Break the chain, and stop living paycheck to paycheck!
At first glance, living paycheck to paycheck may not seem all that bothersome; you’re earning your income, paying your bills, and staying afloat. But the truth is, life is an expert at throwing curveballs, and if you’re struggling to make ends meet, the last thing you want is to be unprepared.
By living paycheck to paycheck, you’re residing in the present moment and not anticipating future events. But the good news is, it’s never too late to break the chain and adapt healthier financial habits. So, without further ado, here are 5 prime tips that will help pave the way:
Prepare a budget
There’s a reason why budgeting almost always ends up as a primary tip in any financial dilemma. Budgeting is a great way to help you see the bigger picture and the small details all at once — it’s also super easy! All you need to do is map out your income and your expenses. To get a better idea about where your money is going, divide the expenses section into: necessities, expenses you need to pay each month, and wants, non-essential expenses you can forgo. After laying it all out in the open, you not only have a clearer picture, but you’re also ready to effectively analyse your spending in order to better manage it.
Cut your expenses
Now that you have a better understanding about where your money is going, you need to look at your expenses. Insurance premium, rent, and monthly instalments are all necessities you need to pay, which is why your focus has to be directed to your needs. Do you truly need that gym membership if you’re barely going once a month? Do you sense an overspending pattern on clothes when all you’re doing is stashing them in your closet?
Try to search for expenses that can easily be scratched out of your budget or reduced, at the very least. Once that’s done, you’ll be left with a good amount of money that can come in handy in the future. And if you follow these next steps, you’ll find a great use for that residual money!
Manage your debt efficiently
Credit card debt, loan instalments, or maybe even the money borrowed from a friend are all considered debt that needs to be addressed promptly. One thing you must do is pay the money back in time, in full, and without any delay. A piece of advice, pay your debts as soon as you possibly can! Once the issue is out of the way, you’ll feel that a huge weight was lifted off your shoulders. Not only that, but you can also But, a piece of advice, try to go the extra mile!
After you cut down on expenses, you were surely left with some extra cash. Say, you were left with 250 JOD. Divide the money the way you see fit: 70/30, 60/40 or 50/50. Assuming you chose the 50/50 method, 250 JOD x 50%= 125 JOD — add this amount to your monthly debt instalment. This will enable you to repay your debt faster, reduce interest, and shorten the number of months it will take to pay off the loan.
Create an emergency fund
As previously mentioned, life has a tendency to throw curveballs in your way when you least expect it — a hospital emergency, an instalment on student loans, or any financial obstacle you weren’t anticipating. By creating an emergency fund, you will be better equipped to face unfavorable future events, especially when there is no room anymore in your budget.
Ideally, an emergency fund should equate the amount you spend on your necessities over the period of 3–6 months. So, let’s say you spend around 600 JOD/month on rent, food, and transportation. You will need to save 1,800–3,600 JOD.
The number may seem overwhelming at first, but the trick is to divide it into small goals. Let’s use the 50/50 approach. Assume that after cutting down on your expenses, you were left with 250 JOD. 250 x 50%= 125 JOD. You’re free to do whatever your heart desires with the first 125 JOD — save it, spend it, invest it, it’s up to you. But let’s look at the second half. Taking the former example into consideration, the 50/50 approach left you with 125 JOD after you paid extra money in debt instalment.
If you steadily save this amount every month, then in around 14 months, you will have successfully created an emergency fund that’s guaranteed to bail you out of any financial obstacle you’ll face. And, if you’re the type of person who spends faster than you save, then here’s an option that’s guaranteed to pique your interest.
Consider standing orders
A standing order is an automated payment method. Let’s say you need to pay your rent on the last day of every month; using our mobile banking app, you can automate an X transfer from your bank account to your landlord’s on the last day of every month. It’s both a free and easy way to ensure you pay your expenses on time, whether that be rent, debt, or any other. But it can also be used to help you save!
If you tend to spend the money left in your bank account, then you can create a standing order and transfer any amount left in your current account to your savings account. That way, you’ll ensure paying your debts and saving money all while staying on budget.
It’s easy to live a financially healthy life once you know the right ways to manage your money. So, if you’ve had enough of this endless loop of living paycheck to paycheck, then now is the best time to break the chain and adapt better financial habits!
