How to Save Money On a Tight Budget
You’ll need to pare down your spending if you want to stop living paycheque to paycheque. For starters, create a shoestring budget – one that accounts for your essentials first, like rent, groceries, utilities, transport, and childcare. Then add expenses dedicated to repaying your debts.
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Pay attention to the difference between your needs versus your wants. Your needs include the fixed costs while whatever is leftover can be used for wants, like shopping, entertainment, and dining out.
You might be far off the 50/30/20 rule, which calls for spending 50 percent on needs, 30 percent on wants, and 20 percent on savings and debts. But there’s no harm in striving to balance your needs, wants, and savings and debt better.
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Live Below Your Means and Save
When you’re feeling the financial squeeze of living paycheque to paycheque, to free up your income, you must scale back on some costs. That could mean decisions like:
- Lowering your household costs by finding a roommate or moving to a less expensive neighbourhood
- Decreasing your transportation costs by taking public transportation and getting rid of your car
- Cutting recurring bills, such as cancelling some subscriptions or choosing cheaper phone and internet plans
- Saving on eating out by meal prepping, cooking at home, and making coffee to go in the mornings
These tips might sound like overused clichés. But you’d be surprised at how much cash you’ll free up by making only a few of these swaps.
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Build an Emergency Fund – Even On a Tight Income
Resolve the anxiety that comes with living paycheque to paycheque by learning how to create a financial cushion via an emergency savings account. Start with the goal of $500 to $1,000, putting away small amounts depending on what’s feasible for your budget.
Automate these savings so the cash is transferred over to an account each payday. As little as $20 a month will amount to $240 by the end of the year – that’s enough to cover a small emergency so you can start to break free from relying on your paycheque to make ends meet.
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Increase Your Income With Side Hustles
Build on your momentum from cutting costs by growing your income with a side hustle. There are numerous options available to you, depending on your interests, skills and schedule. Some people tutor, drive for a service like Uber or Lyft, or freelance in their line of professional work, like graphic design or accounting. Others sell gently used items on Facebook Marketplace, Craigslist, or apps like Poshmark.
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Manage Your Debts Strategically
Sometimes it may seem like you’re taking one step forward, then two steps back with your debt repayment journey. If this is the case, you need to regroup and think strategically about how you’re tackling your debts.
Make sure you’re making the minimum payment on your debts, but beyond that, you should be intentionally choosing where the rest of your repayment is going each month. Some people opt for the avalanche approach, clearing their highest interest debts first, or the snowball approach, tackling their smallest debts first. The pattern here is they’re giving it all they’ve got extra to a single account at a time, wiping out the debt, and then moving on to their next target, while still maintaining minimum payments on all accounts.
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Avoid Lifestyle Inflation
As you implement the steps above, avoid increasing your living costs as your income rises so you’re continuing to live below your means and save. Consumers tend to fall into lifestyle inflation, spending more as they earn more or when they take home bonuses and other windfalls. Instead, apply these extra bits of income towards paying off debt or building up savings for goals like travel, birthday presents, or big-ticket items.
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Stop Living Pay Cheque to Pay Cheque – Professional Support to Make It Easier
The steps to break the cycle of living paycheque to paycheque aren’t light work by any means – whether you’re creating a budget or choosing a debt repayment strategy, you may feel overwhelmed by the decisions you need to make about your personal finances. This is where we come in – if you need a hand, contact us. We are experts at helping you come up with a realistic plan to regain your financial stability. The fear of being one pay cheque away from not making ends meet is no way to live. Whether you need budgeting help, a strategy to deal with your debt, or tips to make it easier, if you’ve got debt; we’ve got you.
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