Living paycheck to paycheck is stressful, and it doesn't take much to turn a paycheck-to-paycheck lifestyle into a financial disaster. What if your car breaks down? Or, you need to take extended sick leave from work? Or, your company lays you off?

If scenarios like these strike fear into your heart, it's time to change your financial situation. It won't be easy. Yet, the peace of mind will be worth the effort and sacrifice. To get off the paycheck-to-paycheck treadmill to reclaim your finances and your life, try these four steps:

1. Take a survey. When it comes to personal finances, many people try to make changes without knowing what they need to adjust. You might think you're spending too much on groceries, for instance, but maybe you're really overspending on entertainment. Or, you may assume paying off your credit cards will be the fastest way to free up extra money, when you really need to downgrade your car. So before you set any financial goals, take time to do a thorough personal financial audit. What are your biggest bills each month? Where are you spending money that you don't even realize you're spending? You might be surprised at how much you don't know about your spending habits. Arming yourself with knowledge is a great way to get started.

2. Set attainable goals. You won't get anywhere financially if you drift along aimlessly, trying only to put food on the table and pay the electric bill on time. But you may start to see progress if you simply set some goals. Goals will focus your efforts and lead to success. Start by setting smaller goals that are easily achievable. Reaching these small goals will give you the confidence you need to tackle larger, longer-term goals. A few goals you might start with include saving $100 a month for the next three months, paying off $1,000 in cred...d balances by March, trimming $50 a month off your grocery bill and tracking every dollar's worth of spending for 30 days. These goals are baby steps, but any one of them will help bring your journey toward financial freedom. Once you achieve a tiny goal, set a slightly larger one.

3. Make your budget realistic. Now that you know where you're overspending and what your first financial goals are, it's time to budget. But don't go about this the wrong way. Too many people budget based on fantasy rather than reality. If you've been spending $800 a month on groceries, you're not going to whittle your grocery budget down to $400 a month overnight. Start by setting a budget based on what you're already spending. If you've spent $750 to $800 on groceries for each of the past three months, budget that much each month. You know you'll have enough, and you won't go over budget.

4. Be pound wise. Have you ever heard the phrase "penny wise, pound foolish?" It's a phrase that refers to our tendency to get wrapped up in the small things, so that we miss the larger, more important ones. If you spend all Sunday afternoon clipping 25-cent coupons, but then order $30 worth of pizza for dinner, you're probably being penny wise but pound foolish. When tackling your financial problems, it's important to look for the areas of biggest impact. Eliminating your $80 a month cable subscription will have a bigger impact than cutting out that $3 a week you spend, for instance, on the occasional drive-thru coffee. You'll save even more money if you drop your cable subscription and drive-thru coffee, but the cable subscription has a much bigger impact.

FULL STORY HERE

Good advice!

RodeoSchro said:

Good advice!

I posted this because I'm one of those living P-2-P & I'm tired of it.

Hopefully anyone out there who is in a similar situation can gleam some worthy advice from this.

Line item #3 is especially applicable to me...I make budgets, and can't seem to stick to them!

Here's a tip. Pick up all the loose change you see on the ground, even the pennies. You'd be surprised how much adds up after a while. I ain't too shamed to bend over to pick up a penny. I had a neighbor who used to routinely throw his loose change in his yard, dimes, nickels, pennies and even a few quarters. One time I collected $1.85 in change just from his yard!

Shyra said:

Here's a tip. Pick up all the loose change you see on the ground, even the pennies. You'd be surprised how much adds up after a while. I ain't too shamed to bend over to pick up a penny. I had a neighbor who used to routinely throw his loose change in his yard, dimes, nickels, pennies and even a few quarters. One time I collected $1.85 in change just from his yard!

...you can probably collect more than that from my garbage cans...

PurpleJedi said:

Shyra said:

Here's a tip. Pick up all the loose change you see on the ground, even the pennies. You'd be surprised how much adds up after a while. I ain't too shamed to bend over to pick up a penny. I had a neighbor who used to routinely throw his loose change in his yard, dimes, nickels, pennies and even a few quarters. One time I collected $1.85 in change just from his yard!

...you can probably collect more than that from my garbage cans...

Sounds like an invitation

PurpleJedi said:

Shyra said:

Here's a tip. Pick up all the loose change you see on the ground, even the pennies. You'd be surprised how much adds up after a while. I ain't too shamed to bend over to pick up a penny. I had a neighbor who used to routinely throw his loose change in his yard, dimes, nickels, pennies and even a few quarters. One time I collected $1.85 in change just from his yard!

...you can probably collect more than that from my garbage cans...

Oh! You've got deep pockets, eh?

I've been penny pinching and save all the (extra) money I make. I make about $215 every 2 weeks and in the last 2 months saved up $700. I will only buy what I need and pay my phone bill and if I ever get hungry for some restaurant I'll eat but otherwise I try not to eat out too much. I try to not just spend just because I have money but use it only for what I need.

I used to have lots of bills to pay and ended up with nothing at the end of the month, I'm not going back to doing that. It's so much stress. Learned my lesson. Oh yeah, I also got rid of the extra bills that I don't need like Melaleuca was one of them, high phone bill charges, credit card debt ( ), and whatever else wasn't important for me to pay each month.

[Edited 2/11/14 18:07pm]

Shyra said:

PurpleJedi said:

...you can probably collect more than that from my garbage cans...

Oh! You've got deep pockets, eh?

...nah, but they seem to have HOLES in 'em

How about getting a high paying job that doesn't require you to live from paycheck to paycheck? Or investing in income-producing real estate or a side business? Those things will probably help most people.

Yes, I know, not everyone can get that high-paying position, and even some people with high incomes are living paycheck to paycheck because they are paying for an exhorbitantly high mortgage and/or car payments, but in most cases those are lifestyle issues and not necessarily money issues. That's where the other pieces of advice come in, as in why are you paying so much for that house and/or luxury car? Is it really bringing you happiness? Do you really need $1000 bottle service at the VIP lounge of your favorite bar?

I just mentioned this because most financial advice involves cutting back on expenses while increasing income is rarely mentioned.

The most important lesson I am still teaching myself might seem obvious, but:

It's easy to be cheap and not spend money when you're broke, but you need to learn how to NOT treat yourself right after you just got paid and feel like you have a bit of money in your pocket. That's the only way it can grow into something larger.

It's not easy!

Found or extra money is always saved for a rainy day. (That would include tax returns).
Did I mention it rains here a whole bunch? lol

All sound, sensible advice. #4 is the one that’s been most important to me. Certainly it’s good to trim around the edges, brown bag your lunch, take it easy on $4 coffee & so on, but the large ticket fundamentals of how you live are where you can really recognize savings. I’ve never owned a car (money-killing beasts, IMO), I walk everywhere, I live in the smallest, cheapest apartment available to me in a neighborhood where I only slightly have to fear for my life at times, and I never take vacations & don’t eat in restaurants. It may not be the most dynamic way to live, but it’s paid pretty good dividends for me, and I’m particularly happy to have the resources available to me now since I’m quite a bit less happy about my work situation these days than I had been in the past.

I have a problem with sticking to a budget.

It's like...if I have it, it's there to spend.

PurpleJedi said:

I have a problem with sticking to a budget.

It's like...if I have it, it's there to spend.

That's really common. One technique I read (and it's what I am trying) to work with that kind of personality is to simply pay your bills first--including your savings, retirement, college fund, etc--and then go crazy with the rest. Just be responsible first. I think it works.

A budget is too much work, honestly! It might be a good idea to do it once just to see where all your money goes, but I certainly can't do it every month. I could never keep to it.

NDRU said:

PurpleJedi said:

I have a problem with sticking to a budget.

It's like...if I have it, it's there to spend.

That's really common. One technique I read (and it's what I am trying) to work with that kind of personality is to simply pay your bills first--including your savings, retirement, college fund, etc--and then go crazy with the rest. Just be responsible first. I think it works.

A budget is too much work, honestly! It might be a good idea to do it once just to see where all your money goes, but I certainly can't do it every month. I could never keep to it.

I have an Excel spreadsheet where I plan my weekly expenditures (helps me schedule my bill payments) and I always allot money for savings...but come the end of the week I'm broke.

PurpleJedi said:

NDRU said:

That's really common. One technique I read (and it's what I am trying) to work with that kind of personality is to simply pay your bills first--including your savings, retirement, college fund, etc--and then go crazy with the rest. Just be responsible first. I think it works.

A budget is too much work, honestly! It might be a good idea to do it once just to see where all your money goes, but I certainly can't do it every month. I could never keep to it.

I have an Excel spreadsheet where I plan my weekly expenditures (helps me schedule my bill payments) and I always allot money for savings...but come the end of the week I'm broke.

IMO It's okay to be broke if you are putting money into savings & retirement. I am pretty sure that unless you're stinking rich, you will always feel broke from time to time. The important thing is that you're not actually broke, not whether or not you feel broke from time to time.