Are you living paycheck to paycheck? If so, you’re not alone. In fact, many American workers are relying on each paycheck to cover their monthly expenses, with little to no money left over for savings or investing. For some people, this is a temporary phase of life brought on by common circumstances from which they recover relatively quickly, such as job loss or having a child. For others, it’s been a way of life for as long as they can remember.
Whichever situation you find yourself in, you can take control of your finances by rearranging your priorities and developing new habits. If you’re ready to start the journey of turning things around and establishing financial security for you and your family, here are some tips to get you started, presented to you today by Connington Wealth Management.
Set a Budget
Circumstances can make it more difficult for some to get by than others, but more often than not, there are unnecessary expenses that can be cut no matter how much is sitting in your bank account. Take a look at the income you bring in each month as well as all your monthly expenses, and determine what you can reasonably afford for each. Separating your needs from your wants will be critical here, because in order to pay all your bills and contribute to your savings each month, you may need to make some sacrifices.
If you plan to purchase a house, then you’ll need to learn to set up a different kind of budget, as well as learn the ins and outs of the homebuying process.
- How to set a house-buying budget.
- How do I get a mortgage?
- Understand when to pay points on a mortgage to lower interest rates.
Save Something Every Paycheck
Along with cutting costs, putting a portion of your paycheck into savings is an important habit to establish. Ideally, you’ll put away 10 to 20 percent of each paycheck, but if this isn’t realistic, start with a smaller amount, even if it’s $5 a check. You should also create an emergency fund to cover unexpected expenses, such as medical bills, vehicle repairs, and home repairs.
- Why should I start a savings account?
- How to start saving when I don't make a lot of money.
- Easy ways to save more money each month.
Start Saving for Retirement
On top of your basic and emergency savings accounts, it’s best to start funding your retirement as early as possible. Many companies match employee contributions, so if yours does, aim to deposit the maximum match amount so you can take advantage of this free money. If you’re not eligible for an employee-sponsored retirement account, a financial planner can help you set up an IRA or a modest investment account. Again, any amount you can set aside is meaningful, so don’t be discouraged if you have to start small.
- What kind of retirement savings plan should I get?
- How much should I contribute to my 401(k)?
- How much should I contribute to my IRA?
If you’re tired of living paycheck to paycheck, start taking charge of your finances. Commit to sticking to your monthly budget, and evaluate which expenses you can live without. Start saving for short-term as well as long-term goals, and try to have a plan for unexpected expenses. Before long, you’ll be on track to a more secure financial future.