Are you ready to break the payday to payday cycle? In today’s blog post I’ll be discussing how to stop living payday to payday. By applying just a few of the nine different ways suggested, you’ll be able to break the paycheck to paycheck cycle and save more of your income to put towards your financial goals.
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How To Stop Living Payday To Payday
It’s the end of the month and your payday has just come, or if not, is right around the corner. Were you counting down the days to payday? If so, don’t worry, you’re not alone. 40% of UK employees say that they are currently living payday-to payday and have no emergency savings. What’s more, nearly a third (29%) revealed that they have financial problems that are negatively affecting their lives.
In today’s blog post, we’re going to once and for all address this pandemic that is plaguing our finances and outline 9 things you can do in order to break the payday to payday cycle once and for all.
1. Set Short Medium And Long-Term Financial Goals
We’re in the last quarter of the year, there is still time to achieve some financial goals. Do you want to reduce your current overdraft balance from £2,000 to £1,000? Save enough money to pay cash for Christmas? Setting financial goals and having a plan for your money will help you break the payday-to-payday cycle. When you have a clear goal and plan for your money, you’re less likely to overspend on things that don’t really matter.
The short-term goals will help you stay focussed day-to-day, but having long-term goals and a bigger goal that you’re working towards will help you stay the course. You have a clear direction you’re heading in and though you may slip up along the way, you can recover quickly as you know where you’re going.
If you don’t know where you’re going, how will you know when you’ve arrived there?
2. Create A Budget
It’s important to tell your money where to go at the start of the month so that you’re not left at the end of the month wondering where it all went. My personal favourite budgeting method is the zero-based budget as it allows you to make a plan for every penny and pound at the start of the month and allocate it to all your different budget categories.
I created my own zero-based budget template which I use to manage my finances and has helped me pay off over £36,000 debt. You can grab your own copy here. Creating this budget transformed my finances and helped me break the payday-to-payday cycle by becoming very intentional with how, and where I allocate my money.
3. Face Your Front!
Nothing will be a bigger drain on your money than watching and following what other people are doing. In other words – stop keeping up with the Joneses. The poor Joneses get a bad wrap, they are just minding their business and living their lives and are not responsible for any bad financial decision you or I make.
But the reality is, we are all being influenced, whether for good or bad by what others around us are doing, so be mindful of what you consume and what you are allowing to influence you.
4. Pay Yourself First
Prioritise yourself and your financial goals. When I say this, I don’t mean that dress that you’ve been wanting to buy for the last two weeks, I mean prioritise your savings. That savings goal that we mentioned earlier, let’s put money towards that first in the budget, before allocating it to all other spending categories.
In the book The Richest Man In Babylon, Arkad, who was the richest man in Babylon, revealed that he found his path to wealth when he decided that a 10th (10%) of all the money he earned was his to keep. It’s not about how much you earn, it’s about how much you keep. Always pay yourself first.
Every penny you save has the opportunity to grow and make you more money, but once you spend it you’ve not only lost the money, you’ve also lost the money that it could have made you.
If you’ve never paid yourself first before, start off at 1%, then each month increase it by an additional 1%, in 10 months you’ll be at the desired 10% savings rate and would have broken the payday-to-payday cycle. If your monthly net salary is £2,000, that’s just £20 that you need to save in month one. Can you find £20 in your budget to save?
I wrote a detailed summary of the book as it was such an enlightening read. It teaches you important fundamental money lessons which will transform your money mindset indefinitely.
5. Get A Hobby
Boredom is one of those psychological triggers that make people spend money unnecessarily. The continuous lockdown over the last 18+ months has been proof of this, with more and more people turning to online shopping to cure their boredom. Can you relate? If so, it’s time to find yourself a less expensive time-filler. From reading books, to learning a new skill that can earn you an extra income, the options are endless.
If you’re looking to upskill, Skillshare is a great place to start. There are thousands of courses across a wide variety of subject areas. There’s hours worth of learning to do that will add value to your life and save you money simultaneously. Click here for a free 14 day trial of Skillshare Premium.
6. Pay Off Debt
A sure-fire way to break the payday-to-payday cycle is by paying off high-interest debt. If you’re paid £2,000 a month, and £500 of that money is going towards debt repayment each month, this is a big problem that needs urgent attention. In my eBook “How I paid Off £36,000 debt” I outline the steps I took to achieve debt freedom. I also wrote a blog post outlining 7 ways to get out of debt fast which can help you on your debt-free journey.
If you are currently in debt, don’t panic, there is light at the end of the tunnel. In this post, What to do when overwhelmed by debt, I suggest practical things you can do if you are overwhelmed by debt.
7. Save Up For Big Purchases
Saving up for big purchases and paying cash as opposed to financing the item will save you a lot of money. You could end up paying APR’s of up to 20% on a single purchase, just because you didn’t wait and save up the money to pay for the item outright.
You want a new sofa, but can it wait 8 months while you save up enough to pay cash for it? This isn’t an easy thing to do in the world we live in today where by-now-pay later is being shoved down our throats. But when these retailers say buy now, pay later, what they really should say is buy now, pay-A FORTUNE-later. This is usually what happens. They may advertise 0% APR, but the reality is, this has already been factored into the inflated item price.
8. Stop Making Non-essentials Essential
By this I mean, don’t turn a luxury into a necessity by committing to unnecessary monthly payments.
Let me illustrate.
So you need a new car? Ok, fair play. My question and challenge to you would be, why do you need a new car? To which you may answer “To get from home to work each day”.
Now we’ve established you need a new car in order to get to and from work, I would suggest exploring other cheaper ways to achieve that same goal.
Can you walk? Cycle? Take the bus? What about the train? These options I’ve suggested do increase in price as you go through them. If none of them are at all feasible then yes, you probably do need a car.
You could in theory save up enough money to buy a reliable used can for under £2,000 to solve your problem. But telling yourself that because I need a new car to get to work, I’m going to buy a car on finance with monthly payments of £500 of my £2,000 salary is not the answer.
Yes, you need a car to get to work, but you don’t need a brand new car to achieve this goal. Turning a luxury into a necessity is a sure-fire way to continue living in the payday-to-payday cycle.
9. Stop Using Your Credit Card
Research shows that in some cases people spend as much as 83% more when paying with a credit card than they do when they pay with cash. Ask yourself honestly if you’re one of those people, and if so it may be time to cut up that credit card.
Yes, credit cards do have huge benefits and I’m not saying you should never use them, but if you know that you’re spending double what you would ordinarily spend, just because you’ve used your credit card to pay, then it’s time to cut it out.
I hope that after reading this blog post, you now know how to stop living payday to payday. These nine ideas I’ve shared should help you break the paycheck-to paycheck cycle once and for all in order to free up finances needed to achieve your financial goals.
If you need more help with breaking this payday to payday cycle and you want some coaching to help you get started on your financial journey, book yourself in for a complimentary financial coaching call and let’s get you started.