living paycheck to paycheck.
Many experts on personal finance have come up with great strategies to help you get ahead even when you can barely keep your head above water. These include actual jars, additional bank accounts, accountability partners, etc.
But the one thing all of them agree on as far how to save money when living paycheck to paycheck is this: pay yourself FIRST.
This is a tough concept to master for most people. Rent has to come first, and then electricity, and then credit cards, and then… Wrong. Anyone who has a sizable savings or investment account will tell you that it is essential to pay yourself first.
Here’s the strategy in a nutshell:
When you receive your paycheck, look at the GROSS EARNINGS (before taxes). Decide on a set percentage to pay yourself each month based on that number. If you are living paycheck to paycheck (and barely getting by at that), start with an ultra-low number: 3% a month. So, if you are earning $3,500 a month, gross, your savings the first month will be $105. If this is too much, consider 1% the first month, 2% the second month, and so on. Once you get to the end of a full year, you will be saving 12% a month BEFORE anything else.
“Basically, once you pay yourself, you will find creative ways of how to save money when living paycheck to paycheck.”
So let’s go back to this $105. This seems like a lot of money, but once it’s out of sight, you’ll easily find a way to make do.
Here are a few ways to trim it down even further:
Do you drink coffee or cappuccino in cafes near your office? Cut back on that a few days a week and you’ll make a BIG dent in that $105.
Do you eat out for lunch or breakfast? A trip through the drive-thru is not only unhealthy, it’s expensive too. Cut that out or down and you might save money AND lose weight. Win win!
Soft drinks or snacks at home? There are some things you don’t want to give up. So in this case, buy a family size and make it last a week or two. Buy a case of soft drinks and hide them from the kids and add them to the fridge a few at a time.
Basically, once you pay yourself, you will find creative ways of how to save money when living paycheck to paycheck.
Give it a try and if it you find yourself succeeding at it, increase the amount. After a while, you’ll find that saving 10% or even 15% of your paycheck FIRST is a lot easier than hoping to have some money left over at the end of the month.
Oh, and don’t forget to have fun and reward yourself for your successes.