If you find yourself saying, ‘my paycheck never lasts’, you are not alone.
Today, we seem to be living in a world where everyone’s paycheck remains unchanged over longer periods of time while the costs of fuel, groceries, and utilities are constantly increasing. Accordingly, more and more people are feeling the pinch and are faced with a paycheck that never seems to last them through to the next one, let alone trying to save for a rainy day.
As a result, they are forced to review their lifestyles and determine which lifestyle choices are the most costly and which they can do without. Cutting out certain daily habits can save that extra cash at the end of each month.
Extra expenses such as:
- Smoking (1/2 pkg / day) $180.00 month
- Lunch out (if purchased each day) $200.00 month
- Alcohol (12 beer / week) $120.00 month
- Coffee (2 per day) $100.00 month
Besides eliminating specific lifestyle choices to reduce monthly expenditures, you can also employ various shopping techniques to help stretch a dollar such as:
- Budget and plan for all purchases based on your paychecks
- Avoid impulse purchases, only shop for necessities
- Take advantage of advertised sales and use coupons when available.
- Buy in bulk or large quantities for commonly purchased items
- Purchase items second hand, if possible
- Look for alternatives that may be cheaper
- Cook and bake from scratch
- Carpool with friends to work, when possible
It is difficult to cut out daily habits and it often can be stressful in itself. But if doing so for a period of time allows you to have more disposable income to help pay off your debt, then it will be a win/win for you. You will be able to reduce your stressors and develop better spending habits.
Budgeting for better financial management
Creating a budget to track your spending is one of the first steps to resolving your debt.
Tips to follow when budgeting:
- Be honest with your numbers: Don’t cheat yourself by not providing accurate numbers or guessing at costs. This only leads to a failed budget plan. Sit down with monthly bills and receipts to know what you are paying out.
- Use a budgeting tool or online resources. There are many tools out there to help you reach your budgeting goals. Worksheets and phone apps can all assist. Have a look at our FORMS page to find printable versions that may help. Also, the FCAC (Financial Consumer Agency of Canada) has valuable information on creating a budget and sticking to it.
- Include all costs. Even small ones. Along with rent, utilities, car and phone bills, make sure to factor in your miscellaneous costs such as entertainment (movies, travel, etc).
What if your paycheck varies from month to month and you are living on a variable income?
Many self-employed workers can never predict what they will make in a given month, so this means budgeting for personal living expenses that are known. You know how much your rent is, your basic food bill per month and personal costs.
To truly budget, you should add all of this up and figure how much of your income you will need each month to cover these costs. This means, a good percentage of your paycheck should go towards your personal and living expenses and another percentage should go towards paying yourself (whether it is saved for tax liability, extra house costs, or to treat yourself).
An example would be the 60-40 approach:
60% of pay goes into personal and living expenses to cover bills, rent & gas, etc.
40% goes toward yourself. You may want to break this down further to save for taxes, school, or unplanned surprises, but you should try to break down your percentages to include paying yourself if your income varies.
This being said, you obviously have to adjust based on personal situations. If personal expenses are more, then you have to allocate more there. If you use a car for business for example, then this may be an expense that needs separate budgeting (a separate percentage.)
There is no hard rule on percentages. You can have 50% toward personal bills, 25% toward taxes and 25% towards business. The key is to create a budget percentage that will get your main bills paid and give you back something, when possible.
Overall, you need to look at the big picture and try to make your paycheck stretch as far as possible. This often means making changes to spending habits as suggested, or using the percentage technique to budget with what you have. If you find that all of your income is going to living expenses and there is none left over, then you may need to look at alternative options for rent/mortgage, cars, and/or childcare, which can all eat up your paycheck.
This summary is not exhaustive and there may be other options available that are unique to your specific situation. However, we hope the information discussed has given you some insight into various methods of making your dollar go further. We at Allan Marshall & Associates Inc. are always available for a free consultation to discuss any matters dealing with budgeting and debt.