If anyone tells you they aren’t living paycheck to paycheck, there’s a high chance that they are either lying to you or lying to themselves. In today’s world, you can never have too much money and unless you come from a wealthy family, managing your living expenses with one salary simply isn’t possible. Therefore it is inevitable that you eagerly await your next salary in order to get by as you have run out of money before your salary date. It’s a vicious cycle that simply prevents ordinary people from saving up or investing enough money to break out of the paycheck-to-paycheck lifestyle.
While it’s easy enough to get “helpful” advice from other people about salary planning or expense planning, the reality is that when you are struggling to just make ends meet, it’s hard to think about other things. But you have to start somewhere and here are some tips to get you started on your way to complete salary planning.
Tips to Get Started
1. Track Expenses
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You don’t need to make any lifestyle changes to get started on salary planning. For the first few months, simply keep meticulous track of your salary, down to the last rupee. Everything from bank charges and charitable donations to savings account interest and refunds should be noted down. This will not only help you really analyse your monthly salary cash flow and understand your salary spending habits, but it will also help you see where you are leaking money and hopefully plug the holes. (Read here : Signs You Are Heading to Financial Disaster)
2. Budget
“A budget is telling your money where to go instead of wondering where it went” (Source: Dave Ramsey Blog). Budgeting is the real first step of expense planning. Separate your salary into fixed monthly costs (bills, traveling and food cost) and then allocate the rest accordingly. Budgeting goes hand in hand with tracking expenses which will tell you when you are dangerously close to reaching your spending limit. If you exceed your budget in one area, you need to reduce the allocation in another area. This will help you take complete control of your salary and not allow your salary to control you.
3. Reduce Expenses
This is the next inevitable step. While it’s easier said than done and requires major lifestyle changes, reducing expenses will actually allow you more freedom to build your savings and even indulge in occasional luxuries. Take a careful look at your salary expense records and budget over a few months and see where you can cut costs. Cancel some of those subscriptions for a few months. Downgrade your internet package. If you are taking taxis to work daily, try and find a shuttle service or use public transport. Once you start feeling the ease, you will not want to go back to the paycheck-to-paycheck lifestyle at any cost.
4. Get Out of Debt
Debt is like an anchor that weighs you down, limiting your freedom and preventing you from utilising your salary fully. With proper expense planning, if you’ve followed the previous three steps to a T, you might be able to start slowly but surely reducing the mountain of debt on your shoulders. The longer you ignore your debt, the larger it grows. Tightening your belt for a few months and using your salary to get out of debt is the smartest move. (Read here : Financial Habits to Avoid)
5. Earn More
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While reducing expenses is one way to utilise your salary effectively, the best way to increase your spending money is to increase your income. Look at other avenues of income apart from your salary that would contribute towards your expense planning. Get a second job (part-time, freelance or consulting), sell some unwanted or extra belongings or learn how to invest your money.
6. Save up for purchases, not on credit or instalments
When you need to make large purchases, save up your salary and make the purchase outright, not on credit or on instalment basis. Avoid long-term financial commitments and stay out of debt as much as possible. This is a solid part of good salary planning.
7. Emergency Fund
Use your salary to set up an emergency fund that is separate from your savings. This extent of expense planning will ensure that should you be faced with an emergency, you will not need to exhaust your savings.
A paycheck-to-paycheck lifestyle is unappealing for anyone and getting out of this rut is everyone’s dream. With some solid expense planning and salary planning, this dream can become your reality. However, if you wish to obtain a quick consumer loan, you can always turn up to OnCredit.lk
