Asked on Reddit: How Can I Stop Living Paycheck to Paycheck?
A Redditor recently shared that even on a salary of $88,000 at age 29, they are struggling to pay their bills.
In this expensive economic environment, it’s a common struggle in many American households. How is it possible to keep up with costs when they keep rising faster than income?
Getting ahead of your cash flow starts with putting savings first, says Kevin Tamlyn, a retirement planning specialist and founder of Next Stage Financial in the Phoenix area.
“The core problem is that people don’t save first. They save last,” he says. Instead of that approach, he suggests putting whatever amount you are comfortable with — whether it’s $20, $100 or more — into a separate savings or investment account as soon as you get your paycheck.
Of course, you need to make sure you have room in your budget for said savings.
Tamlyn suggests taking a close look at your previous month’s spending to see where you might be able to make cuts. Restaurant spending, retail spending and other extras are good targets.
“Then I would start to put a limit or a goal to stay under in each category,” he adds.
In his household, he sticks with just two streaming services at a time, adding additional ones only briefly for a specific show. “You don’t have to have all of them all year long. If you sign up for a month, make sure you cancel,” Walsh says.
Don’t compare yourself to influencers
It’s easy to watch other people on social media and think you need what they have, says Lynn D. McHann, an accredited financial counselor in Bozeman, Montana.
“I hate all those shopping hauls,” she says, referring to influencers who share videos of themselves unpacking shopping bags. “It creates a ‘keeping up with the Joneses’ feeling.”
Instead, focus on what you actually need and when you need it, instead of stocking up in advance for things like clothing. “Make a plan before you go to the store and stick with it,” she says.
Watch out for lifestyle creep
Sometimes, we are most at risk for overspending when income goes up, warns Andrew Wood, a retirement planning advisor with Daniel A. White & Associates in Middletown, Delaware.
“You feel like you earned it and you work hard, so you spend more, too. It’s a natural phenomena,” he says.
That’s why he suggests maintaining or even increasing your savings rate anytime your income rises instead of putting it toward new expenses like a personal trainer or meal-delivery service.
Spending less often comes down to taking your time with purchases.
“We, as a society, tend to be quick buyers,” Wood says. “We get excited about certain things, then make quick decisions.”
Instead, he encourages people to wait and shop around for better prices and discounts instead of rushing.
Talk about money goals with family members
Reining in spending is a team effort, so Tamlyn encourages frequent money conversations between partners and other relevant household members.
“The whole family, including the kids, should be involved in the budgeting meeting,” he says. “It’s also a good way to financially educate your children.”
McHann agrees. “It’s okay to set limits for kids,” she says, even though parents’ first instinct is often to buy them whatever they want. “You are teaching them about the value of a dollar.”
While the Redditor who posted the question might have to wait a few years before educating their baby about finances, it’s a solid goal.
Reddit is an online forum where users share their thoughts in “threads” on various topics. The popular site includes plenty of discussion on financial subjects like budgeting, so we sifted through Reddit forums to get a pulse check. People post anonymously, so we cannot confirm their individual experiences or circumstances.
