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Get out of the paycheck to paycheck trap

Different studies have shown that between half and two thirds of people live from salary to salary. That is quite an alarming statistic! This can be explained in part by the performance of the current economy, our own attitudes about money and the lack of adaptation to a changing world.

Change your attitude

The place to start is with your thinking. With regard to life from paycheck to paycheck, you may well think that “that’s the way it is” or “everyone is doing it,” both of which are false. Maintaining these attitudes will ensure that your situation will never improve.

Take a little time to think about what led you to your current situation. In a Celebrating Financial Freedom article titled “4 Steps to Escape from Paycheck to Paycheck Life Forever,” the author identifies the following mental and behavioral impairments that are harmful to financial health.

• You have come to the conclusion that debt is only part of life – contrary to what some may think, you don’t have to be in debt to survive in today’s world. You must decide to make paying your liabilities your number one priority!

• Luxuries have become necessities – Certain luxuries like cable TV, an expensive car, and eating out have often evolved from extras to necessities. These extras will bleed your budget.

• You are not earning enough – You may be underemployed with little effort to maximize your employment status.

• You are overspending: You may also be spending more than you earn, a common pitfall for some people. This needs to be controlled.

• You have no plans: basically, you spend your money until it runs out with no idea where it is going. You really need a plan.

• Money is so easy to spend – Those credit cards feel so easy to swipe and sign — it doesn’t feel like cash. However, it is, and then comes the interest.

• You have a spending problem – you don’t have self-control when it comes to spending, and you may even be a shopaholic.

• The labor market has changed – Certainly, the labor market has changed and continues to change. You must learn to deal with those changes. On this topic, the author recommends a book by Dan Miller entitled “48 Days to the Job You Love: Preparing for the New Normal.”

With a greater awareness of how you got to be where you are, are you now ready to begin your journey to financial health? Here are some specific steps to follow along with some helpful links.

Get out of debt

You must come to the conclusion that debt is a choice. Interest and fees will drain the money you’ve earned. Eliminating your debt is the best place to start reversing your situation.

Here are some areas where you can save money.

1) Food: Reduce the number of times you eat at restaurants. Buy some healthy ingredients at a market and pack your lunch. This can result in significant savings for you. A few more food saving tips for you. Use coupons.

2) Automobile: another category of expensive expense. If you can, download your car payment. Maybe even switch to a used car. Other ways to cut down on care costs include: changing your oil less often, signing up with the Automobile Club for roadside assistance, researching repair costs, and delaying your car trade-in. Consider carpooling to work. Assess your auto insurance needs. If you have an older car that is paid for, consider dispensing with collision and comprehensive insurance. Maintain a clean driving record and stay on top of low-mileage discounts, multiple coverage with other types of insurance, and group auto insurance plans from employers, professionals, alumni, and other groups.

3) Entertainment: Consider ditching your cable TV for Netflix or Hulu. Here are some fun things to do for free. Go to the library for books and DVDs. Take advantage of free music and museums.

4) Clothes – You don’t need fancy clothes if you’re in debt, shop on sale, go to thrift stores and discount shelves, buy second-hand clothes, order clothes for gifts, take care of the clothes you have, and sell the clothes you don’t have . longer wear.

5) Eliminate credit card debt: Start by calling your credit card companies to see if they will lower your interest rate. The average interest rate for credit cards is around 15 percent, but some can go as high as 30 percent. A study was conducted in 2002 that found that half of the participants who requested a lower interest rate received one. Consider transferring that debt to a lower interest account or taking out a loan to consolidate your debt. If these options are not feasible, prioritize your debts so that you pay off those with the highest interest rates first.

6) Medical debt: You can start by offering to pay cash, if you have it, while you are still in the hospital or at the doctor’s office. This can save you 5, 10, or 25 percent straight off the top. If you end up paying more than the total bill, you will get a refund. If it is less, you will be responsible for the rest. When you receive a bill in the mail: The part of your bill that says “may (should not) owe” can be negotiated. Compare what the bill says your insurance didn’t cover with what your insurer’s policy says it does. If there is a discrepancy, call the doctor’s office to have it fixed. Your provider can also hold your bill for 30 to 60 days to prevent you from going to a collection agency. Notify your provider of any secondary insurance you may have. If you already have medical debt, ask about any partial forgiveness program or request a payment plan with 0 percent interest. Sometimes you can get a payment plan for a year or more.

7) Student Loans: There is a Public Service Loan Forgiveness Program that can allow those in the military, teachers, nonprofits, or public service jobs to have their loans forgiven in full. There are other programs, such as Income-Based Payment, that will allow you to pay less than your regular payment if you are not earning enough income. If you want to pay off your balance faster, start making biweekly payments.

8) Mortgage and IRS Debt: Reduce your mortgage debt with biweekly payments. For IRS debt, try to arrange a repayment plan with them.

In an article titled “The Number One Way to Stop Living from Pay to Pay” by Alex Thomas Sadler, she offers three helpful apps for getting out of debt. They are Pay Off Debt, Ready For Zero, and DebtTracker Pro.

Increase your income

Even with the ability to cut your expenses as much as you can, you may still not be able to cover everything. Now you need to focus on making more money. Consider improving your current situation and income in your current job, getting a part-time job or a side job, or some combination of these. Take some work-related classes and possibly get a certificate to increase your income. Your job will often reimburse you for tuition and books. Some other ideas for you: You can do freelance work (and that doesn’t include just writing), becoming a virtual assistant, bookkeeping, design, and more. You may like to give private lessons in a subject that you enjoy. Sell ​​items you don’t need on eBay and Craigslist. A little more money making ideas for you.

Prepare and stick to a monthly budget

By preparing a monthly budget, you can keep track of where money is coming in and going out. Start by examining your expenses from the previous month for necessary items like your mortgage or rent, car insurance, groceries, gas, etc. Then find out how much you want to spend each month. Post that number somewhere, pay cash whenever you can, and even consider initiating automatic deposits from your paycheck that will go directly to lowering your debt. Do this so you are not tempted to buy unnecessary luxury items.

The following is a link to more valuable articles on budgeting: http://www.cfinancialfreedom.com/budgeting-budget-excuses-overcome/

Here are five apps that can help you create a budget and track your spending / savings goals.

• Level Money keeps track of your spending and gives you an idea of ​​how you are doing. It’s free and probably works best for those who have relatively simple and linear financial lives.

• Mint is a very popular app that helps you create a budget and then tracks your spending, monitors your credit score, and keeps up with potential fraud by automatically downloading bank account, credit card, and investment transactions. The service allows you to combine all your finances in one place, giving you a constant overview of your financial status. You can also set up alerts and automatic bill payment.

• Budget Boss is a highly visual application that uses graphs and charts to keep track of your budget and goals. It also calculates your future account balances based on your current spending habits.

• HomeBudget (iPhone only) is an application that allows you to manage account balances, estimates, and invoices. You can set up credit and debit accounts and keep track of balances, and it syncs the data with other iPhone users and can export it to a desktop. Users can take a photo of the receipt and associate it with a “family sync” feature that allows household members to exchange information and work together within a single budget.

• Wally is a tool that shows you what is going in, what is going out, what you have saved and what you have budgeted for. Wally helps you better understand where exactly your money is going, and then helps you set, as well as track and achieve, various financial goals.

Make a plan

In addition to budgeting, make a plan at a more macro level for how you can stop living paycheck to paycheck. Find out what your top priorities are for both your short-term and long-term future. These may include buying a home or car, taking a big vacation, creating an emergency savings fund, or saving for retirement. Remember that paying off debt will improve your credit score for those larger purchases. Stop spending money on the little things you don’t need so you can get the bigger things you need later. Make your goals realistic so you don’t get discouraged. Spend time with like-minded people, prudent and responsible minded people – spenders can sink you. Finally, celebrate your successes in eliminating your debt!

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