Did you know that out of 158.61 million US workers, 59.3% are living paycheck-to-paycheck? This group entirely relies on their salary to cover their finances and ends up with little to no money for their savings. Add paying a debt to this, and keeping up with repayment becomes almost impossible. Balancing debt while living paycheck to paycheck can weigh heavy on you and your finances, so the smart thing to do is come up with a game plan. Set some guidelines for paying off your debt with a constricting income.
7 Tips To Clear Debt With Paycheck To Paycheck Living
If you are finding it challenging to keep up with your debt repayments living paycheck-to-paycheck, the following tricks should help you out.
- 1. Budget Up
We have said it before, and we’ll repeat it, a budget is a compass you need to steer your finances properly. Apart from recording expenses and assigning income, a well-done budget will help you create a realistic payment plan. Good old Google Sheets are a good starting point, but budgeting tools like YNAB will give you better control of your money.
2. Stop The Comparisons
Human nature dictates we would desire something someone else has. So when friends plan a cruise getaway, you want to be part of the trip. An unplanned trip can dent your finances, especially if you take out a loan to fund your trip. Do not land in debt comparing yourself to others; understand that everyone’s financial situation is unique. Identify what is important to you and start making progress to become debt free.
3. Change Your Money Habits
The small financial choices we make every day add up. The decision to eat out, make your meals at home, shop online, or drive down the grocery store will affect your monthly spending. Analyze your spending and purchases to identify your financial habits. Which of your money habits are hurting your finances? Improve on those areas while focusing more on paying off your debts.
4. Cut Your Expenses
In a world where spending more than what you have is possible thanks to banks and money lenders, it is easy to go off the rails. If you cannot increase your income, the logical step is to minimize your expenses. Look through your monthly statements to see how much you spend and on what? Are there payments you can downsize or subscriptions you can downgrade? Shop around for affordable options for insurance and other payment policies.
5. Increase Your Income
Living paycheck-to-paycheck is a clear sign your income does not cover your living costs; hence you are taking out debt in the first place. You should increase your revenue while keeping your living standards the same. Find creative ways to bring in extra money to clear your debts. It can be taking up a part-time job or translating your skills into a side hustle. If you are a teacher professionally, you can offer tutoring services to students when you are off the clock for extra money.
6. Prep For Big Purchases
Unplanned purchases can throw off your whole month, especially the huge ones. Rather than add an unexpected expense to your credit card, start sinking funds. Make an effort to periodically deposit money to cater for the purchase until you hit the goal. Rather than taking out more debt, save for these purchases over time.
7. Find A Support System
Along your debt-free journey, you will face many temptations to take out more debt. It helps to have a support system to encourage you to keep going and celebrate when you hit your goals. These can be groups of people on the same debt-free path who hold each other accountable to stay on track with your debt repayment plans.
Takeaway
Living paycheck-to-paycheck does not have to be the story of your life. With these guidelines, you can improve your financial standing, stay on top of your debt, and ultimately become debt free. It will take hard work, but all will be worth it in the end!