Extra Money from Paycheck to Paycheck

paycheck to paycheck

Money from Paycheck to Paycheck

Paying off your mortgage, putting the kids through college, amassing an emergency fund, are you serious? For some, having any cash left over from paycheck to paycheck is a tall order.

You can break out of the paycheck to paycheck whole, pay off debt and actually start setting aside money. The key is to start tracking your spending, develop a budget, and setting goals.

Unfortunately people get bogged down in short-term needs and then get caught short when the big expenses hit. If you haven’t taken the time to determine your goals, it’s hard to be motivated to watch your current spending.

Track your spending and watch your expenses

The first step toward breaking out of the paycheck-to-paycheck cycle is to track your spending on a daily basis. Make sure you keep track down to that muffin you had at breakfast. Carry a notebook or a pda with you for a month to write down everything you spend money on. The list needs to be very detailed. Don’t guess how much you are spending actually write down everything you spend money on.

Keeping track of your expenses will be an eye opening experience. You will be surprised to find you spent $50 a week on breakfast, or $100 a week on happy hour. This exercise can be time consuming and frustrating, but you need to know how you’re spending your money before you develop a spending plan. Enter all of your expenses an income into an excel spreadsheet to see how you are doing and where the money is going.

Look for out of the ordinary expenses such as utilities, gasoline, food and recreation. High fees on checking, savings and retirement accounts can eat away at your earnings. High interest rates on credit cards and loans can force you to pay more than you have to over time.

Set short and long term goals

Once you know how much you’re spending each month and on what, you can set achievable goals, such as paying off debt, saving for a house or building an emergency fund, and create a budget. If you don’t establish goals, you won’t be motivated to change your spending habits. Achieving goals shouldn’t require you to make drastic life changes or cut out all the things that make life fun. Make your goals attainable and something you can get excited about (like retiring in a certain amount of time), and celebrate your progress with some short term inexpensive goals also.

When establishing goals, be sure to differentiate between wants and needs. Short-term needs, like buying a new car to replace one that’s toast or paying for a necessary medical procedure, are top priority. Long term needs, such as retirement funds, are secondary goals. A vacation to the Bahamas, falls to the bottom of the wants not needs list.

If you’re married or have a significant other, make sure you set and prioritize your goals together. Each of you should write some goals and compare lists to see which you agree on and how to prioritize them. You need to know what direction you want your financial lives to take before setting a budget to get there.

One thought on “Extra Money from Paycheck to Paycheck

  • at 10:24 am

    There’s some great tips there, just blogged about it too!

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