Three out of four Americans, or 76% of the American population to be precise, are living an unstable financial life stemming from a paycheck to paycheck culture with no savings or any other back up to sail them through tough or difficult financial situations. This is the conclusion of a very recent survey conducted by bankrate.com. Another noteworthy conclusion from this survey is that the numbers are not improving any bit over the last few years in spite of greater financial literacy.
That is a very significant part of our financial literacy education program. Through this program we educate and encourage all our consumers to build a crucial emergency savings fund worth at least six to nine months of income.
A major obstacle consumers face in building such a fund and stop living paycheck to paycheck is debt. With ever mounting debt and playing catch up with it, most of the income is spent covering it even before it is time to be paid. By the time all the monthly debts are covered, there is precious little left to be saved to the emergency savings fund to build any substantial amounts.
With that very goal in mind here are 6 tips to help you stop living such a cornered life.
- A Written Budget: A budget, in writing, is of foremost importance to turn your tide around. An initial crucial step to form your budget is to track your expenses. Once that is done you can analyze your current expenses and come up with an improved spending plan.
- Clear Cut Priorities: Settling your housing bills, debt payments and household bills should be a priority. This should be followed by essential living expenses and lastly come the discretionary expenses. If the budget is particularly tight the discretionary expenses might be entirely overlooked until better financial conditions are achieved.
- Significant Temporary Adjustments: To make drastic financial shifts in the initial stages, it is necessary to give up a few granted luxuries temporarily. These may include dining out, frequent entertainment, and buying things you want. Most people who fail to live on such a budget fail primarily because of their inability to stick to these adjustments. The important thing to focus on is that these changes are only temporary, only till the debts are paid off and the major expenses covered so that the savings fund can build.
- Saving: It is important that some saving be made periodically even when the budget is pretty tight. The saving may be just a little but it has to be made. At first this is important to develop a saving habit but after six months or so you will have saved enough to get a significant debt or expense off your back. Thereafter your savings fund can substantially move upwards.
- Helping Hands: To borrow or lend is not the only definition of having a helping hand. Instead of taking your family or friends out for dinner invite them over for a pleasant dinner at home.
- Debt Plan: Not all consumers are good at getting their debt management plans right but by lowering monthly payments along a well structured timeline it would be much easier to pay them off.