Between paying rent or mortgage and keeping up with utilities, car payments, insurance, and more, it can be easy to wonder where your paycheck went. While we all know that it’s important to save money for emergencies and retirement, such goals tend to fall by the wayside when you’re living paycheck to paycheck.
A recent study by CNBC revealed that the average millennial is spending almost as much as they earn each year on living expenses. As inflation continues to raise the prices of pretty much everything, sometimes it can be hard to figure out how to save money.
That’s why we’ve put together a few tips that can help you discover how to stop living paycheck to paycheck. From how to set up a budget to how to start saving today, we’ll explore some actionable tips that can help you regain financial control.
Ditch Your Debt
We get it. Credit cards can be tempting, especially when they come with offers that make it seem easy to earn cash back or other rewards.
But unless you can pay off your balance at the end of every month, it’s time to take a closer look at just how much those rewards are costing you. While 2% cash back may look like a great deal on a purchase, it doesn’t mean much in light of a 25% APR.
If you’re already carrying a hefty credit card balance that you won’t be able to pay off for years, then think carefully before your next swipe. It’s entirely realistic that you’ll end up paying 3x the original price by the time your interest fees are done doing their dirty work.
When it comes to how to stop living paycheck to paycheck, your most powerful tool is the ability to utilize your income instead of using it to pay for something you bought years ago. While there are many different approaches to paying off debt, finding one that works for you and sticking to it is the first step to financial freedom.
Creating a Realistic Budget
Another important step to regaining control of your finances is creating a realistic budget that details exactly where your money is going each month. But when you sit down to map out your money goals, it’s important to start with a realistic idea of how much you make instead of how much you think you make.
As your pay stub will reveal, your actual take-home pay is what you make after a slew of taxes has already been taken out of your check. That’s why learning how to calculate taxes on paycheck earnings can go a long way toward helping you create a more realistic budget.
ADP has a great paycheck calculator you can use to figure out what percentage of your earnings are going to taxes. Not only will it give you a more realistic idea of your take-home pay, but it can also help you figure out whether it’s time to look into adjusting your withholdings.
Taxes and Claiming Dependents
When you first start a job, you’ll fill out a W-4 that will ask you how many dependents you want to claim. The more you claim, the less money will be taken out of each of your paychecks - but you may have a higher bill or lower return at tax time.
If you’re single, then claiming yourself as a dependent can be a shaky legal area. It’s always best to consult a tax expert before making such a move in order to avoid legal issues down the line.
But if you do care for a child or other relative, then it’s definitely worth exploring whether they qualify as a dependent. Claiming them as a deduction exemption can result in more take-home pay throughout the year.
Explore Health Incentives
An increasing number of both employee and self-funded health insurance plans now offer wellness incentives that can save you a great deal of money each year. Some insurance plans offer rewards ranging from gift cards to hundreds of dollars worth of out-of-pocket medical savings.
The qualifications for these programs vary but tend to include things like getting yearly check-ups or tracking workouts via a fitness tracker. Be sure to look into your health insurance plan to see what type of benefits are offered.
You may even discover that you can score rewards for healthy habits you already follow. If not, then it might provide you with a great incentive to get healthy and save money all in one.
Small Savings Add Up
Ever wonder how some people manage to save hundreds of thousands of dollars? One dollar at a time.
Many of us get sidetracked by the idea that saving involves setting aside large chunks of money on a regular basis. But the truth is that even the smallest savings have a way of adding up.
That’s why Spave was designed to offer an easy solution to tucking aside cash through micro-saving. When you download the free Spave app, you can connect your account right to your debit card.
Each time you make a purchase, Spave will round it up to the next dollar and deposit the spare change in your savings account. The app also offers one-time or scheduled savings deposits to make it easy to save for your goals on your own schedule.
Give Back To Your Favorite Causes
With Spave, you can also choose to direct a certain percentage of your spare change to your favorite charities. We partner with thousands of different charities to help users ensure that their money is going to the causes they care about the most.
Spave also helps you keep track of your donations to make it easier for you to claim qualifying donations as deductions at tax time. Much like savings, even the smallest charitable donations can add up to a huge impact.