When you live paycheck to paycheck, you constantly struggle to have enough money. This never-ending cycle of financial worry is both stressful and exhausting. That’s because, at any moment, a flat tire, speeding ticket, or broken water heater could mean the difference between making or not making rent.
How do I know this? Because I’ve lived this life. During college and shortly after graduating, my bank account reached one or two figures many times. Once, my brother and I needed to make $37 last for two weeks, so we ate peanut butter sandwiches every meal until we got paid.
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If you live paycheck to paycheck, you’re in that situation because your income-to-expense ratio is unbalanced. In other words, you spend too much and don’t make enough.
The solution to this problem is both obvious and simple. You need to spend less and make more. But just because something is simple doesn’t mean it’s easy. So while it’s obvious that you need to spend less and make more, doing either of these things can be difficult.
So in this article, I’ll help you escape the never-ending stressful cycle of living paycheck by sharing four ideas that can help you spend less and four ideas that can help you make more.
Also, be sure to read to the end for a bonus tip.
In many cases, there’s a free alternative to things you’re doing. For example, you could borrow books or movies from the library instead of buying them. Likewise, instead of paying for a theme park or indoor pool, you can get creative and have just as much fun at a local park, lake, or beach.
If a free alternative doesn’t exist, there’s almost certainly a more affordable way to do things. For instance, I used to get my hair cut every three weeks for $35. Annually, that’s about $600.
After some research, I realized I could buy a set of professional clippers for about $200 and teach myself how to cut my hair. I made that decision 15 years ago, which means I’ve saved about $9,000 on haircuts.
Similarly, I built a home gym for about $1000. Before doing so, I was paying $100 per month for a gym membership.
Finally, if there isn’t a more affordable alternative, patience can help you save money if you don’t need something immediately. For example, you might wait for the new GoPro to come out to save on the old model. Or, instead of buying an item at full price, you could wait for a sale like Black Friday or Cyber Monday.
My brother and I started an e-commerce brand selling the type of high-end carbon fiber bicycle wheels you’d see in the Tour de France or an Ironman triathlon. We needed legal advice, but unfortunately, we didn’t have much money.
Thankfully, we were lucky enough to meet an attorney who loved cycling. I think he recognized that we were young and didn’t have a lot of money, so he suggested we swap services. So we gave him free bicycle wheels in exchange for legal services. And those cost savings were very helpful.
Thankfully, you can use the same idea. For example, suppose you’re good with cars, computers, or marketing. In that case, you can offer those services in exchange for something you need.
Not everyone will be open to swapping services, but asking never hurts. Just make sure that what you’re offering has a similar value to what you’re asking for.
A friend of mine with a young family was shopping for a home. Instead of paying double for a home with a big yard and a pool, he moved to a neighborhood with community amenities.
So he lives in a beautiful home with a small yard, but he lives across the street from a park with multiple pools, tennis courts, playgrounds, and a fitness center.
This wise decision cut his home price in half, gave him access to more amenities than he could afford, and saved him from paying to maintain a big yard and a pool.
So think about how you can apply this idea in your life. For example, you could carpool to work. Or, if you need to buy an expensive tool like a table saw, you could ask friends or family if they’d be interested in co-owning the tool.
Many people buy things to impress others when they can’t afford them. For example, I’m always amazed when people drive a $100,000 car or wear a $10,000 watch but have no savings or retirement fund.
I understand the desire to have nice things. I have a lot of nice things. But I didn’t buy those things until I could truly afford them.
While building my e-commerce company, I drove an old pickup truck into the ground. I did that while making enough money to pay for the truck 100 times over.
The point here is simple. There’s a big difference between appearing wealthy and actually being wealthy.
Appearing wealthy is living paycheck to paycheck to afford your car payment. But when you’re actually wealthy, the interest payments from your investments make your car payment for you.
So before you spend your money, take a minute to ask yourself two questions.
First, do I really need this? If not, don’t buy it. And second, am I buying this to impress other people? If so, drop your ego, and make wiser use of your money.
I’m from Canada, but my brother and I spent three summers working in the US during college. The first summer, we made $9,000 in four months. Meaning, we just scraped by. But the second summer, we made $22,000. And the third summer, we made $44,000 in four months.
Our willingness to work more than one job was the main driver behind our increase in income. That third summer, we each worked four jobs. Basically, if we had an opportunity to make money, we took it.
Thankfully, this strategy can also pay off for you, especially with all the new ways to make money. When I was in college, there were no smartphones, and Google had just become a thing. Therefore, all of the jobs I worked were manual labor.
But today, it’s easier to make money than ever before. Of course, you can still make money doing traditional things like babysitting, landscaping, or cleaning cars. But you can also make money with your cellphone or the internet by driving Uber, delivering food, or selling things on Etsy.
So the bottom line here is simple. If you’re struggling to make ends meet, you can increase your income with a second job.
Many people have valuable things that rarely, if ever, get used. For example, if you work from home, consider how many hours your car sits unused every day.
Thankfully, you can rent your things when you aren’t using them.
For example, you can rent your car to other people with Turo. You can rent a spare room in your house using Airbnb. And you can rent camera gear like a GoPro on ShareGrid.
I learned about this idea after talking to a friend who’s using Peerspace to rent his home for photo and video shoots. He makes thousands of dollars each month, which covers his mortgage.
So if you have anything worth renting, consider renting it to make some extra income.
I worked at a hardware store for three years in high school. During that time, I learned a lot about home improvement. So when I worked those summers in the US, I took full advantage of everything I learned.
So I installed flooring, built patios, and trimmed palm trees. More or less anything someone would pay me to do. And because I did good work for a reasonable price, it wasn’t long before people started referring me to their friends.
Thankfully, you can do the same thing. Your goal should be to exploit any talents or skills you have.
For instance, if you’re great at web design or drawing, you can sell those services on sites like Fiverr or Upwork. Likewise, you can teach lessons if you know how to play a musical instrument. Finally, if you’re good at home improvement work like I was, see if you can pick up a few odd jobs.
Before becoming an entrepreneur, I worked as a mechanical engineer.
I worked that job for six years and became a licensed professional engineer. Typically, that accomplishment comes with a significant pay bump. But during those six years, my salary barely changed.
When I met my wife five years later, she was a project manager, making nearly three times what I made at the same age. When I asked her how she managed to get paid so much, she said two things.
First, she asked for it. She knew her value and wasn’t afraid to negotiate when offered a standard 2-3% raise.
Second, she wasn’t afraid to change jobs. Early in her career, she changed jobs several times. Each move came with a 30-40% increase in pay.
Thinking back, I didn’t do either of those things. When my boss gave me the standard 2% raise speech, I said thank you and went back to my desk. And instead of looking for better-paying jobs, I convinced myself I was lucky to have the job I had.
You have to be good at your job for this plan to work. My wife is great at her job, so people pay her accordingly. But I was also good at my job. I just didn’t know how to negotiate a higher salary.
The bottom line here is simple. If you’re underpaid, ask for a raise or find a better-paying job.
One of the quickest ways to get stuck in the never-ending cycle of living paycheck to paycheck is living beyond your means.
Two of the biggest contributors to living beyond your means are your home and car payments. Therefore, limiting what you spend on your home and car is a good idea. Doing so ensures you have enough money to live, save, and invest.
You can avoid this problem by spending less than 28% of your gross income on your home and less than 10% of your take-home income on your car. Remember that your gross income is what you make before taxes, and your take-home income is what you make after taxes.
So, if you make $60,000 per year and pay 35% taxes, you should spend no more than $1,400 per month on your home and $325 per month on your car.
Here’s a summary of this article.
To avoid living paycheck to paycheck:
Reduce financial stress, reach financial freedom, and achieve financial goals like buying a home, paying off debt, and investing for retirement.
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