How Can You Stop Living Paycheck to Paycheck?

Living from paycheck to paycheck can cause stress, especially when you cannot cover all your needs and wants on a monthly basis. Constantly scrambling to make ends meet can feel like running on an endless financial treadmill.

A combination of practical strategies and a positive attitude can help you make real progress. The most crucial step is to start – now!

#1: EXPECT THE UNEXPECTED

When you are struggling to pay for all your current expenses, it can seem impossible to put anything aside for your future. However, unforeseen circumstances can happen anytime. Job loss or accidents could put you in a bigger financial trap. Cushion these circumstances by building and emergency fund.

While people usually put six months’ worth of expenses in their rainy-day fund, you can aim for saving at least S$1,000 first. Even if you start with just S$50 per paycheck, you will become more confident in managing your finances as time passes.

#2: CREATE A REALISTIC BUDGET

Be honest! Do you know where all your money goes to? If you are merely paying for the incoming bills and ensuring that everyone is fed, you may not have a system in place. When you have a budget, you can easily monitor where your money goes and where it should be.

A budget also uncovers your spending habits. Examine these spending habits to make necessary changes. Cutting down on non-essential expenses can help save money for your future.

#3: TACKLE THE FOUR WALLS

According to financial author Dave Ramsey, you must take care of your Four Walls first. These fundamental walls include food, utilities, shelter, and transportation. Put these on the top of your budget priorities and write down other categories that you need to pay for. List these categories based on their importance.

Image Credits: pixabay.com

When you run out of money, that is it. Stop spending!

#4: LIVE BELOW YOUR MEANS

Don’t get a part-time gig to keep living a lifestyle that you can’t afford! Increasing your income streams can help with your situation, but you must be responsible with your money. Remember why you took on that additional job in the first place.

Seek the help of others to ensure that you are not tempted to spend your extra money. Stay intentional and stick to your budget.

#5: AVOID THE CREDIT CARDS

Are you trapped in a mountain of debt? Well, you won’t get out of it if you continue using your credit cards.

As much as possible, avoid using your credit cards until you are completely out of debt. This will help you control your spending. If you lack the willpower, eliminate all your credit cards except for one. Put all your credit on this card and pay off the minimum each month (on time).

#6: BE PATIENT

Getting out of this situation can’t be achieved overnight! Start with small positive steps toward money management. Think of money that you can save and watch it add up. This process takes time and commitment, but you can do it.

Image Credits: pixabay.com

Just have the courage to start now!

Sources: 1 & 2

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Do these 10 things if you want to achieve financial freedom

stacks of Singapore notes

It is fair to say that most of us want to achieve financial freedom. To have enough savings and solid investments to afford the lifestyle you wish to can sound really attractive. Unfortunately, finding that freedom can be challenging.

Many people hold debt, overspend, or encounter challenges that make financial freedom challenging to achieve. However, all hope is not lost. Develop and maintain these simple financial habits if you want to attain financial freedom.

#1: Set specific goals

A goal like “I am going to be rich one day” is vague. A better way to set targets is to use the SMART technique. They should be Specific, Measurable, Achievable, Realistic, and Time-focused. 

You should be working towards a SMART aim like “I am going to increase my savings by 1% a month for twelve months.” Write your desire down in a journal, and make it your mantra. Specific goals lead to accurate results, so cut out that fluff thinking.

#2: Write a budget
budgeting

Image Credits: pixabay.com

Budgeting is essential for wise money management. Instead of squandering money away and realising reason why i’m broke, it’s better to start analysing your spending habits.

Ensure your bills are promptly paid and your savings are funded before allocating money to luxury expenses or feed your lifestyle inflation. Understanding where your money goes each day is the best way to control your urge to splurge.  

#3: Clear your debts

With existing debts looming over your life, financial freedom seems like a faraway dream. When you owe financial institutions money, don’t forget that the interests are rolling.

To eliminate debt, you may want to try the pyramid strategy. Pay off your smallest debt first, then allocate that money to your next-smallest bill, and so on until you have paid your debts off altogether.

You may also be interested in reading our recent article on “top tips on how to pay off credit card debt quickly”.

#4: Automate your savings
automation

Image Credits: Medium

We can’t emphasise enough because it’s one of the stablest ways to grow your savings. If you have a direct salary deposit from your employer to your bank account on payday, ensure a percentage of your income goes into savings right away.

It’s easy to set up recurring transfers to send money to a specific saving account every time you get paid, so you shouldn’t be giving any lame excuses. Once the automation is in, the routine will ease you into saving, so resist the urge to withdraw.

#5: Educate yourself on finances

We may be mistaken, but many of us do not have a good understanding of personal finances. Well, we can’t blame ourselves since it’s not taught in schools?

Wrong.

Take ownership to have at least a basic understanding of how money works – be it in the topic of debt or investments. Read books written by experts or consider taking some courses to develop your knowledge of money.

Speaking of which, do you know that Seedly is organising a Personal Finance Festival 2021? The most extensive personal finance event in Singapore is happening on Saturday, 10 April 2021, from 10am to 5pm. Read more about it here.

#6: Invest when you’re ready
watching the stock market

Image Credits: Forbes

Investing in the stock market can seem scary, and it’s no wonder why some people have analysis paralysis.

Yes, the market is volatile and can occasionally crash. Unforeseen circumstances can cause even the most robust markets to shrink. But without risk, there is no return. As such, the stock market is one of the greatest ways to grow your wealth.

If you know not where to get started, how about beginning your journey through Robo-advisors? From OCBC RoboInvest to DBS digiPortfolio and Stashaway, there are several local options for Singapore investors.

#7: Monitor your credit scores

Your credit score is the first thing lenders will examine when you wish to make a major purchase, such as a car or a house.

Do you know how to grab hold of your credit report? You can get a copy from the Credit Bureau (Singapore). Each CBS Credit Report is chargeable at S$6.42 (inclusive of GST). Simply make a purchase online, at any SingPost branches, at the Credit Bureau office, or CrimsonLogic Service Bureaus.

Read up more information on credit scores and why they matter here.

#8: Maintain your health and assets
health is wealth

Image Credits: Medium

If you achieve financial freedom but then neglect your health, your hard work could go to waste due to unexpected healthcare costs. Constant exercise, eating right, and avoiding unhealthy lifestyle choices will benefit you in the long run.

While you take of your health, don’t forget to keep an eye on your things. Making sure that they last longer can help you save money.

This is true for everything, from mobile phones to laptops and cars. Keeping them well-maintained is likely to increase their lifespan and save you money on costly repairs or replacements down the road.

#9: Don’t exceed your means

Frugality is frequently on our radar, and you might have read about it in several money-themed blogs too. But you know what? It is an excellent trait for achieving financial freedom, and we’re going to play it like a broken record.

The ideal way to live within your means is to distinguish between things you want and the things you need. Just because you can afford something does not mean you need to buy it. If there’s a cheaper option out there, go for it.

#10: Talk to an expert
two men talking

Image Credits: Great Eastern

Once you have accumulated some savings, talk to a professional about how to manage your money. Picking the right financial advisor who is legally obligated to act in your best interest instead of theirs is vital.

Final thoughts

While financial freedom may seem like a daunting goal to reach, it is well within your means to achieve it! Taking a disciplined approach and developing the abovementioned habits over time will help you get to your desired state of financial freedom in no time.

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Different Ways To Define Financial Independence

Whether you call it Financial Independence or Financial Freedom, the first step to achieving autonomy is by defining it.

If you Google this term, you will find that there is an abundance of definitions available. However, let us focus on these four:

1. BY CASH FLOW

The most common definition of Financial Independence relates to cash flow. Many experts accept the idea that it is the “state of having sufficient personal wealth to live, without having to work actively for basic necessities.” Simply put, you passive income is able to cover your living expenses. Passive income sources include rental property, royalties from intellectual properties (e.g., books), trust funds, online business, investments, and pension plan.

Quantify your progress by calculating the percentage of living expenses that your passive income covers. When you reach 100% then, you attained Financial Independence by this definition. Having a full-time job is certainly optional with this circumstance!

2. BY WORRYING LESS

For many people, Financial Independence is achieved once they can use their money to banish their stress. These people focus more on what they can accomplish – in the terms of minimizing the “gap”. The gap that I am referring to is the division that exists between your income and your spending.

By this definition, you can increase the gap and reach Financial Independence quicker by spending less and earning more.

3. BY HAVING NO DEBTS

Financial Independence is characterized by being off the debt latch. While some debts are necessary and can be easily paid off, others are unplanned and difficult to pay off. Eliminating the latter is a crucial step to gaining financial freedom.

There are numerous ways to minimize your debts and build a better relationship with money, learn some of them by checking out our helpful posts, here.

4. BY DOING WHAT YOU WANT

A refreshing definition of Financial Independence is shared by Investopedia. Its contributor believes that Financial Independence “should mean the ability to live more or less as one wants to, within reasonable limits.”

Financial Independence can be seen as being able to do and choose the path that you desire the most. Absolute autonomy mean not always be synonymous early retirement as it can refer to your power to quit a horrible job.

Image Credits: pixabay.com

Image Credits: pixabay.com

In my opinion, this is the most achievable definition among the four.

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