Here’s how to shore up your finances if you’re starting the year off on rocky footing.
- People who live paycheck to paycheck often experience stress and run the risk of landing in debt.
- It’s important to pull yourself out of that situation as quickly as possible.
During normal times, living paycheck to paycheck without any money in savings is a precarious notion. But right now, it’s an even more dangerous financial situation to be in.
High inflation has caused the cost of consumer goods to rise exponentially. These days, people are paying more for everything from gas to utilities to groceries. And without a financial cushion to fall back on, you could end up landing in unhealthy debt if an unplanned bill comes your way, or if consumer prices rise even more.
If you’re starting off 2022 with a paycheck-to-paycheck existence, you’re certainly not alone. But it’s important to pull yourself out of that situation as quickly as you can. Here’s how.
1. Set up a budget
Following a budget is one of the easiest ways to track your spending and get a better grasp on your finances. If you don’t have a budget yet, comb through your bank and credit card statements from the past six to 12 months and figure out what your various bills entail. Then, aim to figure out what they cost you on average (while you might pay a set $900 a month on rent, things like your grocery and utility bills may vary).
While you can create your budget using a spreadsheet (or even good old pen and paper), there are different budgeting apps worth looking at to help you stay on track. Some of these apps sync up with your checking account and credit cards to assign purchases to different spending categories and help you really get a clear picture of where your money goes.
2. See if you can trim your spending
To build some cash reserves, you’ll need to not deplete your entire paycheck every month. That could mean having to make some tough choices about the things you spend money on.
Once you have your budget in place, comb through it and see which expense categories you have the potential to cut back in. You may not be able to lower your auto loan or rent payment, but if you spend $80 a month on cable, …….