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Yahoo
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- Yahoo
How To Stop Living Paycheck to Paycheck When You Make Good Money
According to numerous reports, about half of all Americans say they live paycheck to paycheck. This isn't limited to low- or moderate-income households, either. Almost half of those earning six figures feel the same way. For You: Try This: If you're struggling to make ends meet and feel like you never have enough money to meet your financial goals — like saving for a down payment or paying off debt — you're not alone. But your situation isn't hopeless, either. GOBankingRates reached out to several financial experts about how to stop living paycheck to paycheck when you earn enough money not to. Here's what they said. Sean Fox, president of debt resolution at Achieve, suggested making a spending plan or a budget. 'Most people don't want to 'budget' because it sounds hard, tedious and complicated. It's not. It's just a way to understand your finances in simple terms, with an eye on goals you've set,' Fox said. 'That means taking time to consider what you really want in your life, both in the long run (e.g., retirement, vacations, buying a house) and short run (e.g., a new piece of furniture, clothing, time for your favorite hobby or pastime). Then you can build your spending plan around what it will take to reach those goals.' No matter how much money you earn, you should always keep track of your spending. It's all too easy to fall into the trap of lifestyle inflation, something that occurs when you start spending more because you start earning more. You could be earning $100,000 a year and still have very little to show for it at the end of the month…if you're not tracking your expenses. Knowing how much money you spend and on what can help you figure out where the problem areas are and fix them. 'Keep a record of every single expense (online and off) you and everyone in your household makes for a couple of weeks,' said Fox. 'Most people have some surprises, and are then in a better place to make some decisions on smart spending that's in line with the budget.' Find Out: The Federal Reserve found that 82% of American adults have a credit card, while over 40% regularly carry a balance. While not a guarantee, if you're living paycheck to paycheck while earning a decent income, chances are you have some credit card debt, too. If that's the case, Fox suggested paying off this debt first. 'With interest rates over 20%, this is a huge expense — both in terms of what you're paying to the credit card issuer and the fact that you're effectively paying much more than the purchase price of what you bought,' Fox said. 'Plus, if you are carrying debt and paying all that interest, you have no opportunity to do something positive with that money — like saving for retirement and other goals you've set.' If possible, increase your monthly payments to pay off your debt sooner. If that's not an option, see if you can get a balance transfer card or a low-interest debt consolidation loan instead. Depending on the new interest rate and term, you could end up paying less in interest and getting rid of your debt sooner. There are a lot of reasons why people who make plenty of money live paycheck to paycheck. One of the big ones is that they don't differentiate between wants and needs. 'Whether it's about 'keeping up with the Joneses' or just preferring to not do so, the lack of thinking about whether a given purchase will meet a 'want' or a 'need' fuels overspending and credit card debt,' said Fox. 'It is much easier to simply buy what you want than to develop the habit of stopping to consider each purchase, and whether you really need it in your life.' All of this leads to overspending and living beyond one's means. If you're living beyond your means, take the time to distinguish between your wants and needs. Once you've done that, see if you can take it one step further by living below your means. Living below your means 'provides some cushion, a way to save and insurance that you are not living paycheck to paycheck all the time,' said Fox. Similarly, find ways to limit your discretionary spending. 'Cutting back on nonessential purchases is a great way to stop living paycheck to paycheck,' said a Quicken spokesperson. 'It is important to consider how many nonessential purchases [you are] making each week that you could either go without or make more cheaply at home.' You don't have to do it all at once. You can use a budgeting app or expense tracker to see where your money is going. Or, once a month, you can look through your bank and credit card statements to find out what you spend money on — and start finding small ways to cut back. Having goals, whether they're short or long term, can help motivate you to get a hold of your finances. 'By prioritizing your financial goals and having a time frame in mind, you can maximize your savings, stay motivated and move closer to the finish line,' said the Quicken representative. But don't fall into the trap of trying to achieve those goals all at once. Having that time frame is key. With it, you can avoid taking too long for a certain goal while also keep yourself moving toward it. For example, say you want to save your first $1,000 in an emergency fund. If you don't have quite that much money at the end of the month, that's OK. Start with a smaller sum — like $100, $200 or whatever you're comfortable with. If you know you want to save that amount within three months, break down your monthly savings goals accordingly — $1,000 divided by three. Once you've achieved a few short-term goals, you can start thinking about those long-term goals — like retirement. Joe DiSanto, a financial expert, consultant and the founder of Play Louder, suggested making a 'financial independence roadmap.' 'This is a long-term plan to reach your retirement goal, which includes a savings plan and required levels of investment return,' he said. As you work on your spending and savings habits, it's important to be consistent. 'You need to be consistent and make it part of your life,' said DiSanto. 'You can't 'wing it' or 'go with your gut feelings.' It's like going to the gym or maintaining a healthy diet. I use those examples specifically because most people struggle with that, too.' You can go about this in many different ways. For example, you could get an 'accountabili-buddy,' someone who can help you stay on track financially. Or you can do things like automate your savings or use a budgeting app. Whatever works for you, do it and be as consistent as possible. More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 7 Luxury SUVs That Will Become Affordable in 2025 9 Downsizing Tips for the Middle Class To Save on Monthly Expenses This article originally appeared on How To Stop Living Paycheck to Paycheck When You Make Good Money
CBC
13-05-2025
- Business
- CBC
School's (almost) out for summer, but are graduates ready to move out on their own?
Social Sharing Summer is just around the corner, and for young people preparing to leave home for the first time, it marks a significant rite of passage — one that can be riddled with challenges around managing money. Reese Finlay will graduate from Kennebecasis Valley High School next month and will be taking a bachelor of music at Mount Allison University in September. She said her parents have set aside some money for her tuition and she's been saving, too. "I've been working since I was 14, saving up for university. So I'm hoping to get through relatively debt free," she said. Finlay's parents are cattle farmers and she grew up selling steers to make money, later moving on to become a lifeguard and camp councillor. Financial responsibility was an open conversation in her house, she said, with her parents making sure she and her sisters are "prepared for life." "I feel like our parents are really drilling into us that we don't want to end up in a situation that's hard to come back from, because you really have to get it right the first time," she said. Those are important dinner table conversations that experts say don't happen nearly enough. Marissa Sollows, director of communications and public affairs with the Financial and Consumer Services Commission of New Brunswick, said people need to get over the taboo of talking about money in order to help teens navigate financial challenges and build resilience. "There's so much excitement coming into summer. There's a lot of freedom for the students, but underneath that there is a real financial landscape that they're navigating now," she said. In an economy increasingly populated by meme coins and other crypto currencies, traditional savings vehicles, like RESPs, RRSPs and TFSAs, can seem quaint, if not downright old-fashioned. But understanding where and how to save are lessons best learned early in life. "Young people today are facing a confluence of rising costs for essentials like groceries and rent, the responsibilities of managing credit cards maybe for the first time, or budgeting maybe for the first time," said Sollows. "And they're facing some pretty significant economic headwinds while they're doing this." Sollows points to an annual survey the commission conducts which tests the financial knowledge of New Brunswickers. "We fluctuate between 55 and 60 per cent scores on the tests, not a passing grade in all cases, but not misaligned with performance across the country." Another study by the Financial Consumer Agency released in January found that 44 per cent of Canadians describe themselves as financially knowledgeable, compared to 46 per cent last year. Financial education The Department of Education said there is a compulsory course in middle school called personal wellness that teaches students about financial matters. There are also five elective courses, mostly in the field of mathematics, accounting or finance, offered in the anglophone school system, that address personal finance. Sollows said she's noticed the school system has incorporated more financial education into the curriculum in recent years, but said financial literacy goes beyond the classroom. "It really does take a village. It takes the schools, it takes organizations who provide financial learning, it takes parents and guardians and communities at home to really provide young people with a good financial basis." Jada Hector is about to graduate from Kennebecasis Valley High School in Quispamsis next month and plans to study psychology at UNB Fredericton in the fall. She admits it's a little scary moving out on her own, but she's been preparing for this move for years. Hector has been working since she was in Grade 9, and pays for her own car and cell phone. "My dad always felt like he was in the dark when it came to that kind of stuff growing up," she said. "So he wanted to make sure that me and my four other siblings were brought up in a way that we would understand it all together, so it would make this transition easier." Hector said she took a family dynamics class in Grade 11 that taught her about debt, but most of her knowledge around spending, saving and financial responsibility came from her parents. Sink or Swim Lucía Pavón admits she had "no real concept of what money was" before leaving home in Honduras to come to university in Fredericton. Knowing the sacrifices her family made to send her all the way to New Brunswick, including paying international tuition, she said she was determined to figure the rest out on her own. "I started working my first job ever in my life, and that's when I really learned the value of money and like, 'Wow, this burger is an hour of my life.' This is a $15 burger and one hour of my [pay]." Pavón said she learned quickly from friends and mentors along the way, but there was a steep learning curve. "You really won't know the value of money … and how much it really serves you in everyday life, until you earn it and you have to spend it." Pavón is now going into her fourth year of university and is the incoming president for the Student Union. Looking back, she said the sink-or-swim method worked for her, but admits she could have used a bit more advice. "I 100 per cent wish that someone would have sat down with me, and told me, 'The value of money is important. Not everything is fun money. Groceries are expensive, they're only getting even more expensive. Rent is real and you need food and shelter. Your mom won't always be there to provide it for you. Get ready, start saving.'" Setting realistic expectations Sollows said it's important to keep a realistic mindset about what things cost, and avoid overextending on things like an expensive car loan that could set the unwary up for financial hardship down the road. And she adds that parents need to be careful too, especially when it comes to co-signing loans. "There are some real financial consequences for both sides if it goes wrong. So I think it's important that parents and students go in with their eyes open, understanding terms of contracts before being signed." Student loans, payday loans and lines of credit should come under the same scrutiny, she said. "You're stealing from your future self. So you're stealing not only the money that you're going to need to pay back in the future, you're stealing even more than that because you'll have to pay the interest on top of some of these things." Sollows said her best advice for young people is to reward your future self.
