Cannot Find Margin, Due to Inflation

The paycheck-to-paycheck problem is real. I hear and read about it every day. Inflation is at an all-time high and that means your paycheck does not nearly go as far as it once did. But the question remains, is this the truth? According to a Forbes article just a few days ago, 2/5 or 40% of Americans surveyed reported living paycheck to paycheck. In a CNBC article, just last year the number was much higher at 64%, saying that was up from 61%. I don't doubt that Americans are struggling and inflation certainly is not helping, but I also challenge everyone to think about the truth of these statements and what you can do to get out of the cycle and find freedom.

Everything starts with margin, no one wants to get to the end of the month or week anxiously waiting for that next paycheck to come in. No one wants to look at their credit card bill at the end of the month and wonder how much they are going to be able to pay on it. If you want to get out of the cycle, making more money is not going to change it. I've been there, the paycheck increases every year due to promotions and merit increases, but somehow you continue to spend more and more. The only way to shift gears is to start living on a budget, know what is coming in, and what is going out, and find what is left at the end. The reason people feel like they are living paycheck to paycheck is because they are not doing this and they just have no idea how or where they are spending their money. Then the month end comes and they pay what they can and move on to the next month.

The lowest level of education does not teach a person how to do a budget, our kids are growing up just swiping credit cards, taking out student loans, and having no idea what the later implications are to life. Hopefully, by now, I've made my case that you need to learn how to live on a budget, that is where everything is going to start. Once you lay some basics out, then you can see where the high expenses are, make some cuts, and find the margin you need to live a lower-stress life.

1) Map out a budget!!

Visit my Budgeting 101 section for more information, but this is where it all begins. I encourage people to just start by listing their monthly income. If it is variable, list out your high and low and come out with an average income (you will need to learn to live through those low months, but it will give you a baseline to start). Next, list out your basic expenses and what you expect to spend on them. At the end of the month, I want your budget to read 0!! Nothing left so all your expenses should be equal to your income. If it is not you have to find some places to cut back. Once you have done that I want you to write everything down and track every dollar spent throughout the month and see how you land. I guarantee month 1 is going to be different than what you expect. so keep going and move on making adjustments each month until you get this nailed down. Yearly expenses will catch you off-guard so be ready for them.

2) Where to cut?

This is the reason why people don't like budgets. It makes them think about their expenses and cut back on areas that they enjoy. You do not want to cut back on gas or housing, but chances are you can find some ways to spend more efficiently and stretch those dollars. Some places to look here are in processed foods. It always costs you more for something processed, over raw ingredients. If you are big into buying those pre-made items, look here to help cut back on that grocery bill.

Dining out is a big one. If you have to look to some area, this is one where you can save big time. Right now, this is one area that has been increasing quickly, even beating inflation. A quick search has shown menu increases of 8%. This makes sense considering labor costs are up along with food prices, thus hitting your menu prices. It's a good time to cut back on this area to help stay within your means.

Finally, the last big area is subscriptions. Whether it is cable TV, streaming services, or countless other subscriptions. Take a count of all of these and look for some opportunities to pull back.

Now as you look to reign things in on your spending, the last big area is to think about what is really important and what is not. As you look to cut back, you have to make sacrifices and you have to figure out what you are willing to give up to find some margin in your spending to accelerate your saving or get you out of debt. As I told my kids in Sunday School this past week, you have time for the things you want to do, just like you have money for the things you want to do. As you look through the budget what is important to you? Is that gym membership the most important thing to you? Or what about the alcohol or cigarettes? Or maybe that dining out? There are 3 ways to live, live for the now and spend all you have while you can, live for later where you will have plenty of money to retire later on in life, or live in balance, finding ways to spend now, but also save.

I believe balance is key to everything. It doesn't pay to sacrifice so much now to be extra frugal and miss out on some things while you are young. But it also does not pay to just spend recklessly, because you will find yourself regretting that later in life.

It is time to prioritize your spending and find out what is most important, set some goals, and be ready to make some changes so that you can live with a bit of margin and not worry about that next paycheck to come in, or be set back when that big car repair comes up.