Waiting for payday

Waiting for payday

Do you find yourself counting the days until your next payday right after you just got paid? Well, you're not alone. In fact, over 38 million Americans are living paycheck to paycheck. What's most staggering about this substantial number is that two-thirds of the people living paycheck to paycheck make more than $41,000 a year. For reference, this is well above the federal poverty line of $16,240 for a family of two. So what does this mean? Simply put, Americans are living well above their means and aren't giving themselves any room for error in their weekly budgets. Although there are variables in each person's financial situation, we've broken down three that we see often and given some simple solutions to them.

1. Problem: You don't have an emergency fund

Why it matters: As the saying goes, you can plan a pretty picnic, but you can't predict the weather. No matter how well we plan out our expenses each month, we can't plan for the unexpected variables that life throws at us. The air conditioner always seems to go out in the dead heat of summer or the transmission in your car right before Christmas. Even a flat tire can be a huge setback for your budget when you're living paycheck to paycheck. Think of an emergency fund as insurance. But, unlike the health insurance you pay for (that you probably don't use) it's almost certain that you'll have to use your emergency fund multiple times throughout the year.

Simple solution: Automate your savings, Be realistic. Although most financial advisors suggest having six months worth of salary saved in your emergency fund, it's best to be realistic when you start saving. It's difficult mentally to save for "in case something happens" when things are currently happening in your life. So, take the thinking out of the situation by automating your saving. Start by having a goal of one month's salary in emergency savings. An easy way to do this is by rolling over $20 or more weekly from your checking into your savings account. Trust me; you won't even notice it's gone. Once you're comfortable with the amount you're saving, you can gradually increase and work towards three and six months salary saved. Having an emergency saving is listed first because it's the foundation for the rest of your financial goals. Knowing that you're prepared for whatever comes your way financially is true peace of mind.

2. Problem: You're not tracking your spending

Why it matters: Imagine you're in a boat with a hole in it, and you're sinking because you're taking on water. You have all the tools to plug the hole, but you can't find out where the water is rushing in from. This is similar to what's happening with your budget if you're not tracking your spending. Tracking your spending is all about clarity. If you're making enough money and you're still living paycheck to paycheck, there's a good chance you have a leak in your budget somewhere. 

Simple Solution: The answer here is straightforward. As opposed to in the past, technology now allows for complete transparency into all of your accounts; all in one place. Using a tool like Wela provides instant visibility into your spending habits. This allows you to see where you stand and how each transaction affects your overall budget and your short and long term goals.

3.  You forgot the side hustle

Why it matters: A couple of items to consider here: First, one of Warren Buffet's core principles and most known tips is to never depend on a single income. A second thing to consider is that a millionaire has on average seven streams of income. So, to go from paycheck to paycheck, you're most likely going to need more than just your 9-5.

Simple Solution: Budgeting is like dieting. There's are two fundamental ways to improve your situation. To lose weight, you can either cut calories or burn more calories by exercising. To see the quickest and best results, you can do a combination of the two. With your budget and overall cash flow, you can either cut your spending or add to your revenue. And, just like dieting, a combination of the two brings the best results. Starting a side hustle like Uber, Airbnb, or freelancing one of your many abilities, can add much-needed funds to your bottom line. One benefit of the time in which we live is that there are ample opportunities to generate more income. Ultimately adding a side hustle or two gets you further away from living paycheck to paycheck and closer to the seven revenue streams that a millionaire has.

Getting out of debt, building an emergency fund, and saving for retirement are the things you have to do to be financially successful. But, taking care of these items doesn't mean you can't do the things you want to do like exploring Europe or going to a music festival in California. Wela allows you to do more. Download the Wela app to take control of your financial situation today and start living your best life tomorrow.