One of the toughest things I have ever had to admit out loud was that at one time, my family and I were living above our means. We got in over our heads trying to keep up with the Joneses and had to cut
Put simply, living above your
If you are one of the millions of Americans who are living paycheck to paycheck, there is a good chance that you are also living above your means. However, living paycheck to paycheck doesn’t necessarily mean you are living above your means. You may be living within your means, but are just not managing your money well.
So, what’s the difference?
There are some basic budgeting percentages to go by to help you know whether or not you are living within your means.
Here is an idea of the percentage range you should find yourself in:
Take the time to dig through your spending over the last few months to see if there is a particular area of your budget where you are living above the recommended budgeting percentages.
When it come to these percentages, the toughest area to deal with is housing because chances are you are locked into a mortgage or a lease that you can’t quickly get out of.
If that is the case, don’t worry, we will dive into other areas of your budget where you have a lot more wiggle room.
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One of the biggest problem areas most people face is spending too much of their income on debt.
Debt should be the first area you really take a look at when it comes to your budget because paying off debt has the potential to be one of the best ways to get money back in your life for good.
After calculating how much money you spend each month on debt, take a moment to consider what it would mean for your life, your budget and your paycheck to paycheck lifestyle if you had that money back in your pocket each month!
The next biggest budgeting struggle for most people is the small, unplanned, day to day spending.
Take a moment to go through your budget for the last 3 months to see how much you are spending on average on small, insignificant (and unplanned) purchases. —Don’t forget to add in the expenses that you might be putting onto credit cards!
This number can be an extremely shocking number to see. So often we go through our lives making small purchases less than $10 without realizing how big of an impact it’s making on our budget.
Once you have a good grasp of your spending habits and where all of your money is going each month, see what you can do to tweak your budget to benefit you.
If you are living above your means or living paycheck to paycheck, it’s time to start trimming the fat in your budget. That means cutting cable, canceling unused subscriptions and memberships and eliminating unnecessary spending.
Okay, so you know your numbers and you’ve got some ideas on how to reduce your spending. From here, it’s time to get a game plan for debt payoff and smarter budgeting.
My absolute top recommendation for debt payoff is the Debt Snowball that Dave Ramsey talks about. Check out the full video tutorial on how to get started.
Okay, you’ve worked through your spending, got a plan for debt payoff, now it’s important to create a solid budget that works! You can use all the printouts from the Fun Sized Budget Bundle workbook to help you!
Remember, there are super important things that you want to make sure you are including in your budget. See the 38 Things You Might Not Be Budgeting For.
Believe me, I understand how scary figuring out all of these numbers can be! That’s why it’s important to be aware of when it is time to create an additional income for yourself in order to improve your finances and get yourself out of debt faster.
If you have crunched all of the numbers, planned out a budget, and still do not have enough money to survive, then it’s time to consider downsizing or finding yourself a side hustle.
No matter what, making big changes can be tough. There will definitely be setbacks but don’t ever give up! If you are living above your means, it is crucial to your success and happiness that you get a solid plan in place to help you stop living above your means, ditch the paycheck to paycheck life and start living a life with more financial freedom!