How to Prevent Running Out of Money Each Month
- PR Newswire's data showed that 61% of Americans were living paycheck to paycheck in June 2022.
- Living paycheck to paycheck means that you run out of money before the next paychek arrives.
- To stop living paycheck to paycheck you would either have to increase your income or reduce your expenses.
PR Newswire's data showed that 61% of Americans were living paycheck to paycheck in June 2022. With more than half of the American population making just enough to get by, it’s safe to say that some people regularly run out of money every month. Running out of money is a financial situation that no one wishes to go through, so below are feasible ways to prevent yourself from living paycheck to paycheck.
Track Your Transactions
The first way to prevent running out of money and help improve your financial position is to begin tracking your transactions. Tracking your transactions lets you know how much money is going in and out of your bank account. One main issue people run into is excessive spending without tracking their finances.
Whenever a transaction occurs, keep the receipts and track all the income and expenses coming in and out of your account. Also, your bank generates a monthly report called a bank statement, that list all your banking transactions. If you have a hard time keeping track of your receipts, schedule time every month to review your bank statement. By viewing your bank statements you can see your financial habits clearly; you are able to assess where you can save money, track fraudulent charges, and stay on top of banking fees like a monthly fee or overdraft fees.
CapWay Pro Tip: CapWay doesn’t charge any hidden fees to it’s account holders. Learn more about CapWay’s banking features here.
If you use credit cards for your purchases, you can see where most of your money is going. Credit card companies typically organize your transactions in different sectors, such as food, services, and clothing which you can see on your monthly bank statement.
By keeping track, you get a better understanding of your spending habits, and whether your financial mindset is contributing to your financial setbacks. If that is the case, then you should consider creating a budget.
Recommended Read: How to Change Your Money Mindset for the Better
Building Your Perfect Budget
If you realize that you are spending too much money, then your next plan of action is to create a budgeting plan. For some, budgeting can be difficult because they want to achieve their financial goals in a short time, so they save aggressively. The problem with reaching your objectives within a quicker time frame is that more drastic measures must be taken.
Image Credit: fizkes / Shutterstock.com
Unfortunately, these restrictions cause temporary success as a best-case scenario, and they do not always work out in the long run, so it is important to make implementations that you know will be feasible.
When you find a technique that works for you, saving money becomes easier and does not seem like a chore. Although there are various budgeting methods, one common savings plan people use is the 50/30/20 rule. This budgeting rule says 50 percent of income goes towards needs, 30 percent towards wants, and the remaining 20 percent will be saved.
Along with creating and sticking to a budget, another way to cut spending is to determine whether the majority of your purchases are for wants or needs.
Wants refer to expenses that are not necessities to everyday life. Wants are items that make life enjoyable, such as purchasing new clothes, dining out at a restaurant, and spending money on streaming services like Netflix. Although it is important to have money to use on items you want, excessive spending can have many financial consequences.
Needs are essential expenses for survival, such as transportation, food, and housing. These expenses cannot be avoided, and ensuring that your funds go towards these costs first is important. Due to their importance, the cost of these necessities can sometimes be non-negotiable, meaning any price raises have to be taken on.
As a result, before you do anything else with your money, you should look at paying for these expenses first. If you see that your current financial situation results in you running out of money because your essentials are too expensive, then you can look at learning a new skill or applying for a new job.
An emergency fund is a savings account containing between three to six months' monthly expenses. The emergency fund's purpose is to have money set aside for financial emergencies. If an unexpected event occurs, the money set aside in the emergency fund will help fund these extra expenses, reducing the financial stress induced. For example, if your monthly expenses amount to $1,000 per month, the emergency fund should contain between $3,000 and $6,000.
How to Increase Your Income
Learn a New Skill Online
If you feel that your current job is making it difficult for you to earn money that can accommodate the higher cost of living, then finding a new skill is key. There are various free online courses that offer classes on different topics.
These courses allow you to pick up a new skill which can help you earn more money. Depending on the course you select, it will take a certain amount of time before you complete the class and earn a certificate.
However, once you receive the certificate, you can then put that on your resume and digital profile on LinkedIn. If these certificates are from an accredited website, they can help you earn more. For example, if you take a programming course, you can use your skills to set up a side hustle or start a part-time job as a freelancer. By doing so, you are taking advantage of the opportunities that come from your newfound knowledge, which can ultimately help you prevent running out of money each month.
If you feel that your skillset is good, then you can improve your resume to increase your chances of finding a better-paying job. Resumes are key in hiring, so knowing how to make yours stand out from the rest is crucial. If you wish to know how you can create an exceptional resume, look at the recommended read below.
Recommended Read: The Best Resume to Land Your Dream Job
Invest in The Stock Market
After putting some money aside in the nest egg, you can begin incrementally investing in the stock market. The stock market is a platform where many people put their excess cash so it can increase in value over time.
Investing into dividend paying stocks can be one way to increase your income. Dividend stocks can provide the shareholders with regular income from dividend payments. Also, the capital appreciation of the stock price can be another source of return for an investor.
Image Credit: eamesBot / Shutterstock.com
Recommended Read: How to Read Financial Statements | Investing for Beginners
The Money Wrap-Up
When you are living paycheck to paycheck it can feel as though, you will never have enough money to get to the next level. But you must remember that you have the power to get out of the paycheck to paycheck cycle. First, start by learning how to have a healthy money mindset. Next, read CapWay’s Learn Money page where they share various tools to help you learn about money, get better with managing your money, and get you started on the journey to building wealth.
Main Image Credit: Yellow_man / Shutterstock.com