When your salary is finally over $ 100,000, all of your paycheck-to-paycheck livelihood worries should be gone, right?
Not necessarily. According to a November 2020 survey by the Center for Budgetary and Political Priorities, 16% of the six-figure workforce said they had difficulties covering basic costs such as groceries, rent or mortgage and car payments.
You live from paycheck to paycheck.
How is that possible? Here’s the thing: it doesn’t matter how much money you make if your expenses outweigh (or are the same as) your income. This is why it is so important to have a solid plan for your budget. Otherwise, you could run out of savings and debts.
No matter how much you make, here’s how to break the paycheck to paycheck cycle.
Make a budget and stick with it
There is no question that the cost of living is rising rapidly – not just in big, growing cities, but across the country.
But slowly rising wages cannot stand it all to blame for our $ 0 balance at the end of the month. Bad budget – and lack of budgeting – hold millions of us back. So if you don’t have a budget or haven’t updated your budget in a while, put one together.
If you don’t know where to start, a simple and straightforward approach is a great way to start reviewing your budget. We like the 50/30/20 method. You assign all of your expenses as follows:
- 50% of your monthly take-home goes towards what you need. This includes rent, groceries, utilities, minimum debt payments, child care, etc.
- 30% goes to your wishes – like your Netflix subscription, dinner with friends and travel expenses.
- 20% is earmarked for financial goals like paying off debts, increasing your savings, and adding to your retirement fund.
If you’re living from paycheck to paycheck, the last 20% likely isn’t getting the attention it needs from your bank account. And while the “wants” can easily get out of hand, your “needs” can be the biggest culprit.
How can you fix that? Here are some secrets to help you regain control of your expenses and put more money into your savings:
Cut costs and bills where you can
Usually your largest monthly expense is your rent or mortgage payment. And unless you are living the #vanlife or having a cute establishment month to month, the chances of finding a cheaper place to live next month are out of the question.
However, there are some necessary bills that you can cut significantly without sacrificing the services you need.
- Car Insurance: Look for new car insurance every six months and you can save some serious money. Comparing car insurance prices on a website called Insure.com could save you an average of $ 489 per year. All you have to do is enter your zip code and age and it will show you your options.
- Homeowner insuranceHomeowners Insurance can be a huge waste of money if you get the wrong coverage. Fortunately, an insurance company called Assure makes it easy to find out how much you are overpaying. You can find cheaper policies and special discounts in minutes. Plus, users save an average of $ 700 per year.
Eliminate credit card payments
If you have credit card debt that you’re paying the minimum for, you’re probably paying a ton of interest. And why should your credit card company care? They get rich by kidding you on those high interest rates – some up to 36%.
Credit card payments alone could keep you on the paycheck-to-paycheck cycle for years. That said, it’s time to get rid of those payments for good. A website called AmOne wants to help.
If you owe your credit card company $ 50,000 or less, AmOne compares you to a low-interest loan that can be used to pay back every single one of your balances.
The advantage? You have to pay an invoice every month. And because personal loans have lower interest rates (AmOne rates start at 3.49% APR), you will be out of debt The much faster. Plus: No credit card payments this month.
AmOne keeps your information confidential and secure, which is why after 20 years in business it probably still has an A + rating from the Better Business Bureau.
It takes two minutes to see if you qualify for up to $ 50,000 online. You need to give AmOne a real phone number to qualify, but don’t worry – they won’t spam you with phone calls.
Create a separate account for savings
When you’ve cut your monthly costs, make sure to prioritize your savings. Whether that will contribute to your retirement provision, invest in the stock market or set up an emergency fund – you made it! Congratulations on breaking the cycle and cleaning up your spending habits.
Speaking of emergency money, many Americans haven’t even saved $ 400 if their car breaks down or their child ends up in the emergency room.
Where should you start saving up for one? A typical savings account doesn’t bring you much interest.
That’s why we want a free account from Aspiration. The Spend and Save account allows you to earn up to 16 times the national average interest rate on your money and up to 5% cashback when you use Aspiration’s debit card. This will help your emergency fund grow much faster.
Enter your email address here to receive a free Aspiration Spend and Save account. After you’ve verified your email address, securely link your bank account so you can get extra cash. Their money is FDIC insured and they use military grade encryption which is nerd-talk for “this is perfectly safe”.
Follow these secrets and you will be well on your way to breaking the paycheck to paycheck cycle.
Kari Faber works for The Penny Hoarder.