Living Paycheck to Paycheck

Article revised February 22, 2019 by Anthony Piccininno.

Are you living paycheck to paycheck?  It turns out you are not alone.  Nearly half of Americans say their expenses are equal to or greater than their income, according to a new study from the Center for Financial Services Innovation (CFSI).  For those 18 to 25, the percentage is over half, up to 54%.

“Half of America has no financial cushion,” says Jennifer Tescher, president and CEO of CFSI, which released the study.  “They are living really close to the edge.”

With one out of every two people maxed-out with expenses, it is likely someone you know.  Maybe it’s you.

How do we get out of the rut?

There are numerous things that can be done to break free of the pattern of living paycheck to paycheck.

Track your Expenses – Tracking how much money is coming in versus how much is going out, and where exactly that money is going, is the only way you will be able to understand your finances.  It helps allow you to make the right decisions at the right time.  You must understand your patterns and routine.  If you don’t pay attention, it becomes very difficult to make sure that you’re adequately prepared.  Tracking your expenses is the beginning to controlling your money instead of it controlling you.

Implement a Spending Plan – Otherwise known as a budget, a spending plan will help you aim to not only cover expenses, but set aside funds for an emergency fund and savings for the future.  Go through the expenses you tracked.  Are there any that you wish didn’t cost so much or that you did not have at all?  Look into those items to see if there is a way for you to lower the cost or do away with them completely. 

Do you want insurance coverage on your mobile phone plan if the company only provides you with a “refurbished” phone and not a new one? 

Do you have complimentary anti-virus software that comes with your internet service plan that would permit you to cancel a paid annual plan?

Are there recurring expenses you had forgotten about?  Do an audit of all your subscriptions.  If there are ones you are not using, cancel them.  Are you able to consolidate with a family member, partner, or roommate?  If so, take a few minutes to make that happen.

It’s questions like these that can help you “free up money” that can be saved or spent in a way that brings you more happiness.

Utilize Financial Tools – While they make take a bit of extra effort in the beginning, using financial tools can really reduce the work and time commitment you will need to put forward to help improve your situation and assist you in getting yourself out of the paycheck-to-paycheck cycle.

Some tools like Clarity Money bundle several items into one website.  Clarity Money not only helps you track transactions, save,  and keep on top of your credit score, but also offers a bill negotiation and lowering service.

• Getting Organized – FileThis is a great way to keep track of all of your bills and account statements in one easily accessible place.  Just link your FileThis account with all of your online accounts to get a complete overview of each account, download account statements and get alerted with bill due-date reminders.
• Developing a Spending Plan – Take the complication out of a budget by letting an app/website do the bulk of the work for you.  Apps like LevelMoney tend to work best for people who have relatively simple, linear financial lives.  Others like Mint and You Need A Budget are a bitmore comprehensive.
• Leveling Out Your Income – There are tools that aim to help people manage their money more efficiently if used responsibly.  Most are startups like Activehours, FlexWage, Clearbanc, Even and Payactiv. Some, like Activehours, let the user access portions of their wages owed before payday. Others like Even are working to smooth out irregular income. All are combing transactions and other data to deliver funds to individuals on their terms, rather than the employer.
• Paying Down Debt – The burden of debt can really be controlling your financial life.  Websites like Unbury.me or even this simple debt-free calculator can help with a debt repayment strategy.
• Increasing Savings – If your employer offers an employer-sponsored retirement plan, participating in it can provide you with an employer match and other benefits.  For non-retirement savings you don’t even need to think about, websites/apps like Qapital, Acorns, and Digit may be for you.
• Getting Motivated – Sometimes we need someone to help us hold ourselves accountable or a person who can help us when we become stuck and need to think differently about a situation.  We may need someone who can help provide direction, education, and motivation to keep on track.  Crimson Money Concepts provides certified financial coaching services that can help.  Please contact us today to see how we can help.

Updated on February 22, 2019 by Anthony Piccininno