Many who struggle with their finances are living paycheck to paycheck, and can not see a way out to break the cycle and start saving and planning for the future. This cycle can generate strong emotions and a feeling of defeat and hopelessness. What might surprise many is that people feel this way across many different income levels. Living paycheck to paycheck is not just a function of low income. It is a function of choosing a lifestyle whereby your expenses match or exceed your income. Even many with high incomes still live paycheck to paycheck.
There are many successful strategies to help people break this cycle depending on the financial circumstances and personalities of the people involved. I am not trying to cover all of them, but rather give some basic insight that perhaps can help you in how you approach the situation.
Many want to think… if only I could make more money, then my problems would be over. More money certainly has the potential to help but is not typically the answer. Often people who live paycheck to paycheck do not solve the problem when they increase their income… they just increase their spending.
As an example, consider that many who are considered “low income” in a country like the USA are actually wealthy by global standards. If you have shelter, clothing, and a steady supply of food you are actually doing well by global and historical standards. Many of the other things we think we “need” are really just “wants”. All too often we judge what we “need” based on what we see others around us have rather than true needs.
Step 1: Prayerfully ask God for help. Submit to Jesus Christ and change your behaviors and attitudes to be different from the world and more like His. Ask Him for help specifically with your finances.
Step 2: Clearly separate in your mind true “needs” from “wants”. Need is really limited to such things as basic food, shelter, clothing, and safety. Even much of the more expensive food, shelter, and clothing qualify as “want”. I do not need brand-name clothes or expensive food or an expensive home.
Step 3: Commit to yourself and before God that you believe you can and that you will, take steps to pull yourself out of your financial situation even if it feels difficult and you have to give up things you like and want. If you don’t believe you can or if you are not committed to taking sometimes painful steps, you will fail.
Step 4: Find an accountability partner who you trust to share your finances with, or at least your expenses. It works best if it is someone who will tell you what you need to hear rather than what you might want to hear and also if you find someone who is a good role model. A good role model is someone who is demonstrating the behavior you want to achieve yourself. In this case, find someone who has already gotten out of the paycheck-to-paycheck cycle and is planning successfully for the future.
Step 5: Track your expenses over a few weeks or a month. Really write down everything you spend… as you spend it. You can use your phone’s “notes” app or you can carry a pad and pen. Next to each item consider and write down if it is a “need” or “want”. Be careful in assessing what food and clothes you buy. It is too easy to say “need”, when in fact we may have spent more money than truly needed in order to get a style or amount of food or clothes that we “wanted”.
Step 6: Review with your accountability partner. Discuss your assessment of need and want for key items. Add up the seemingly small expenses in categories rather than ignoring them. For example, if you get a Starbucks coffee each day for a few dollars, that may seem small but actually, over a month it can be significant. Identify some of the wants in your spending that you can change your behavior on and reduce your expenses. Make a plan and write it down.
Step 6: Execute your plan based on the wants you choose to avoid based on prior spending. Take that same amount of money directly into separate savings or checking account… or an envelope in a secure location if you prefer. You have just started saving for the future and are still living on the income you had last month.
Step 7: Repeat, starting back at step 1. Look to increase how much you put aside for the future. You must start with seemingly small, achievable goals as you change your attitude and behavior. As you start to experience success you will likely increase in confidence and motivation and be prepared to take additional steps to improve your situation.
Soon you will be able to start planning for the future… establishing an emergency fund, generating an operating fund (allows you to absorb unexpected timing issues on expenses or income), and then future costs like a car, school, and retirement. There are also longer-term decisions that may help you improve your situation such as growing your income, but that topic is the subject of other posts.
Are you ready to break the cycle of paycheck-to-paycheck living? What will your first step be?
Remember that all you have belongs to God. Manage your money God’s way. Visit GrowGodsMoney.org.