Whether you earn $50,000 or $150,000, living paycheck to paycheck is extremely frustrating. Here are five signs that you are stuck in the paycheck to paycheck cycle:
* You are waiting for a paycheck to get deposited before you purchase something
* You are juggling bills—and thinking about “which paycheck” you will pay them out of
* You feel like there is no money at the end of the month
* You tend to think of money in two week increments
* Any unexpected large expense has to go on a credit card
Do any of those sound familiar? When people live paycheck to paycheck, they seldom feel in control financially. And they usually experience various levels of chronic financial stress. It’s often as if they are waiting for the other shoe to drop…. There must be a better way!
As a money coach, I teach my clients a lot of skills to escape this cycle. Often, they go from feeling at the mercy of whatever life throws at them (the other shoe??) to being the one in control of their life.
One technique I teach people is to start building a cushion at the end of the month. What I mean is this: we all know that ideally you want your spending to be under your income. But the goal is NOT to end at zero each month in your bank account! What if you ended with a cushion? A cushion is a buffer, a shock absorber, and a shield to protect you. And what if you let this cushion slowly grow to the point where it equaled one of your paychecks, or perhaps your mortgage payment?
Let me give you an example. Let’s assume you start the month with $600 in the bank. Of course this is often where the stress starts. You may not be starting with enough money, from a cash flow perspective. Then your math goes like this: If you bring in $5,000 this month, and you plan on spending $5500 this month ($500 more than your income…) guess what—you’ll only end the month with $100. That’s not much of a shock absorber for the coming month. Yikes!
So as odd as it may sound, sometimes we start with the end in mind, and not the beginning. Where do you want to end the month? Just imagine it. How much money would you prefer to end each month with, so you are not waiting for that first paycheck? Believe it or not, you can decide what this number is, and slowly build towards it. Perhaps you would feel a lot calmer if you started each month with $3,000 as your beginning bank balance. Then you wouldn’t be timing all those paychecks!
By starting with the end in mind, it will help you decide how much you can actually spend in a given month to begin building this cushion. It may take a while. But with a specific goal, you may decide to eat out a little less, or skip that Nordstrom’s trip. Less stress is worth a lot. Each month you end with a little more. But after a few months, you are there.
Here is another tip. Once you are ending with your desired “cushion”, what happens if you end with more than that? Take it out of your checking account and place the difference in savings! That savings becomes what you use for all those “unexpected” expenses, or the expected, like the holidays.
Oh my gosh, did I just say “holidays?”
Go back and enjoy the sunshine.
