The concept of living “paycheck to paycheck” entered the popular lexicon in the aftermath of the financial crisis nearly ten years ago. Once people stopped living beyond their means and started paying down their debts, they found that they had little money left over at the end of the month to put away for a rainy day. Although people are saving more today than they were in the run-up to the Great Recession, they’re still only saving a fraction of what they used to save in earlier decades – including the 1980s.
So what’s behind all this? Why aren’t people saving like they did in the past?
One answer is that it is a generational thing. So many people have grown up relying on credit from banks and building societies that they have essentially forgotten how to save. There’s a culture of being able to have everything now and work for it later, rather than saving up in advance.
But that behavior should suddenly change like that seems more than just a consequence of changing tastes. The other problem is the fact that living costs have gone up while wages have remained flat for most people. We’re allegedly in the recovery period from the financial crisis, but most people still haven’t made up the ground they lost when the recession hit. In other words, incomes haven’t gone up for the average family in more than ten years.
There’s a final reason why savings aren’t higher: interest rates are incredibly low. Central banks all over the world are operating off economic models which tell them that they have to keep interest rates low in order to stimulate demand in the economy. They’re terrified that if interest rates don’t remain at rock-bottom levels, then the economies in the West will enter a deflationary cycle from which they might never emerge. Lower prices will lead to lower output which will further reduce prices and so on. Unable to lower the interest rate anymore, they fear that they will be rendered impotent and unable to shape the economy in the way that they would like.
For regular people, all this seems like it’s way outside of their control. And while a few politicians and bureaucrats might take it upon themselves to steer the direction of the countries they rule over, individuals still have a say in what happens in their own lives.
Nobody wants to live paycheck to paycheck. It’s super stressful and ends up leaving you feeling insecure. So how can you get off the crazy train and stop living this way? Here are some ideas.
Be Honest With Yourself
Some people live paycheck to paycheck because they have to. They’ve got mouths to feed and bills to pay. Others, though, don’t. Although their cost of living is high, there’s no real reason why they should be living on the edge all the time.
According to Frugal Debt Free Life, one of the main problems that people encounter is their own expectations. They’ve got a certain idea in their heads about what their life should be like, rather than what they can afford. This expectation ends up ruining their chances of paying down their debt and putting some money aside. They feel as if they “deserve” the best, even though they can’t pay for it.
This expectation is worth fighting if you want to escape the paycheck to paycheck cycle. Try to give up the idea that you somehow deserve to go out to fancy restaurants or buy expensive cars. Cheaper alternatives will do for now. In the meantime, you can focus on ways of increasing your income so that you can eventually have all the things that you want.
Ask Companies To Lower Your Bills
Many companies, especially companies that charge you a monthly fee, will bill you for whatever they think they can get away with. For instance, it’s not uncommon for home insurance companies to offer introductory rates of, say, $8 a month, only to jack them up without warning to $25 a month, hoping that you won’t notice. Car insurance companies do the same. One year, you’ll be asked to pay $500 for the year, the next $800, even though you didn’t change where you live or make a claim.
Utility companies will also slowly increase their prices for people who have been with them for a long time. They know that some people won’t bother switching providers, even when their bills start going up, and so they try to raise prices, hoping that they won’t notice. Switching energy providers could save you as much as $300 a year.
Find Extra Sources Of Income
Many employers are trying to avoid taking people on full-time because of the enormous overheads that they incur. As a result, fewer and fewer people have one single job. It’s actually quite common for people to have multiple jobs that they split up throughout the day. These extra jobs are a great way to put a little extra money aside and avoid living paycheck to paycheck.
Many jobs you can do over the internet pay very little money indeed. But some, like tuition or writing, pay more. In fact, depending on the agency and the level of tuition, you could earn up to $100 an hour. Regular tuition, if you’ve got a college degree, could net you more than $50 an hour – not bad when you think about it.
There are other ways that you can earn an extra income too, without having to take a second “job.” One idea is to run a small business from your home, selling whatever services you think people will want.
Sell Stuff That’s Just Lying Around
It’s amazing what people will buy if you put it up for sale on the internet. Thanks to sites like Ebay and Craigslist, selling stuff – even broken stuff – is easy and enables you to supplement your income. One great seller is textbooks – books that students want at the lowest possible price. Another great seller is electronics. The ability of the internet to buy up all your broken laptops seems to be without limit. You can also try getting rid of tools and machinery you never use, like your carpet cleaner or you spanner set, so long as they’re in reasonable working condition.
Always Say Yes To Hand-Me-Downs
Many people – especially young people – feel that they have to buy new stuff all the time for their homes. Tables, sofas, dishwashers, clothes. But all these things are actually very expensive. What’s interesting, though, about the majority of the furniture in your house, is that many people regularly take these items down to the dump, despite the fact that they’re perfectly usable. This means that there’s a whole hand-me-down market, just waiting to be explored. Try asking around to see whether anybody in your family or community are getting rid of pieces of furniture you could have. You never know what things people are throwing away.
Say No To Debt
Another reason people live paycheck to paycheck is because they’ve got a list of large debts which roll over, month after month, and charge them interest. These debts can quickly get out of control if you don’t take any action. While it might seem like a good idea to take money out to buy a new car or home improvements, it can wind up financially crippling you in the long run.
If you’ve got a lot of debts, you might consider consolidation help. Consolidation brings all your debts together into one payment which is often lower than if you were trying to pay off multiple creditors individually. Consolidation companies are expert negotiators. Often they’re able to convince lenders to accept less overall money in return for settling the debt. As a result, they amount you pay, and the interest, are also lower.
The best way to confront your debts is just to sit down with them and go through them one by one. Write them down and work out whether it is feasible for you to pay them back or not, based on your income. If you don’t think you can, then it’s time to ask for professional help.
Get Brutal About What You Could Cut
Most people think that their budget is tight and that there’s little they can do to cut it further. But if they’re honest with themselves, there’s usually something they can eliminate. How about paying a fortune every month for rentals? What about your weekly visits to the cinema? Are you a member of a salon? All these things are nice to have, but they’re not essential to live- and they can certainly make it harder to break the paycheck to paycheck cycle.
Also, take some time to figure out whether you’re using up all the food that you’re buying. Most families throw out about 33 percent of their food, costing them around $100 a month. Using up all the food you have is an excellent way to have a little extra money left over at the end of the month.