If you are living paycheck to paycheck, then you know that there is not an ounce of money to spare for your saving account no matter how much you’d like to build up your savings. However, by not saving money, you are only ensuring the permanence of your current stressful lifestyle. I want better for you and for your future; I want you to have financial freedom in your future instead of bill cycles and anxiety. In order to have this, we need to find ways to get your money from your paycheck into your saving account using your current income. Below are some ideas. Please remember that any of these ideas are useless if the extra money they free up does not actually make it into your saving account.
Tap Your Tax Resources
If you are living paycheck to paycheck and have been for awhile, then you are surviving on what you make. Everyone just received a 2% “raise” from the government because they lowered the social security taxes by 2%. Give this money purpose, and make sure it goes into your savings account. Depending on what your household makes, it could mean an extra $50, $100, or more in savings per month.
If you receive a tax refund at the end of the year, then sit down with your HR department and figure out how to adjust your withholding so that the extra money ends up in your paychecks. Then earmark this extra money for your savings account each month.
Deposit Your Two Extra Paychecks
If you are paid every other week, then there are two months out of the year where you will receive three paychecks. Since you are used to living on two paychecks per month, this should feel like winning the lottery (okay, a lottery that you had to work 40+ hours for). Instead of earmarking this golden nugget for a large purchase, or letting it sit in your checking account to be slowly squandered away, deposit it into your savings account pronto. I am paid once a month so this does not apply to me. However, Paul is paid twice a month, and June is the next month where he will receive an extra paycheck. We will be using his extra paycheck to invest and grow our net worth.
Break Your Contracts
If you are living paycheck to paycheck, that means you cannot afford your current financial obligations. Look at your contracts for your cell phone, cable, rent, utilities, car lease/payment, etc. Some will be easier to get out of than others. Because of cancellation costs, some will not be financially worth it to break. The first step when breaking contracts is to find a better deal for the services that you will still need, like a phone, a car, and utilities (read: cable is not a necessity and you should be eager to give it up at this moment in your financial distress in order to sock away the extra $60 per month towards financial freedom. An example of people who recently did this is from the show Downsized).
- Cell Phone: You can get out of your contract without paying the $175+ early cancellation fee. Sell your contract to sites such as CellSwapper or CellTradeUSA. There are some great pay as you go cell phones available that you can sign onto.
- Utilities: This is geared towards utility markets like the one we have in Houston where there are numerous utility companies that compete against one another. While you may still have to pay a fee to get out of your utility contract, many companies offer $200-$300 to switch to their cheaper rates. You can use this money to offset the cost of early termination with your other company.
- Cable/Internet: You will want to call the cancellation department of these companies and tell them that you need to cancel your contract. One of two things will happen: they will offer you a better deal, or they will be able to temporarily suspend your contract to give you a few months off for free until you can pay again. Either is great to boost your savings.
- Car Lease/Payment: Is your car payment or lease more like an apartment payment or mortgage? Cars are not a good investment—they lose value as soon as you roll them off the car lot, which is why you should typically buy used and let the first owner take a hit on their investment. Still, you can sometimes get out of these obligations. For an un-leased car, you can attempt to sell it. For cars that are leased, you can use services such as SwapALease.com or WalkAwayLease.com where you can list your car and a buyer who is looking to take on your lease will hopefully find you. Transferring your lease does not ding your credit score, but you cannot do it without your lease company’s consent. Make sure you understand your contract and discuss your options with your lease company.
Take in a Roommate
I have an aunt who lives in a beautiful area of D.C. in a gorgeous, two-story home. How did she afford to live just a few blocks from the metro in our nation’s capitol? At least since I was born, she has taken in roommates. She posts the ads in the newspaper, conducts interviews, gets to know the candidates and then makes a decision. A lot of these people are students, people traveling on business for a period of time, and people from foreign countries. She has met a wealth of individuals, made connections to last a lifetime, and each month, she gets to divide up the mortgage, utilities, and all other house expenses by 2-4.
I lived with a roommate during my first year out of college and the savings were dramatic. Even if you have a family, this can be an option for you. Do you have a basement, or a spare bedroom and bathroom? Are you within distance of a major city or a college campus? Think about the possibilities.
Attack Your Variable Expenses
Variable expenses are the ones that are easy to trim, as you are in control of them and typically are not bound by any contracts. These categories include transportation, food, entertainment, clothing, habits/addictions, etc. We will tackle these as individual categories in upcoming articles.
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