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How to save money while living paycheck to paycheck?

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Last Updated on July 9, 2020 by Early retired mom

Did you know that an astonishing 78% of American workers live paycheck to paycheck? This is based on CareerBuilder survey.

The survey also discovers other important facts like:

  • Nearly 3 in 4 workers are in debt today
  • half don’t see their situation ever-changing
  • More than 1 in 4 workers put any money for saving each month

If you are one of them, here are a few baby steps to save money while living paycheck to paycheck.

Now, I know what you think, how can I save if I do not have any money left at the end of the month? Where is that money going to come from?

This process is not too overwhelming or complicated, but it does require you to want it. Even if that seems farfetched right now.

Because it is possible.

So here it is:

1. Diagnose your spending

Are you keeping a closed look on your finances, or do you spend like there’s no tomorrow?

I was able to cut my spending last month, in a few areas, just because I started tracking my finances in a budget.

So, first you need to know where your money is going. What is it being spent on.

For me personally, after looking at 2019 spending amounts, I was shocked to see how much I could have saved, if only I have started this journey a year earlier.

But no point looking back. We are in a new year. A new decade actually. And it’s better late than never, right?

I track my expenses in an Excel spreadsheet, as well as, a local app. It is really easy, and you can even start right now!

Just download one of the recommended mobile apps in your country and start tracking.

Then analyze what you see after a month. Where did you spend the most?

And how much of that cost can you trim?

2. Cut spending where you can

It is not as hard as it sounds.

Once you have a full month view of tracked spending. You can clearly see where you start and squeeze those spending amounts for next month:

  1. Eliminate overspending – once I saw how much I spent on insurance, I called my insurance broker and was able to drop my monthly charges by over a 1/3. Same goes for mobile phone, internet, TV/cable charges and anything that you pay month by month. See if you can reduce that cost.
  2. Cut your grocery bill by eating at home and using more basic food products. See how I was able to cut my grocery bill in half (link to article).
  3. Walk / bike instead of taking the car – you can reduce your car insurance and other bills if it makes sense to walk and bike more.

Those are just a few examples.

I advise you to go through each category of your spending and find creative ways to reduce your spending. If you are using an app to figure out your spending, you can even start today instead of waiting a full month.

As a personal example, after I saw my first month’s spending, just by becoming aware, tracking my expenses and eliminating unnecessary spending, I spent $1,000 less than I did the month before.

Can you imagine that?

Just by revisiting some of my monthly bills and being more conscious whenever I reach with my hand to my wallet. This is the perfect example, of how you can save money while living paycheck to paycheck.

3. Can I earn more money?

This is a question, every person, wanting to reach financial independence and early retirement, should ask himself.

There are plenty of opportunities today to create an additional source of income other than your day job.

A person that lives paycheck to paycheck and need to start saving money, sometimes from scratch, needs to think of other ways to create additional revenue. Not to be able to spend more, but rather to pay off his debt and add additional money to his savings.

In today’s world, you can work from the comfort of your home, in flexible hours that will allow you to still keep your day job.

This can be video editing gigs, website design, copy writing, language proofing, or even dog walking. It can even be selling what you do not use anymore. From your kids toys to items from your wardrobe and more.

There are endless possibilities – just pick an area you are good at and start.

4. Save in baby steps

Don’t think right now about setting aside 10-25% of your income into a saving account.

If you do not have the money to do so, it doesn’t mean that you cannot save.

Not saving, will hurt you tremendously in the long run.

Learning how to save money while living paycheck to paycheck will reward you significantly and will increase your quality of life.

So, start small.

Take the small coins you have in your pocket / wallet by the end of each day and put in into a saving box.

At the end of the month, deposit that money into a separate account and repeat.

This time maybe set aside 1% of your income. You can do it automatically today and then just use the money you have left.

And again, the month after, maybe this time 3% of your income will go into savings.

Use that money to:

  1. Creating an emergency fund of 6-9 months of salary to cover unexpected expenses
  2. Paying your debt
  3. Save money.

The saving muscle will start working and your spending will be adjusted to the new level of income, after deducting the money you set aside.

Make saving part of each paycheck a priority.

5. Revisit this process

I’ll be honest with you, you will not stop living paycheck to paycheck immediately. This process takes time and may seem daunting at times.

But this is the only way out if the loop.

Each month, revisit your budget and decide where you want to cut cost and how much will you save this month.

Make it a habit.

Have another tip? or a question? Feel free to share

Early retired mom


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