5 Strategies to Break the Paycheck-to-Paycheck Cycle.

You may be familiar with the phrase, “living paycheck-to-paycheck” as 80% of people live this way. If you’re one of them, don’t waste time feeling bad about it— try implementing these five steps instead. 

If you survive on scraps as payday approaches, you’re in good company: Nearly 8 in 10 workers in the U.S. say they live paycheck to paycheck, according to a CareerBuilder survey. With COVID-19 wreaking havoc on personal finances, this number is expected to dramatically rise.

The good news however, is that you only have to break the cycle once. Here’s how…

1. Identify the Problem

Sounds easy right? Wrong. The first step to preventing a financial disaster is to look at where your cash is going, and the findings may just surprise you.

To start, step back and take a bird’s-eye view of your finances: Gather all of your pay stubs, deposit accounts, monthly bills, and receipts. You need to determine how much income you have and outgoing expenses.

Maybe you’re overspending, or perhaps you need a side hustle because your paycheck barely covers your bills. Once you figure out the “why,” you can change your habits to start saving money. Once you have all of this information in front of you, you’ll need to separate your core living expenses from the rest of your monthly costs. Core living expenses include your mortgage or rent, monthly car payment, loan and credit card payments, household utilities, groceries, etc. These are areas of your budget that are non-negotiable.

2. Focus on Your Biggest Expenses First

If you’re living in a home you can’t afford or drive a car that’s beyond your budget, you’ll probably never stop living paycheck to paycheck, no matter how much you cut the smaller stuff.

A rule of thumb is to try and avoid spending more than 20-25% of your gross income on rent or your mortgage, even if that means you need to downsize by finding a smaller place, get a roommate or move in with family. Your car payment shouldn’t eat up more than 10% of your gross budget, so consider a cheaper ride or alternative transportation if you’re paying too much.

Go through your expenses one-by-one and make changes where you can.

3. Re-evaluate Your Debt

When you’re living paycheck-to-paycheck, checking in on your debt is critical. By refinancing your home or consolidating your credit card debt, you could save big bucks on interest.

If you’re stuck in debt and are rolling balances into the next month, call your card issuer to see if they’re willing to lower your interest rate. This will help you spend less on monthly interest as you work your way out of living paycheck-to-paycheck.

A personal loan can also be especially useful for consolidating your current debt. When you apply for a loan and use it for debt consolidation, you’re combining all of those outstanding balances into one monthly payment. This grouping of debt makes it easier to work out a time frame to pay off your balances without getting overwhelmed.

4. Find Ways to Earn More $$$

Sometimes cutting expenses isn’t enough. Selling stuff is a legitimate strategy. What do you not need or not use anymore? Would a couple hundred dollars go a long way? Yes! Get creative.

To take it one step further and find ways to  earn money while stuck at home during COVID-19; Whether it be online tutoring, food delivery driving or business consulting, use your skills to drive in the extra dough.

5. Change Your Habits

It seems that we frequently read articles and advice posts that tell us not to spend money, but unless you change your habitual spending you’ll wind up back at square one. You need a new normal! On average, it takes more than 2 months before a new behavior becomes automatic — 66 days to be exact. And how long it takes a new habit to form can vary widely depending on the behavior, the person, and the circumstances.

The reality is you are probably going to have to attack this from all sides: freeing up some extra money and spending less. Once you break the cycle, and you resume a much more normal pace, every time you get paid, you will decide what those dollars need to do before you spend them.

Happy saving! 🙂

COVID-19 UPDATE from TLC Loans

As the COVID-19 crisis continues, more individuals than ever are going to face economic hardships, and these resources will become more important than ever. Due to the ever-changing circumstances of this crisis, actions taken by the government are changing frequently. For updates and resources to help navigate the path forward, you should keep up with the actions federal, state, and local governments have taken to combat COVID-19 in your area.

If your financial condition has been negatively impacted by the Coronavirus (COVID-19) and you are worried about your financial well-being, TLC Loans remains committed to assisting you in your time of need. If you need a personal loan, we can help! Find out more and apply for your loan here today.