Breaking The Paycheck To Paycheck Cycle

Today’s post comes from Jesse Mecham, founder of You Need A Budget.com. He’s showing us a little bit of what I talk about in my book in terms of taking control of your financial life. Read his tips, apply them to your life, and watch as you begin to breathe easier when it comes to paying those bills: 

BY JESSE MECHAM

Too often, we let ourselves believe we’re locked in to a certain kind of financial fate, especially when that fate doesn’t look too bright. Getting caught in never-ending overdraft fees or a paycheck to paycheck cycle certainly does feel eternal. But there IS A WAY OUT! You have more control than you realize and it doesn’t involve another loan, more credit card debt, or borrowing from family. You can break the cycle of living paycheck to paycheck and conquer the feeling that there’s never enough money to meet your needs.

It involves a plan, a goal, and a new way of thinking. Remember, you’ll stay where you are if you keep doing what you’re doing.

The plan is to put as much distance between you and the brink of financial crisis as you can. That means, you need a game changer, i.e. an influx of money. It doesn’t have to be perpetual. You need just enough to create a buffer. From there, you’ll shift your spending habits—or I should say, timing—helping you to further break away from the cycle. More on that later.

First you need that influx of money. Some methods include selling stuff, getting another (part-time) job, or starting a business (don’t laugh, I’m serious).

Selling your stuff is the fastest method for a quick money fix. With plenty of online markets such as eBay, webstore, or your local online classifieds, it’s easy to find a buyer and have that extra cash in your pocket within a few days or weeks. Better yet, throw a good old-fashioned yard sale and pocket your money by the end of the day.

If parting with your New Kids on the Block cassette tape for 25 cents seems too much to bare, take on a part-time job once or twice a week and dedicate those wages solely to the buffer. Waitresses, tutors, or at-home typists, can make a considerable chunk over a few months time with just a few hours of work a week. (Tara notes: More on that here.)

If you’d rather be your own boss and you have a marketable idea (not to mention lots of time to get it off the ground), start your own small business. Consider your strengths, passions, and interests. If you already spend countless hours of your free time playing guitar, making crafts, or giving people advice about finances, think about turning that skill into extra income. Give music lessons, sell your wares, or start a service. This, of course, is not a quick fix, but a nice way of constantly adding to that money buffer over the long run.

For the more tedious but effective suggestions (working overtime, cutting back…even more), the biggest thing to remember is: this isn’t forever. It’s just a short-term change in your daily activities to establish a permanent distance from the paycheck to paycheck lifestyle. A hard sprint. Once you generate that extra cash (preferably at least one month’s expenses) you’re ahead. Done and done.

From here, it’s time to change your way of thinking. This may be the hardest part, but you’ll thank yourself soon enough. In order to maintain that buffer (and build on it!), you need to shift the timing of your monthly spending. Normally, most people use up their paycheck the same month they get it, creating a perpetual cycle of living on the edge of financial crisis. Instead, work towards the ideal financial situation: using your current month’s paycheck on the following month’s expenses. That means if you receive $6,000 in July, you don’t use that money until August.

Use that money buffer you just created to help you transition into living on last month’s income. It may require a bit more cutting back and cinching of the belt, and for most people it takes several months.  But once you make it a whole month and you still have those pristine, untouched paychecks from last month, you’ll know it was worth it. Why? Because all that money is waiting for you now. No more timing your bills with your paychecks, or fretting about your projected wages for the month (if you work off commission). You know exactly how much money you have to cover your expenses and you’ve already earned it. Much less worrying and much more peaceful sleep. Congratulations, you’ve officially broken the cycle.

Jesse Mecham is founder of the financial software company,YouNeedaBudget.com—because you do! Based on four fail-safe rules, Jesse’s revolutionary software teaches a method that helps people break the paycheck to paycheck cycle, get out of debt, and save more money faster. You haven’t budgeted like this.