Living from paycheck to paycheck is never a good thing. For most of the middle class, their financial reality is that they expect to pay the bills, do the bulk of their grocery shopping, and buy their needs and wants right after a paycheck. But is that a good thing? Of course it?s not. However, this is the reality for a majority of people from all over the globe. So how can you change that?
What Exactly Does ?Living On Last Month?s Income? Mean?
When you live on last month?s income, it?s basically like having a month?s worth of money that?s tucked away. For a lot of people, this isn?t a reality. It?s different from your savings or retirement fund and living on last month?s income means that should something happen to you, say you lost your job, you could easily survive for a month without having to get a loan or touch your retirement fund.
Living on last month?s income means that you?re not going to stress on financial responsibilities and actually be able to breathe freely even if a financial disaster strikes.
How to Start
Having a ?one month fund? doesn?t mean that you?re a CEO or a well-known entrepreneur. A lot of regular Janes? and Joes? are actually living the dream of not having to live from paycheck to paycheck. You can start by looking at your monthly spending and finding out where you can cut corners. This is one of the most difficult parts of the process as you have to be completely honest about your spending. This is even more difficult if you?re a parent or someone who has a lot of credit card debt.
If you can, start by eliminating your credit card debt. Easy to say, I know! Next is to stop paying using your credit card. It?s going to be an emotional process and it can even be physically impossible to leave credit cards at home but it?s definitely worth it.
Where to Save (And Splurge)
This might not be considered a ?splurge? per se, but doing off with high interest debts is one of the things you should prioritize. You can always save a few dollars when going to the grocery store or buying food in general. Know which areas you are most likely to splurge and save accordingly.
You can start by looking at your monthly spending and finding out where you can cut corners.
Find A System
For some people, finding the perfect system to save money is not a quick process. Having different envelopes to store an allotted amount of cash is sometimes enough for some folks. But for some people, a further tightening down on the way they spend their money is needed. It really depends on the job you have, your daily cost of living, and your money-spending style.
The Hardest Part
The hardest part about living on last month?s income is the first time you really start to curb your expenses. You can cut down on gas expenses, groceries, and entertainment costs. It?s definitely going to be a lifestyle change but once you get started, it gets easier to stick with. Just like any goals, you have to remind yourself of the long-term pay off.