Steps to stop living paycheck to paycheck

[jeffrey]

When you look at a typical article about how to avoid living paycheck to paycheck, most give the following advice:

1. Track Spending
2. Create a Budget
3. Cut Expenses
4. Increase Income

This is all solid advice which will be helpful. I was wondering what other things you would add to this list? What other essential steps do people who are living from one paycheck to the other need to do to break out of that habit? Also, do you think there are essential steps that a person needs to take within each of the 4 areas I mentioned above?

[bigdaddybus]

5. If you have debt, do not add to it and pay it off (Ramsey and others suggest the debt snowball approach)

[kork13]

6. Start Saving.

Living paycheck to paycheck happens because someone doesn't have any extra money to fall back on while they wait to receive their next paycheck. If you have savings, you can maintain some cash in your account until payday and you won't be rushing to the bank at lunch every Friday so you can afford to fill the gas tank on your way home.

[bjl584]

Pay yourself first. The first financial transaction that you should make after getting paid should be a deposit into your savings or investment account.

[lorraineb]

1. Commit. Nothing is going to happen unless you seriously commit to do this. if you just go through the motions because others tell you to, it will fail.

[creditcardfree]

Plan for expenses that occur less often than monthly.

[scfr]

1. "If you are married or otherwise share your finances with someone, sit down and have a conversation with that person. Make sure the 2 of you are on the same page, with an agreed-to plan to work toward common goals. Compromise as needed."

Over and over we hear how one person's efforts are sabotaged by their spouse/partner's behavior. If a couple can't get on the same page, it's going to be really tough.

Regarding the step about tracking spending, for some people it can be overwhelming to record every single penny spent, especially if they use cash and don't have a paper trail for some expenditures. A separate coin purse can be helpful. You can put a small amount of cash ($10 or $20) in the coin purse and write it down as a "Misc cash" expenditure. You can use that cash for minor purchases (pack of gum, dollar to the office lotto pool, etc) and replenish it when it's gone. Your "coin purse money" should last you for quite awhile; if you find yourself running out very quickly you may decide that you need to record those expenditures too. This is a technique I used successfully when I started tracking expenditures 20+ years ago. I no longer use it (don't need to), but at the time it was really helpful.

[annibe11e]

Savings. You cannot get ahead if unexpected/irregular expenses send you into the red.