If you’ve ever been to one of those payroll loans shops and taken an advance on your salary, you might be in financial trouble. If you barely make it — or can’t even quite make it — to your next pay day, you’re living in a vicious financial loop where you can never get ahead. You’re likely paying exorbitant interest because you can’t make more than minimum payments on your debts; you may never build up equity in your home. Even the smallest of emergency situations, like an unexpected car repair or a sick pet, can be a trial. Big, life-altering situations like serious illness or divorce can be devastating. A resort vacation or a new car? Forget it.
It’s a hard habit to break, but it can be done. The first thing it will take is the acknowledgement that you didn’t get here by magic — the decisions you’ve made in the past and the way you’ve chosen to handle your money are why you’re living paycheck to paycheck. Once you get real about what got you here, it’s time to get real about your spending. Check out our last post for some help making a spending plan.
Be prepared to cut. Do whatever it takes for as long as it takes — getting off the paycheck-to-paycheck merry-go-round will be worth it. Start with little things, like turning off lights when you’re not in the room and taking your lunch two or three days a week. Move on to carpooling and ditching your cable television. Then, take on the big stuff, like selling your motorcycle or getting by with one car between you. Then, start talking to your family about the really, really big stuff, like whether you should be selling your house, using the equity to pay off your debts, and renting an apartment for a couple of years.
Start putting away a small amount for savings, even if it’s just $25 or $50 a check. Have it taken directly from your bank account on pay day and put into a tax-free savings account (TFSA), where it will require a special request and 24 hours’ notice to get at it. It makes it hard to buy on impulse, and over time, you’ll be surprised how much small amounts add up.
Pay your bills as soon as they’re due, and pay more than minimum on credit debts, even if it’s just $5 or $10 more. It will make a big difference in how long it will take to pay them off, and how much your borrowing will cost you. Get in the habit of keeping just one credit card with you, with a small limit, strictly for emergencies, and leave the rest at home.
Also get in the habit of tracking your spending, maybe forever. Keep a little journal and write down every penny you spend for the first few weeks, and then when you’ve developed better habits, start looking at your spending
perhaps once a week. If your expenses start creeping up again, act to reduce them. Consider turning a hobby into a part-time venture, or volunteering for overtime at work to increase your income.
Take responsibility and act now. Enlist the help of a qualified Credit Counsellor to help you stop living paycheck to paycheck.