When you’re living paycheck to paycheck, your #1 priority is to save $1,000.
Unexpected expenses pop up every month. With a $1,000 cushion, you can manage surprise expenses without going further into debt.
To break the paycheck to paycheck cycle, you’ll need to take it step-by-step.
Now, you won’t do this overnight.
But you may surprise yourself with how fast you can save $1,000 when you follow a solid plan.
Here’s that plan..
Step #1 – Give every dollar a job
A budget is you telling your money where it needs to go.
It doesn’t need to be complex.
The simplest and most effective way to budget is to:
- Add cash + expected income. Add up the cash you have on hand + your total expected take-home pay for the month.
- List expenses. Make a list of all your expected expenses over the next month.
- See what’s left. Subtract your expenses from your cash + expected income.
- Get to zero. Anything that’s leftover, categorize as savings (we’ll get to this in step # 2)
If you failed at budgeting in the past, that’s OK. Nobody is a pro in the first month. It takes a few months to fine-tune a system you’re happy with.
Step #2 – Open a separate checking account
After you created your budget, there are two situations you’ll find yourself in:
a) Your expected income is ABOVE expected expenses
b) Your expected income is BELOW expected expenses
If you’re expected to spend more than you make, go to step # 3.
If you are living below your means, here’s an important step you need to take–open a new savings account.
In this new account, deposit ASAP the gap between your expected income and expected expenses.
For example, if your expected income is $3,000 and expected expenses are $2,800, you would deposit $200.
Why should this account be separate?
Because your goal is to make it as hard as possible to spend this money.
One catch is some banks are terrible when it comes to fees on accounts with small balances.
To avoid any nasty fees, I recommend searching for a new account on Fiona.
Fiona is a free search engine that helps you find the bank that pays the highest interest rate in your area. Plus, you’ll see upfront any hidden fees.
No personal information is required, enter your zip code to get the results.
When I did this, I found a bank that paid 22X the national average on their savings accounts!
Step #3 – Free up cash
Until you’re able to save $1,000, you want to minimize your living expenses. In other words, make your food, invite friends over instead of going out, no new clothes, etc…
It’s important to remember you’re not giving up these things for good. This is temporary.
Beyond minimizing day-to-day expenses, you should look for ways to save big chunks of money at a time.
Here are three strategies to take right now:
Strategy #1 – Shop your car insurance
Lowering your car insurance bill is one of the easiest ways to save.
There’s a lot of competition in the insurance industry, which means finding a company with lower rates isn’t hard.
If you haven’t yet, check out Esurance.
Esurance’s Express Lane Quoting allows you to get a quote in minutes, even on your phone. Plus, with their online-only model, they offer very low rates.
Strategy # 2 – Cancel subscriptions
Monthly subscriptions are another way to cut expenses fast.
And there’s an excellent hack to doing so; it’s called Trim.
Trim is a free app that analyzes your accounts to find recurring subscriptions and uncovers ways to save.
Trim will even go the extra step of canceling your subscriptions or negotiating to lower your rates–all with a simple text message.
The other day Trim negotiated a credit on my Comcast bill because there was a power outage in my area:
Strategy # 3 – Check to see if stores owe you money
Have you ever bought something only to find the price dropped soon after?
Frustrating, to say the least.
Thankfully there’s a free website that helps you get a refund if something you bought has dropped in price.
Unlike other similar sites, Paribus allows you to keep 100% of the refund.
That’s right. There are no hidden fees.
You might even be able to cancel your internet subscription altogether, as there are a number of ways to get free legal internet access.
Step #4 – Increase your money making skills
Benjamin Franklin once said,
“There are two ways to increase your wealth. Increase your means or decrease your wants. The best is to do both at the same time.”
With that in mind, your next goal is to make more money.
Go in with the mindset that making money is a skill you can build.
This month you may only make $20 a month. But chances are you may learn a thing or two that allows you to make $40 next month. $80 the next. And so on.
Don’t be afraid to start small.
Here are three strategies for earning more money faster:
Strategy # 1 – Increase your primary source of income
The easiest way to make more money is to increase your primary source of income, e.g., the income you earn from your job.
There are three options to consider:
- Ask for a raise
- Ask for more hours
- Find a higher paying job
Strategy #2 – Do this while watching TV
Surveys are one of the fastest ways to make money online.
And considering you can complete surveys on your phone watching TV, it makes for productive use of free time.
Earning money is pretty simple too.
Just sign up with a reputable site, and you’ll get notified when a survey becomes available.
For example, here’s a survey opportunity recently emailed to me (not all are this good):
Readers of The Ways to Wealth have tried a lot of survey sites and by far their favorite is SurveyJunkie.
Here’s what’s to like about SurveyJunkie:
- SurveyJunkie is the highest rated survey site on TrustPilot, with an 8.8/10, with over 6,400 reviews.
- They do not send you spam junk emails.
- Offers some of the highest payouts in the industry.
- Pays in cash through PayPal.
Strategy #3 – Lyft
Sign up for Lyft to get paid to drive people around.
This is one of the most popular side hustles around because as a Lyft driver:
- You can set your hours
- Choose only to drive during peak times to maximize dollars earned per hour
- They give a $250 signup bonus for those who sign up right now
Step #5 – Consider a Balance Transfer Card (or other refinancing strategies)
If you’re struggling to save $1,000, one of the smartest ways to save money is by refinancing existing debt.
This strategy depends a lot on your existing debt and credit history but it is worth considering.
If you have credit card debt, consider switching to a balance transfer card.
What’s important though is that you want to pay off the entire balance of the loan before the 0% rate expires. This is by no means a strategy that allows you to accumulate more debt!
Other refinancing strategies you may want to check out include:
- Compare student loan refinance rates with LendKey. The average individual who refinances with LendKey saves $16,000. It takes only a few minutes to check your rates.
- Compare mortgage refinance rates with LendingTree. Have a mortgage? See if you can lower your interest rate with a company like LendingTree, which lets you compare up to five different offers in minutes.
- Compare auto loans with LendingTree. For auto loans, check LendingTree to see if you can find a better rate.
When it comes to debt, you want to make sure you’re paying the lowest interest rate possible. This then will allow you to pay it off as fast as possible.
Step #6 – Give every dollar a job (again)
- You have made a budget
- Opened a separate checking account
- Lowered your monthly expenses
- Made more money
- Checked to see if you can save money refinancing
Now it’s time to adjust your budget, so it reflects the changes you made.
Once you know the difference between your expected income and expenses, put the difference in your new savings account.
Moving forward, ending the paycheck to paycheck cycle (and building wealth in general) comes down to increasing the gap between your income and expenses.
Need some ideas?
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