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Living paycheck to paycheck is a struggle. Not to mention, over time, it can take a mental and physical toll. Without the ability to put much toward savings, you may be left feeling like you can't get ahead and everything you do is just to stay afloat. Once you're in the cycle, it can also feel hard to get out of it.
However, it is possible to break the cycle and move toward greater financial independence. If you're wondering how to save money when you live paycheck to paycheck, the key is having a plan and following through.
While this certainly isn't a new issue, the COVID-19 pandemic has left many struggling and trying to get back on their feet. Now, more than half of Americans live paycheck to paycheck.
Not being able to save money means you might not be able to cover costs related to an unexpected health emergency or be able to weather unemployment for more than a few weeks. But just because you're living paycheck to paycheck now doesn't mean you have to stay stuck. You can help to get yourself on the path toward saving more with these six strategies.
1. Create a Budget to See Where You Stand
It's hard to know where you stand financially if you don't know what you're making and spending each month. Creating a budget can help you get a complete picture of your finances, making it easier to see where you might be able to cut expenses and squeeze more into your savings.
Start by creating a spreadsheet. Google Sheets is free to use, or if you prefer to use an app, there are several good free options available. From there, look at your expenses and list them in the order of priority. Pay your living expenses first and make sure you're covering at least the minimum on debt payments. Then look at your discretionary spending — which includes going out to eat and clothes — and see what you might be able to cut.
2. Automate Your Bills & Savings
The next step is to look at automating your bills and your savings. Most companies let automate payments, such as for credit cards or student loans. This will help to simplify your finances so you stay on track, and help you ensure that your bills are paid on time and that you avoid late fees. Even with a tight budget, doing so can make a difference.
You can also try automating your savings as well. Many banks will let you open multiple savings accounts. You can designate one as your emergency fund and schedule money to move into it monthly. It doesn't have to be a huge amount. A few bucks a month can add up and give you some cushion. As you grow your savings, add funds to pay off debts and save for retirement.
3. Negotiate Your Bills
If a chunk of your paycheck always goes toward paying down debt from credit cards or other loans, you can try approaching those companies to negotiate better rates. Gather some information, such as your lender's name, the amount you owe, the interest rate and the minimum payment. Then contact the lender to see if you can potentially get better terms. If you feel nervous, you can write yourself a script and keep it handy.
In the same vein, you can also call your cable and internet provider, car insurance company and phone company and do the same. It never hurts to give your providers a call and see if you can reduce your monthly bill. If they won't budge, consider other options or competitors. Switching providers might save you each month, which you can then apply to your savings.
4. Look for Help
There are many social support programs designed to help people living paycheck to paycheck. While the country is still coming out of the pandemic, many companies are offering assistance, ranging from moratoriums on late fees to free online resources.
If you feel like you're falling behind, check your state or local government websites to see what help you can access right away. If you've got a lot of debt, consider exploring a debt management plan to help you get your finances on track over time.
If you're struggling with student loans, you may be able to refinance or apply for deferment or forbearance, which can delay your payments for a period. Or, you could try to renegotiate your payment plan with income-based repayment options, which can potentially reduce your monthly payment. Just keep in mind that in some of these scenarios, interest will still accrue, so you likely want to weigh the pros and cons for your situation before making a decision.
5. Add to Your Income
When you have a set income, there are only so many costs you can cut. However, there's another option that can help you save — bringing in more money. You may want to consider taking on more hours at your current job or negotiating for a raise. You can even explore new employment options that make more money.
You might also want to look at taking on a second job. Working a few extra hours a week could have a significant impact on your income and savings. There are plenty of options for side jobs both online and in-person in today's gig economy to help you boost your income each month.
6. Stay Focused on the Long-Term
Learning how to save money when you live paycheck to paycheck can be a process. It takes time and effort. Give yourself some grace and keep your eyes on the long-term prize.
As you develop a plan, watch your budget and stay focused — seeing yourself make progress toward building up savings can be incredibly encouraging and motivating. It's not always quick and easy, and there will be ups and downs, but sticking to your plan and seeing your savings add up over time can make a real difference to your financial health.
If you think you could use a guiding hand in creating a plan to move past living paycheck to paycheck, you may want to consult with a financial representative. These knowledgeable professionals can provide individualized insight and help you chart your progress toward personal goals.