Here are the 6 steps you need to follow
I’ve been here before, so not only can I relate to people living paycheck to paycheck and financially struggling, but I know the steps I’d take to escape the predicament.
First, we are entirely responsible for our financial situation. No one else is responsible, even if we get ripped off, cheated, taken advantage of, or have money stolen. We are the responsible ones. If you want to transform your finances, here are the steps.
1 Calculate My Expenses
The first thing I’d do before I make any moves is calculate my exact expenses down to the decimal. It’s important to know where your money is going so you can know where it doesn’t need to go anymore and where you want it to start going.
2 Calculate Income
You likely already have a good idea you’re not making enough money in the first place. But it’s still good to know exactly how much money you bring each month after taxes so you don’t miss out.
You might earn more than you think, or you might earn less than you thought. Either way, being informed puts you in a much better position.
3 Identify the Gap
Subtract your expenses from your income, and what number does that give you? If it’s negative, you now know precisely how much you need to add to your budget, or you know how much you can detract from your budget. If it’s positive, you’re just overspending, and you can easily cut that habit out.
4 Select A Path
You have two options to meet your financial needs:
- You can slash your expenses
- You can increase your income
I recommend doing both, but the easiest way to give yourself financial breathing room (immediately) is to slash your expenses. It takes no time at all. If your budget has many superfluous expenses, you might not need to increase your income immediately after eliminating these from your budget.
5 Path A: Slash Expenses
Slashing expenses is not for the faint of heart. If you’re a spender like many or someone who doesn’t identify as a spender yet never has any money, this part is for you.
When you slash expenses, that means everything unnecessary goes…everything, which includes:
- Car payments
- Streaming services
- Phone installments
- Overpriced housing
- Extra gym memberships
There was a point when my rent and utilities combined equaled $300. I didn’t have a car note or any other significant debts, so my expenses were severely low, which helped not only increase my wealth but also enabled me to stop living paycheck to paycheck.
Do what you must to slash your expenses; it’s only temporary. Live with family or roommates, sell the house, sell the car, get rid of all your subscriptions, stop eating out so frequently and cook more meals at home, and quit buying impulsively.
5 Path B: Increase Income
I always recommend you increase your income - even if you rate your income as “good.” And when you’re living paycheck to paycheck, one of the best things you can pair with slashing expenses is elevated income.
What would I do in this situation? Pick up a part-time gig or find other ventures that bring in relatively quick money.
It doesn’t have to be the perfect job; it just needs to offer you some financial relief.
6 Commit to The Process
Whenever I’ve experienced financial turmoil, I have taken a laser-focused approach. There was no such thing as retreat, and I made the necessary sacrifices until I was back in the driver’s seat.
If you’re struggling with your finances and barely making it, apply the six steps. You know what you need to do. Now, you need to act.
-
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.