Finance Blog
Living Paycheck to Paycheck—How Can You Save?
Living Paycheck to Paycheck—How Can You Save?
Mechel Glass, CredAbility.org
It’s not impossible to save while living paycheck to paycheck, but you must be willing to sacrifice.
I often teach classes about budgeting and saving to people with full-time jobs who, unfortunately, are living paycheck to paycheck. These are hard-working people with families who know the value of a dollar. They tell me things are tight and they can’t save money. But knowing they have little margin for error, I implore them to begin to save. Here’s the plan I give them.
First, you need to create a prioritized spending plan. You start by itemizing every expense planned for the current month; this is the only way you’ll know where your money is going.
As you list your expenses, think about what counts as a “necessity.” There’s no room in anyone’s budget for coffee that costs $3 per cup when you can make coffee at home. That’s wasting your money, especially if you’re already on a tight budget.
Once you have outlined your expenses, consider developing a budget that allows you to live on 70 percent of your income, with the remaining 30 percent put into savings for the long term.
If that isn’t possible, you need to make some tough choices about what expenses you are willing to give up. If you really want to build a savings account—and you need to, so you’re prepared for emergencies—you must be willing to give up certain expenses that aren’t critical, whether it’s a membership at a local health club or cable television service.
Reduce Your Expenses
Next, you have to consider spending less on necessities, and this includes food and clothing. At CredAbility, when we counsel people to help them pay down their credit card debt or avoid foreclosure, we often direct them to buy their groceries at Angel Food Ministries, a nonprofit organization dedicated to providing food relief.
To find other low-cost services, like daycare, in their community, we often direct people to call United Way, at 211. For clothing, I recommend that people visit their local thrift stores. To anyone who has never visited a thrift store, this sounds like a major change. Well, guess what? It is, but it’s one of the ways to save money and start building a savings account.
Most people think they have few options when it comes to paying for their utilities, but this isn’t true. For your heating and air-conditioning, investigate the budget billing plans from your service providers. If there are competitors in your region, see if they are advertising lower rates or discounts. For telephone service, consider eliminating your home phone and using only your cell phone. Cut out additional features, such as text messaging and data plans. If you have to have Internet service, as most people do, check out local and long-distance phone services that cost as little as $20 annually.
For people who must travel to work every day, consider carpooling with a colleague, especially now that gasoline exceeds $3 per gallon in most parts of the United States. If this isn’t an option, consider taking mass transit. A savings of $20 a week in fuel adds up to over $1,000 a year.
Increase Your Income
My final recommendation is to consider taking a second job, even if it’s just for a few months. For parents with young children, I know this is a tough choice. If you are unable to work outside the home, consider selling items that you no longer use, such as books and clothes. These items can be sold not only at garage sales, but also online at Amazon, Yahoo, and eBay.
What other talents do you have? Are you good at baking or writing? Many parents with small children have taken on small side businesses, such as writing books or baking or making products and selling them on the weekend in their communities.
These are just a few suggestions to consider, but if you don’t have a savings account, it’s time to make some tough decisions. It’s much easier to reduce your expenses and boost your income before you need those funds. The tougher task may come later if you haven’t saved money for medical emergencies or an unexpected job loss.
Read More:
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Debt Reduction: Why Paying Down Your Credit Card Debt Helps Your Credit Score
Mechel Glass is the Director of Education for CredAbility. In this position, she is responsible for developing the curriculum and educational materials for online classes including webinars, podcasts, videos and listen-on-demand classes. She is responsible for managing the agency’s community outreach programs and staff, including financial education specialists in a 14-county area throughout metro Atlanta and north Georgia. She also manages the development and reporting of education partnerships online for the agency.
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