Living paycheck to paycheck is so frustrating. There is increased stress when you don’t know if you can cover all of your bills. If an emergency comes up, you can just feel your stomach drop. Can you actually afford to do this thing that has to be done? Why is it so hard to master money management?
I know that feeling all too well like when you are ready to make a purchase, and you aren’t quite sure if you have enough money to cover it. You hold your breath as your card is processing…..phew! It worked! You live to fight another day!
You just ignore your money until you get close to being really low in your bank account, then you go on a spending freeze until the next paycheck. There is a constant feeling of being “okay,” to then being panicked about having enough to make it to the end of the month.
I used to live like this during my internship year after vet school. I was working too many hours during the week to pay attention to money which left my husband to be in charge of our finances. His style of management was exactly what I just described.
In his mind, there was a certain amount of money that we had to have in our account at all times. If we dipped below that amount, he was in a panic and we were on a spending freeze. It made me feel like we might lose everything at any second.
But, when we weren’t on a spending freeze, we would eat out, go shopping and do whatever we wanted. When we had money (ie. the first 10-14 days of the month), life was good. But, the second our bank account dropped below that cut off my husband had in his mind, we were in conservation mode…like living with the lights off to lower our electric bill conservation mode. It was serious.
We were broke. We ran out of money every month because we didn’t pay attention to what we were doing. We couldn’t even afford our rent. We had a family member essentially supporting us for an entire year. Instead of taking advantage of it and saving money, we took that as having that much more money to spend elsewhere. So dumb.
We didn’t have time for a lot of activities so we used going out to eat and shopping as our entertainment. We found joy in acquiring more things. All of our joy came from spending money. The money we definitely didn’t have.
It’s a weird pattern that I figured out about us. The less money we made, the more we spent. Are you doing this in your own life? I didn’t even realize it until looking back. The same goes for some of the veterinary technicians and assistants I work with. I notice that they will go out to eat every day and I pack lunch.
They don’t make very much money, yet they spend it eating out because it is fun and entertaining. I have a salary now, and I pack my lunch every day to save money. It is a pattern I see over and over, and I have lived it myself.
I spent more money when I didn’t have it because I was unhappy and was trying to find joy somewhere. Now that I have more money, I don’t need to spend it because I am happy with what I have.
If you want to go from broke to wealthy, there are steps you can take to get there. If you want to stop living in the paycheck to paycheck cycle, you can get there. Being broke is not a good reason to just throw in the towel altogether, which is what my husband and I did.
During that internship year when we had more month than money, we gave up on being successful with our finances. We didn’t budget, we barely monitored our bank account, we spent money we didn’t have and we were unapologetic about it.
We gave up financially because we felt so bad about our situation. We weren’t willing to change anything to make it better. We lived like this for a year and a half before we made any changes to how we managed our money.
Instead, you should be driven to get out of the paycheck to paycheck cycle and start making financial progress.
Money Management Tip #1: Assess Your Current Situation
There has to be a beginning to your financial journey. Stopping and taking an assessment of where you are right now is step one. If you don’t know where you are, you won’t know how to improve for the future.
If you are living paycheck to paycheck, there is something (and probably more than one something) that needs to be improved. The best way to really see your financial situation is to figure out your net worth.
Debt
This means you will take a sheet of paper and write down all of your debts. Just list them out. Owing money on anything to anyone constitutes as debt. If you borrowed money from a family member, write it down. If you financed furniture for your sick new house (that you can’t afford), write it down. If you have massive student loans that are crippling your future, write them down.
One debt you don’t have to include in this number is your mortgage. This will be a totally separate entity.
After you have written down all of your debts, add them up.
Assets
On the second piece of paper, write down all of your assets. An asset is anything of value that you own 100%. This includes vehicles (get the approximate value from Kelly Blue Book), a home (use Zillow for approximate market value), any jewelry that has been appraised and any other recreational vehicles.
All of the other “stuff” in your life can be worth a blanket $3,000-$5,000 depending on how much stuff you actually have.
After you have written down all of your assets, add them up.
Ready for the moment of truth?
Take your Assets minus your Debt and this equals your Net Worth.
Once you have this number, just know this is only your beginning. If you have zero net worth or even a negative net worth, you can change it.
When I first did this in 2015, I had a negative net worth of over half a million dollars! That’s insane!! No matter where you are, this is just the beginning and things are going to change from here.
Money Management Tip #2: Say No to Debt.
If you are absolutely serious about turning around your financial situation, you have to stop making it worse. If you have debt, you have to stop taking on more debt.
If you are struggling living paycheck to paycheck, you can not make your life better by taking on an insane car payment because you “need” a reliable car. It just doesn’t work that way.
If you want to change your future, you have to decide to not take on any more debt, ever. There are no excuses for this. You do not borrow money for any reason. You will not put yourself further into the hole.
There is no way around this, you can not take on more debt. You have to decide from this day moving forward you are only making positive changes concerning your money. You are only beginning to build wealth, get out of debt and change your future for the better.
No more debt. Ever. There will nothing so important that you have to borrow money for it. Instead, you will save up for whatever purchases you need to make, and you will have an emergency fund to take care of those surprise expenses.
Money Management Tip #3: Set up a Budget.
This may be the single most important thing you do to change your financial future. Your budget is the financial road map that you will follow to be successful with your money.
Do you want to stop living paycheck to paycheck? You need a budget!
People get all freaked out when they hear the word budget because they suddenly feel like they’re in a straight jacket. What’s insane is, it really is the exact opposite that happens.
When you know how much money you have in your account for the month, you have a plan for all of those dollars, and then you follow the plan………you have zero stress!
There is no question where your money has gone. You won’t reach the end of the month sweating bullets as you swipe your debit card for food, praying it gets approved. You won’t have to deal with any of that.
If you write down a plan and follow the plan, you will have security knowing exactly what your money is doing. And, if you screw up, it’s only your fault. You have no one else to get mad at. Nobody else is trying to control you.
Feelings of constriction happen when you make yourself start to change your lifestyle and spending habits. The budget doesn’t do that to you, your own choices do that. But here’s the amazing thing, when it’s YOUR choice to cut expenses and live below your means, instead of feeling constricted, you are going to feel empowered.
You have made the choice to live this way. No one else said you had to. You have decided you want a better future and you are going to make sacrifices.
That’s freaking empowering! You are going to feel like you can conquer the world. In no way does that feel restricting.
Let’s look at this a little differently. Say you are going on a diet where you count calories and you get 1,400 calories per day. The nutritionist tells you, a calorie is a calorie, you just can’t go over 1,400.
When you first start this diet, you may be using up your calories with Oreos and Reeses Peanut Butter Cups (I know I would). You feel good because you aren’t deprived which keeps you motivated to continue with the diet. You start to lose a little bit of weight, but you feel a bit tired and the snack food isn’t super filling.
You decide to change your food to healthier foods that are lower in calories and more filling to be able to eat more and still be within your calorie total.
Once you start doing this you are feeling fantastic and even more driven to stick with the diet. You have made healthy choices, you get to eat more and you don’t feel like you are sacrificing because YOU have chosen the foods you want to eat.
See how that works?
Budgeting is the exact same thing! You can budget for all entertainment, clothes, and cosmetics and stay within budget and feel great. But, once you start taking control of your money, and not feeling deprived, you will want to change your lifestyle to squeeze even more money out of your budget.
It will be a natural progression. I don’t care if you spend the first three months of budgeting, doing it so you can spend more on clothes. Just learn to budget and figure out how it works.
Eventually, you are going to want more money to accomplish your goals, and when that happens you will start to cut expenses somewhere.
My guess is clothing will be one of those areas you cut. But, instead of feeling bitter about it, it will be your choice and you will feel amazing and encouraged by the sacrifice you are making.
Experts say budgeting is 80% behavior and 20% math. I completely agree with this. Your behavior is running the show. You just need to start and then that behavior is going to take over and guide you to be more successful with your money. Things will be better than you ever could have imagined them.
