Paycheck-to-paycheck living means you exhaust all your income before the end of the month, and wait for your next paycheck before you can even think of paying for the essential requirements of life, such as rent, electricity, food etc. It is a very scary and dangerous situation to be in. You can’t survive even a few days without the regular paycheck coming in. And if an accident or a calamity strikes, then it is a perilous situation to be in. A few days of sickness and absence from the job, can push one into an abyss of debts.

This means leading a stressful life and being fearful of any disaster striking your life, for which you are not prepared. Such a scenario, in fact, is not very uncommon or rare. In fact, about almost three-fourth of population spend their life like this. Spending your working life like this means living in misery. You can’t take your family out for a vacation whenever you wish to, you can’t buy a good house, or you are stuck with your old car year after year.

However, you don’t have to feel gloomy. There is absolutely no reason to continue to be stuck in such situation. The fact that a large proportion of the population lives like this doesn’t mean it is due to less salary. Rather it simply means that whatever be the salary, at the core of the matter it is basically a financial planning issue. Therefore, this situation can be rectified and such disastrous way of living can be avoided or at least improved. It is possible to break this vicious cycle and freeing oneself from the worry of not having enough money in the bank at the end of the month.

Moving away from living paycheck to paycheck will give you lot of peace and make you sleep better at night. It will also bring you closer to your dream of financial freedom that you have always aspired for. Here we give you 10 Tips to get rid of the Paycheck-to-paycheck Cycle.

#1. Check your Balances and Flow of Funds:

Start doing your homework. Go to last month’s expenses. Jot down all the expenses and classify them into two headings; Essential or non-discretionary, and discretionary. Under the first head, put all the expenses that have to be met, like rent, electricity, food expenses etc. Anything that doesn’t belong to this list can be put on the other. Look ar your bank statements, find out your cash balances and how many checks you have drawn that are waiting to be paid.

#2. Make a list of your Creditors and the amounts to be paid every month:

Make several copies of this list and keep this handy at places where you can glance up and see it anytime every day. This will be a constant reminder of your monthly financial commitments. This will help rein in your spending and impulse buying, and motivate you to get out of debt.

#3. Start making a monthly Budget:

Start working on your expected monthly salary for the coming month and expenses. This will help you create your Monthly Budget. It might be a good idea to deduct 10-15% of your monthly salary, and then work out your expenses on this. Are you able to fit in your expenses? If yes, then the path ahead is easy for you. In case you are not able to do this even with full salary received, you need to exercise a lot of financial discipline.

#4. Make a separate Emergency Fund:

Your salary is your own hard-earned money, and you should reward yourself first, and not be content with what is left. In case you were able to make your monthly budget after excluding 10-15% of the salary you receive, then put that amount in this Fund. The best way to achieve this is to open a separate Recurring Deposit account and ensure that this money is deposited every month. You can start with small amounts initially. When it matures, put the money aside in a Fixed Deposit account, and open another recurring deposit account.

Is Emergency Fund a Want or a Necessity?

#5. Stop using your Credit Card:

using your Credit card, except for emergencies or buying air tickets.

using your Credit card, except for emergencies or buying air tickets.

Credit cards only fuel spending; it spurs you to indulge in Impulse Buying. Banishing the Credit Card from your wallet will stop you from buying something which you spot in a shopping mall, or during a sale. Often, we buy not as per our needs, but according to the discounts offered. Stop using your Credit card, except for emergencies or buying air tickets. Any unpaid amount in your monthly credit card bill carries a very high rate of interest, which you can save. Start paying in Cash or by Debit card. This is a surefire way to cut down on reckless spending. It will also make you see the expenses in proper perspective.

#6. Find ways to reduce your spending:

Your lifestyle may be a big drain to your resources, but you can manage this. Indulging in luxuries and pastimes may let you enjoy your present, but they also deny you the benefits of a sound financial future. Cutting down on small expenses like going to restaurants, bar, movies and frequent get-together with friends, can add up to huge savings. Learn to say “No” to your colleagues and friends. You can stop the gym membership and instead walk, run or jog and exercise at home. Avoid using car, walk as much as possible and use public transport whenever possible.

#7. Instead of Upgrading, consider Downsizing:

There is only a limit up to which you can cut your expenditure. But some fixed monthly expenses can be so huge that they keep you indebted for the rest of your life. If you are living in an expensive house or paying very high rent, you should move down to a house whose mortgage does not exceed 25% of your salary. Similarly for car, the installment should not be more than 15% your salary. You can also take up less expensive plans for your Mobile, Data and Cable TV connections. These will lower your monthly expenses drastically. It is better to live below your means, than above them.

#8. Find ways for a second income stream:

If cutting down on your expenses is not enough, plan and work towards creating a second income opportunity. A second income can from the rentals of a property or extra space you have, taking a paying guest, investments in capital markets that give you a small but steady annual income. You can also use your hobbies to earn that extra dollars or start moonlighting in a small way. You can take up a part-time job or consultancy. Even if it pays little, the extra income adds up towards your financial security.

#9. Take your Family into confidence:

Cutting down on expenses or downsizing your requirements can work havoc with the family peace, unless it is a shared effort. Confiding to your spouse or family members can not only solve many of these problems, but the co-operation and motivation will make lot of things easy. Having a shared vision works so well and shared goals are easier to achieve.

#10. Persistence pays, so do not give up:

You might face a few setbacks initially. It is tough to do what you had been doing earlier with a smaller outgo. Inculcating a sense of discipline takes time. Do not expect overnight miracles. But with determination and putting off a few temporary indulgences, will give you a good start towards a debt-free goal.

So start right away and get rid of the Paycheck-to-paycheck Cycle haunting you any longer.