How to live on a budget?

Many people think that living paycheck to paycheck is okay. Thus, "I need to save money for clothes" or "I can't buy this until I get paid" is natural for them. However, do you have to work hard for a month just to pay rent and buy food?

Unfortunately, most Americans live paycheck to paycheck. What's more, research has shown that about 50 percent of Americans have saved less than $ 1,000 to cover an emergency. It is also worth considering that this information was obtained before the coronavirus led to layoffs.

While many people prefer to live like that, you shouldn't behave the same way. By making the decision to end your paycheck to paycheck life, you can free yourself from debt and gain self-confidence. Learn the basic tips for living the life you want.

1. Make a budget

As a rule, most people are confronted with the thought "I do not understand what I spent all my salary on" and do not understand how to solve this problem. However, to deal with this situation is quite simple - start making a budget, because it will help you understand where your money is going. Why do you need a budget?

If you do not plan your purchases and expenses, then you do not even know what you are going to face. Thus, you often spend money that you were not going to give for this or that thing. Of course, this is because you don't have a plan. Thus, having a budget ensures that you have money to live on and more.

Of course, it is important to draw up a budget correctly so that it works for you and you do not receive additional debts. So your monthly income minus expenses should be zero to keep you from going into debt. Thus, it is important that all the money you receive has a purpose. So, it is important to decide what you will spend this or that amount on in advance.

  • So, the first thing you need to do is to write down all of your earnings for the month. This includes any money - your salary, possibly pension or disability payments, part-time jobs, passive income, and so on. Thus, you must know the specific amount you have. Also now there are many ways to write down your income and expenses. For example, you can buy a notebook, use a spreadsheet on your computer or an app on your phone. Choose what is convenient for you. So, after you figured out the income, you should make a list of all expenses for the month. First of all, include the most important things like food, rent, utility bills, phone bills, internet bills, and so on. Also remember that costs can change, so a new budget needs to be drawn up before each month.
  • After you have taken into account the most important expenses, you need to do the following. Take any amount that is not very large for you (sometimes 50 or 100 dollars is enough, but you can take more if the situation allows) and forget about this money. They cannot be spent on any of your needs. Thus, every month you will save an amount that will later become your savings.
  • Also, after you have set aside money (savings), it will be good to save at least 50 more dollars that you will not use. A little later it will be explained why.
  • Next, you can look at the remaining amount and plan for smaller expenses such as clothes, gas, gym membership, and whatever else you need. Remember that you need to plan your spending in such a way that in the end you come to zero and you do not have to go to the bank for a loan.
  • After you finish planning your budget, review it again. It's important to double-check your plan in case you forgot a particular waste. However, if suddenly this happened, and you forgot that this month you need something else, you can use those 50 dollars that you have set aside recently. It is they who should go to the needs that you could forget about. If you have taken everything into account, these 50 dollars are not spent on unnecessary things, but are added to savings. The more you can save, the better.

2. Living on a budget. First - important, then - everything else

Since many people often cannot even pay their bills because the paycheck money has already gone to something else, it is important to focus on the most important things from the beginning. Thus, prioritize. Further information will help you do this.

So, there are things a person cannot live without. Typically, food, bills, housing, and transportation are the main ones. Thus, if you do not want to be left without water and light, you better take care of these things from the very beginning.

So, first of all, understand how much money you are spending on these things and minus it from your paycheck. Forget this money, you cannot spend it on anything else, because nothing is more important.

Only after the most essential things have been covered, you will be able to distribute the rest of the money. It is important to do this in order of importance. Thus, having made a list, mark the most important in red and distribute in descending order. If your budget is exhausted, then you cannot afford the rest of the items on the list this month. It may be difficult at first, but then you will not only get used to it but also become more frugal, which will help you have more free money. So, following this plan, you will always have enough money to pay bills and rent and your family will have something to eat.

It is also important to remember that if you did not have enough money for something this month, then these are just temporary difficulties that you will remember with laughter later. Now it is important to be prudent about your situation and spend money according to your needs.

3. Take debt out of your life

Oftentimes, debt is what keeps most people from moving towards freedom and financial independence. People who often borrow money are no different from those who live paycheck to paycheck. Perhaps they can afford a little more, but in fact, they do the same thing - they live from debt to debt, borrow from one person in order to return to another.

First, it's important to understand that debt isn't just money you've borrowed from a colleague, friend, or family member. Debt is any amount you owe. So if you take out a payday loan, make car payments, use store credit cards, have a business loan, and so on, it still counts as debt. Debt is when you use other people's money to cover your own needs.

So how do you stop living in debt?

The most important thing is to stop taking on new debts. Do anything, limit yourself, be patient with buying what you want, but don't run into new debt. Stop paying for things with a credit card or taking out all the new payday loans to keep you alive. Also stop borrowing money from one friend to give to another. Forget it, it’s generally possible.

Debt is a trap that will keep you from getting better financially. Instead of taking on debt, focus on how to cut costs and deal with old ones. Include debts in your budget and give back a little each month. If you start paying off debts instead of taking on new ones, you will soon sort out your difficult financial situation.

After you get out of debt, you will notice that you have already learned how to save and be thrifty. Thus, you will have more money.

4. Find a part-time job

It is sometimes very difficult to deal with expenses and debt when you are paid a small salary. So one more job, even a temporary one, might be a good option for you. Often people come up with a large number of excuses in order not to look for it, but if you are determined to improve your life, you need to work harder in order to quickly cope with what is happening now.

So, find a job that doesn't take a lot of your time. If you have a car, you can become a driver and work in the evening or on weekends. You can also work in a call center, be a waiter, barista, and so on. Also now, due to the coronavirus, there are a large number of job offers from home. Thus, you can receive additional income by working at any time of the day.

You can always ask friends and family if they can provide you with a job or introduce you to someone who needs an employee. Thus, social connections are a handy tool when you need something.

Moreover, pay attention to what you know, or what you did before. Perhaps you have some talent. Maybe you are good at painting, writing articles, baking cakes or anything else. Any of your skills can be sold, so you can earn additional money and get out of debt faster.

5. Sell things

Another good way to make money quickly is to sell things you no longer need. A lot of people just love to accumulate junk or things that they don't use and that they are sorry to sell. However, think about which is better - to gain financial independence or continue to live with a bunch of unnecessary things and a lot of debt? Thus, if you have an old car or bike that you are not using, sell without hesitation. In the end, after you deal with the debt and your financial situation is stable, you can buy it again if necessary.

Also, pay attention to jewelry and other valuables that you need and you just store them in order to put on one wonderful evening. Remember that the opportunity may not be presented, and you need the money now. It is important to prioritize what is important at the moment.

Moreover, if you have any clothes that are in good condition and you are not using them, you can also sell and get some cash. Find your old phones, computer or laptop - many people buy these to use parts. So, pay attention to anything you don't need and get rid of it. More free space and more money - isn't that a great solution?

However, don't get carried away too much. Don't sell things to your detriment just because you want to cover costs. Don't make your garage sale a disaster.

6. Cut costs

Perhaps you are used to a kind of beautiful life: occasionally dining at restaurants with friends, making rash purchases, ordering other meals at home, and so on. So, today is the day when it is necessary to give up everything except the necessary. It is especially important to cut down on any unnecessary spending in order to get your financial situation better.

If you think you've already cut your budget as much as possible, consider the following things:

  • Internet and cellular providers. Surely you can use a cheaper tariff and cut your costs. So, be sure to do it.
  • Check your subscriptions. Perhaps you pay for Apple Music, Netflix, Disney and so on. It is also possible that you get your favorite magazine every month or order expensive cosmetics. Forget about it, at least for a while.
  • Avoid going to massage, spa, and so on. You may not notice this, but often the beauty industry takes up a lot of money.

Of course, it’s unpleasant to deny yourself the excesses that you’re used to and that make your life comfortable. However, now it is important to understand that this is a temporary and forced step that will help you achieve financial stability. Once you sort out your debt and learn how to manage your budget, everything can return to its place.

7. Live within your means

As already mentioned, it is important not to go beyond your budget in order to achieve financial stability. Unfortunately, however, many people live in a different way.

Even though they don't earn enough to go to restaurants, buy branded clothes and so on, they still keep doing it and incurring debt. Why are they doing this? Often people try to correspond to the society where they are, try to seem better than they are. However, this is a direct path to huge debts, which will be very difficult to deal with in the future. If you take on all the new debts and do not pay off the old ones, then very soon you will no longer know how to make ends meet.

Therefore, it is very important to only buy what you can afford. Think objectively: if you can't buy something, it's a reason to make money on that thing, a reason to try harder to get a raise, but not a new opportunity to get into new debt.

8. Plan big purchases

Another enemy that affects the financial stability of most people is impulse buying. Surely you have come across situations when you saw a wonderful TV or something in a store that you have wanted for a long time, and bought it acting on emotions.

If this happens to you, then it is important to tell yourself "this is just a temptation that will lead me to financial problems." Do not deviate from a thoughtful plan that will help you get on your feet and free out of debt for the sake of one thing that may wait for a better opportunity.

So, when you see something you really want, just add it to your budget list. Let's say you are interested in a $ 200 item. Knowing your income and budget, you can save a certain amount every month to buy what you wanted. By sticking to the plan, you will get what you want without debt and loans.

9. Have money for an emergency

We have already talked about this in the budget paragraph. Each month you must set aside an amount, preferably about $ 100, in order to save it in case of an emergency. It is advisable to have about $ 1000 in order to cover your expenses when you have no money at all.

Of course, $ 1000 sounds like a lot to most people, especially for those who are used to living paycheck to paycheck, but it’s not. If, when you receive money, you immediately put that money aside and forget about it, it does not feel that much. Thus, in less than a year, you can already save $ 1000 and have an emergency fund you need to cope with the possible difficulties in the future.

Having money for an emergency will give you a sense of peace. Thus, if one day you have to pay for example speeding fine, you will not need to run in a panic and ask loved ones to lend you money. You will always know that you have a cash airbag that will help you cope with any situation.

10. Dream and plan

Most people are so busy living paycheck to paycheck that they completely forget about the existence of both the present and the future. Every time you want to give up, buy something unnecessary or get into another debt, think "what can I spend money on when I achieve financial stability and independence?" Perhaps you have always dreamed of going on vacation to Europe, buying something unforgettable for your child, changing your car, or so on. Your dreams can be anything - however, they should motivate you to stick to the plan. Thus, very quickly you can not only learn to live frugally but also plan for the future. A budget will help you move forward, travel, save money for important purchases, and live in a comfort.