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 emergency fund, 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. Categorize anything that’s left over as savings
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 until you’re happy with it.
Step #2: Reduce Your Big Recurring Expenses
Reducing your fixed expenses allows you to see immediate results. Within hours, you can cut your monthly expenses by hundreds of dollars. And just as importantly, you’ll build your skills and confidence at managing money.
There are three spending categories I highly suggest you start with. I picked these three because they require the smallest effort, yet carry big rewards.
Strategy #1: Shop for your home and auto insurance.
I worked at an independent home and auto insurance agency for 10 years. When people asked what my #1 tip was for saving money on insurance, I suggested shopping for a new home and auto insurance policy every year.
Comparing prices annually is by far the best strategy if your goal is to pay the least possible price for the best possible coverage. Yet, most policyholders don’t switch every year due to the perceived hassle. That’s why I like the new startup Gabi, which makes it dead-simple to get the best deal on insurance.
Their technology is so good that they’re able to save each new customer $825 per year on average.
The process is easy, too:
- Connect your existing insurance policies
- Snap a picture of your driver’s license
- Get quotes from 20+ top-rated insurance companies
Strategy #2: Reduce your food budget (without clipping coupons).
Food coupons can save you a lot of money on groceries. But cutting them beforehand, bringing them to the store, and remembering to use them is difficult.
Fortunately, there’s Ibotta — an online coupon app that can save you serious money on food.
Start by signing up for Ibotta and browsing the app for coupons that interest you. When you go to the store and buy those items, simply save your receipt.
Then, when you get home, scan the receipt with the Ibotta app and your cash-back will be in your Ibotta account within 48 hours.
With over a million combined reviews from iPhone and Android phones, Ibotta is helping millions of people save money.
Strategy #3: Consolidate debt.
The concept of debt consolidation is simple: borrow money at a low-interest rate and use it to pay off debts with a higher interest rate.
You then stand to save money by paying less in interest. For example, say you have $10,000 of credit card debt at 20% interest. Your total annual interest on this credit card debt would be $2,000.
Now, say you refinanced and consolidated that debt to a 5% rate. You’ll only pay $500 a year in interest, and therefore, save $1,500 a year.
This concept works with all kinds of debt — from credit cards to student loans and everything in between.
To see how much money debt consolidation can save you, check out Credible.
Credible lets you easily search all the top online refinancing and consolidation options for free. Unlike many other comparison sites, they don’t sell your information to lenders (this is rare)!
Step #3: 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. By doing so, you’ll increase the amount between what you make and what you save. At The Ways To Wealth, we call this “Growing the Gap.”
Go in with the mindset that making money is a skill you can build.
This month, you may only make $20. But chances are you’ll learn a thing or two that allows you to make $40 next month, $80 the month after that, 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: in other words, 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 that fact that you can complete surveys on your phone while watching TV, it makes for a productive use of free time.
After you sign up with a reputable site, 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):
Here’s what’s to like about Survey Junkie:
- Survey Junkie is the highest-rated survey site on TrustPilot, with a score of 8.8/10 and over 6,400 reviews.
- They do not send you spam emails.
- Offers some of the highest payouts in the industry.
- Pays in cash through PayPal.
Strategy #3: Pick up a job in the gig economy.
Gig economy jobs, such as driving for Uber, are one of the surest ways to make cash quick. You won’t get rich with a side hustle, but in the right job you can make $20 an hour in your spare time.
You’ll also take home 100% of the tips when you make a delivery.
To get started, create your account. Postmates will send you a welcome kit with a delivery bag and a debit card (which you’ll use to pay for customer orders). Then, just download the app and go online — you’ll get a notification whenever there’s a delivery in your area, and you’ll have the option to accept or decline.
Step #4: Get a Better Checking Account
If you’re living paycheck to paycheck, here’s an important step you need to take: open a new checking and savings account.
Banks are terrible when it comes to fees on accounts with small balances. And there’s nothing worse than getting hit with a fee when your balance is at or near zero.
That’s why, if you paid a single dollar in banking fees last year, it’s time to find a new bank account.
A great bank to start with is Chime. Chime has no overdraft fee, no maintenance fee, no minimum service fee, and over 38,000 fee-free ATMs.
Another benefit of Chime is that you have the option of receiving your next paycheck a full two days early. This can make all the difference when you’re in a real pinch.
Step #5: Give Every Dollar a Job (Again)
To summarize, you’ve:
- Made a budget
- Lowered your monthly expenses
- Made more money
- Opened a separate checking account
Now it’s time to adjust your budget so that it reflects the changes you made.
Once you know the difference between your expected income and your expenses, put the difference in your new savings account.
How to Save $1,000: Summary
When you’re struggling to make ends meet at the end of the month, it can be easy to feel hopeless. One thing people don’t talk about enough is the incredible stress a difficult financial situation inflicts on a person and their family.
But you don’t have to live paycheck to paycheck. There are ways to make your financial situation better. It might seem impossible, but I promise that it’s not. Taking just a few of the small steps outlined in this post can improve your financial footing. From there, you can take a few more steps… and then a few more.
Just remember that 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?