If Your Salary Barely Has Breathing Room, Do This So You Can Build Up Savings
The overall rising costs of daily expenses combined with stagnant wages have made it difficult for millions of American employees to focus on financial growth.
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If you find yourself in a position where it doesn't feel like you're getting ahead financially, it's essential to know that you're not alone. According to a recent study from Resume Now, 37% of Americans admitted to making enough to manage their basic living expenses with limited room in their budget for extras.
What are the best ways to use your income when it just covers a little more than your regular expenses? Here are five financial strategies that we recommend you employ to improve your current situation.
1. Consider Adjusting Your Lifestyle
"If you barely have enough money to pay your bills and have little room for extras, it may be time to adjust your lifestyle to make your income-to-living ratio less tight," said Melanie Musson, a finance expert with InsuranceProviders.com.
You'll want to start by looking into your expenses and current lifestyle to see if you can adjust anything, because the frustrating reality is that with costs going up, certain sacrifices will have to be made.
Here are a few lifestyle adjustments to review if you want to save money to get ahead:
Review variable expenses like dining out and entertainment. You want to ensure that you have the income to justify the money that you're spending on eating out and entertainment so that you don't set yourself back.
Analyze your living arrangement. Living costs are often the most significant expense for most people. You could improve your financial situation by seeking out a roommate or moving to a lower-cost community.
2. Try To Save Whatever You Can
"Even if you can't afford to save a lot of money each month, consistency makes all the difference," said Erika Kullberg, an attorney, personal finance expert and founder of Erika.com. "Everyone's financial situation is different and unique, so there's no one-size-fits-all-all amount that you should save or invest, but try to save the same minimum amount each month so you can watch that consistency pay off."
When it comes to saving money, building the habit is more important than the amount you can stash away monthly. Trying to figure out how much to save will depend on what you can put away. The goal is to create the consistent habit of setting some money aside monthly so you can eventually get to a position where you're not just getting by — bringing us to the next point.
3. Work on an Emergency Fund
When you're barely getting by financially, you're in a difficult situation, because one unexpected expense could destroy your finances. This is why it's critical that you start building up any kind of emergency fund. Even though the idea of saving money doesn't seem feasible, you want to do your best to create some sort of buffer.
4. Focus on Paying Down Debt
"When you have just a little extra money, look at putting any extra you have toward paying off high-interest debt," said Musson. "If you can pay off credit card debt, you'll free up money in your budget."
You may have to overhaul your finances for a period of time by focusing on eliminating high-interest debt and making this a priority so that you can keep more of your money in the future.
"Make a plan for paying that debt off faster. Spending money on interest every month doesn't benefit you in any way," Kullberg said.
If you can remove that monthly debt payment, you can make space in your budget so you don't constantly feel restricted.
5. Find Ways To Treat Yourself Without Breaking Your Budget
Musson pointed out that when you make your budget every month, you'll want to add some flexibility to your spending.
"So while most of your money should go toward paying off debt and saving, you should always include a little money for yourself," she said.
It's not realistic to try to save every penny you earn without ever getting to enjoy life. You work hard and want to feel like it's worth it. The good news is that you don't have to spend much to take care of yourself occasionally.
Here are a few ways you can treat yourself:
Find a coffee shop that you'll splurge at on the weekends.
Think of creative ways you can spend time with friends, from potlucks to meeting up to play board games.
Look for deals and discounts on events happening near you so that you can still get out.
"If having a nice coffee from a cafe motivates you, budget that expense for once a week or once every other week but make sure that the money you're spending is on the things that really bring you lasting joy," Kullberg said. "The key is to plan for it with intention to avoid mindless, unaccounted-for spending that can end up tanking your finances over time."
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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