Strategies to stop living paycheque-to-paycheque, by experts

*Personal finance experts discuss practical ways to rein in spending, so that there is money still in the bank account at the end of the month, noting the ‘paycheque-to-paycheque lifestyle can sometimes be a little overwhelming’ for consumers

Isola Moses | ConsumerConnect

Surveys consistently, have indicated that a majority of employees in several economies, including the United States (US), live paycheque to paycheque, spending all the money that they earn.

The number has increased as the US economy has slowed, m ConsumerAffairs report said.

For Financial Literacy Month, the publication states it interviewed six personal finance experts on a range of financial topics.

The analysts started with ways to rein in spending, so that there is money still in the bank account at the end of the month.

Taylor Kovar, a certified financial planner and Chief Executive Officer (CEO) at TheMoneyCouple.com, said: “You can’t manage what you can’t measure. “So, the first thing you need to do is figure out how much money you have coming in, and exactly where each penny is going out.

“Once you have it all lined out, you can almost always see where you are wasting money.”

Speaking on the topic, Jim Wang, Founder of Wallet Hacks, also agreed that starting with a review of current spending is a good idea for consumers.

Wang noted that some minor trimming could add up.

The expert also stated “this could be as easy as canceling a subscription service or as complex as renegotiating your rent.

“If you have insurance, shop around for a new policy to see if you could save money with another carrier.

“These one-time moves can pay dividends over the course of a year, especially for expensive services.”

All of the experts we consulted said a paycheque-to-paycheque lifestyle can sometimes be a little overwhelming.

Einat Steklov, Founder of Kashable, as well noted that when you’re living paycheque-to-paycheque it is hard to think about saving.

Steklov suggested refinancing high-interest debt, such as credit cards, with a balance transfer card or personal loan.

The personal finance expert said: “Many people earlier on in their career start small and put aside a specific amount of money each month.

“This can be done manually or come directly out of your paycheck into a savings account.

“That way it becomes a habit, and you won’t feel that money is missing.”

Shift priorities

Robert Johnson, PhD, CFA, CAIA and CEO at Economic Index Associates, also offered the advice of legendary investor Warren Buffet, the Date of Omaha, in Nebraska, US, who once said: “Do not save what is left after spending; instead spend what is left after saving.”

Johnson reportedly said: “If one truly wants to make savings a priority, it cannot be a residual — what is left over.

“It should be a line item on your budget. You don’t successfully build wealth by simply taking what you have left after all your expenses.”

In other words, savings must be active instead of passive.

Setting up a separate bank account and transferring a small amount into it each payday may be a good way to start.

How about making a little extra money?

Markia Brown, a certified financial education instructor and registered financial associate at The Money Plug, agrees that savings need to be a line item in your budget.

And while cutting expenses may be a priority, she suggests increasing income should not be overlooked.

She said: “Explore opportunities to boost your income through a part-time job, freelance work, or selling items you no longer need.

“Even small increases in income can make a difference in breaking the paycheque-to-paycheque cycle.”

How many people are paying for subscriptions they no longer need? Andrea Woroch, a popular personal finance blogger, says you could be wasting money without realising it in the form of unnecessary add-ons, useless fees and unused services.

Woroch stated: “Spend time scrutinising your bills for services you don’t need or compare rates with competitors as you may be able to save more by switching.

“For instance, a recent study found that 90% of mobile users waste money on unnecessary unlimited data plans. “Reduce your data plan to a cheaper option based on usage or switch to an online-only carrier” that offers service in bulk.

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