Living from paycheck to paycheck can be likened to your finances being in a revolving door, your money comes in and goes back out. This might be okay for some people but it definitely isn’t the way to go if your plan is to build wealth. The interesting thing about this topic is that it applies to both low and high-income earners. If you’re currently in this situation, keep reading because we have outlined practical steps you can take to walk out of that financial revolving door.
- Start Budgeting: Like we’ve said time and time again, budgeting is the first step to managing your money efficiently. A budget exposes all the unnecessary expenses you didn’t know were ruining your finances and helps you make better decisions. Click here to read about 5 easy steps to make a budget.
- Prioritize your expenses: Your expenses should be arranged in order of priority. The first four expenses should be food, shelter, utilities, and transportation. After taking care of these four expenses, everything else should be listed according to importance. By doing so, when you eventually run out of money, you’re sure that your most important expenses have been taken care of.
- Apply Personal Finance Hacks: Now that you know exactly what you’re spending your money on, it’s time to apply finance hacks you cut down on your expenses. Hacks like cooking instead of eating out, borrowing stuff from family and friends instead of buying, etc. We carefully outlined 10 hacks to help you save money, you can check them out here.
- Pay Up All Debts: As we have previously discussed, debt has a way of robbing you of your present and stealing from your future. It’s practically impossible to build your financial future with debts holding you back. You need to settle all your debts and avoid incurring more debts. Always avoid “Buy now, pay later”, instead save now and buy later. Read more on the best way to pay off debts here.
- Sell Your Personal Belongings: You probably have some items you’ve outgrown or are no longer in need of. Items like clothes, shoes, jewelry, appliances, etc. You should consider selling them to make some extra cash. It’s generally known as a Yard or Garage Sale. A very easy way to go about this is by simply advertising the stuff for sale using your social media.
- Get A Side Hustle: Sometimes, even after you have done everything right, you still find yourself struggling financially. In that case, you just need additional income. A side hustle or an extra job is what you need to change your situation. Check out some side hustle ideas here.
- Avoid Lifestyle Inflation: As human beings, it is natural for our taste to change as our earning power increases. We find ourselves spending more money to suit your new status. This is called Lifestyle inflation and it is the reason why a lot of high-income earners are still living from paycheck to paycheck. When your income increases, make a conscious effort to increase your savings and investment instead of increasing your lifestyle expenses.