Living from paycheck to paycheck? Here’s how to fix it

Living from paycheck to paycheck
Living from paycheck to paycheck?

Millions of South Africans live from paycheck to paycheck, have no savings at all and lack even the most basic money and budgeting skills and knowledge.

If you’re finding it hard to make it through the month, are finding yourself reliant on short-term debt and don’t have an emergency fund, this article will help you figure out what’s actually going on and will help you turn the situation around.

Some scary stats to get us started

Early on this year, Tyme Bank released a report stating that about 76% of South Africans run out of money before the end of the month. In addition a staggering 57% of South Africans run out of money before the 15th of every month. Only 4% of us are, according to the study, able to put away money for emergencies, education and other important things.

While we can all accurately reach the conclusion that this points to a lack of sufficient income, poor spending habits and a reliance on debt are just as much to blame. Making a change not only to our lives but our sense of security and peace of mind starts by educating ourselves on finance and learning how to create and stick to a budget.

Where’s all our money going?

According to the study, 41% of our income goes towards housing and 24% goes towards groceries with transport and school fees following shortly thereafter. These are essential items that rarely can be avoided and are actually correct in terms of how we should be spending and budgeting.

What’s happening with the money we have left over?

For those who are lucky enough to have some money left over after paying housing, groceries, transport, school fees and debt the money that’s left over generally goes towards non essential purchases such as takeaways, clothing and going out socialising.

How to change your month-to-month lifestyle

Regardless of how much you earn, you can cut down expenses and avoid some of the non-essential purchases that we all make on a monthly basis. Whether it’s take outs and movies or drinking with friends, cutting out some non-essentials and putting some money towards savings can change everything.

Start small and work your way towards a big change

Changing your spending habits is no walk in the park and will take a lot of planning, effort and commitment on your part. The key is to start making small changes and then work your way towards bigger and more significant changes and savings.

Invest in educating yourself on all money related matters

Improve your financial savvy by using the thousands of free online blogs, articles and tools made available by banks, financial planners and regular South Africans to help you make the most of your money and achieve financial independence, security and ultimately long-lasting wealth.

Take the time to request a copy of your credit report, find out how to clean up your bad credit record, review your bank account fees and create a realistic budget that will help your money go further.

6 steps to help you say goodbye to your month-to-month lifestyle

#1: Stop borrowing money to make it through the month

If you’re reliant on short-term loans and credit cards to make it to the end of the month, this is the first area that you need to address. Any form of short-term debt, no matter how small or seemingly insignificant is expensive and is making your month-tom-month situation worse.

Interest rates are high and dependence on such forms of credit is hard to avoid. Even if you currently have outstanding loans, make a commitment to not take out any further credit and pay back the existing debts.

#2: Reduce your large expenses

Since housing and groceries are the two highest expenses, cutting these down by any measure will make the biggest difference to your budget. Consider downscaling to a smaller or more affordable housing option or even moving in with family until you are able to stabilise your finances.

When it comes to groceries, it is best to avoid shopping as soon as your salary reflects in your account. Rather make a habit of shopping a few days after you’ve paid your essential bills and expenses and always shop with a list of essentials.

You should also try and look for special offers and deals and try to create weekly meal plans that reduce waste by ensuring all fresh produce are consumed before they go off.

#3: Cancel subscriptions and services you do not need

Have a look at all of your debit orders, subscriptions and contracts. Are there any that you do not need or use? When was the last time you used your gym membership? Do you really need that gold membership?

If it’s time to upgrade your mobile phone, why not choose not to and save yourself a lot of money? Cancel whatever you don’t need or use and you will be well on your way to financial security.

#4: Eliminate non-essential spending

It’s very difficult to change long-standing habits like Tuesday movie night and the Monday pizza nights but, these are the type of non-essential spending items that just have to go when you’re living month-to-month. You do not have to eliminate all non-essential spending but you must at least eliminate some to free up some income and help you get through the month without borrowing.

If you spend money buying food during lunch at work, start packing left over or making sandwiches instead. If you buy coffee, start making your own at home or at work. All of these small changes will make a massive difference at the end of the month!

#5: Repay your short-term high interest debts

If you’ve taken out any short-term loans or have credit card debt, any money that you free up from the steps above must be used to repay this debt. Not only is it expensive but such debt will hinder you from being able to save any money and will make it harder to make it through the month without taking on more credit.

#6: Open a savings account and automate savings

Provided that you follow the steps listed above and that you don’t have any short-term debt to clear, you may find that you have some money left over and this money should be put towards savings. Even if you start with a small sum like R50, getting started is important.

Once you get used to your new budget and spending habits you should automate a set amount of money to be debited from your everyday transactional account into your savings account. You need to then ensure that you do not dip into these savings, regardless of how badly you may want to. Financial discipline is key to long term financial security and stability.

There are many South African savings accounts that offer Tax free returns at competitive interest rates as well as savings accounts that offer instant access to cash when you need it.

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