Hi Jay,

I am 25 years old and I have always lived paycheck to paycheck.  I feel like every day is a struggle just to make it.  I don’t make much, but I make enough to live on, even still, my finances are dry.  I know that a lot of people live paycheck to paycheck so it is not all that abnormal, but I have decided that it is just not something that I want to continue to do.  I want security.  I want to be able to build a savings and have a cushion.  I’m not in a bad place financially.  My bills get taken care of but after that I don’t have anything left. God forbid something major happens, I wouldn’t be able to afford it.  How can I change this pattern and begin to live a financially freeing lifestyle.

-Feeling Broke and Disgusted

Hi Feeling Broke and Disgusted,

You are right.  A lot of people do live paycheck to paycheck.  However, it is not something that you have to continue.  You have all the authority in your hands to change the pattern for the better.

You have to treat your life like a business.  This is the only way that you will yield the best results for your life.  When a business is not performing well financially, the first thing they do is cut costs.  If you feel that your financial well-being is not optimal, you should begin focusing on areas where you can cut cost.

I have learned that we make time for what we want to make time for.  This can be said for our money as well.  We will spend money on what we want to spend money on.  This means that you are in total control to reduce your spending.

How Can I Stop Dry Finances?

Your whole life is like an enterprise.  When I was studying for my Finance degree, I recall a line in one of the text books that stated, “People are in business to make a profit”.  That stood out to me because while we like to say we do business in an area because it is our passion, the bottom line is that we are ultimately in business to earn profit.

Anytime you lose sight of that, then your business will begin to suffer.    You have to treat your life the same way.  Any unnecessary thing that is taking away from that profit has to be addressed.  Comb through your finances.  Look at your bills and make a honest determination on what you spend money on that you do not have to spend money on.

Are you keeping a budget?  Tracking your spending will show you just how much money you are spending on things such as eating out or clothes.  This will allow you to determine where you can make cuts.  These cuts will add to your disposable income which will then allow you to begin saving.

Saving Money Even When Finances Are Dry

The issue with saving money is not that you do not have it to save.  The issue comes because you do not have the discipline to save.  To remedy this, you want to start small by attempting to save a small amount of money periodically, whether it be once a month or once every pay period.   Start with $5 or whatever your budget can allow.

I think what scares some people about saving money is the amount.  They have a preconceived notion in their mind that you must put away large sums of money for it to actually count.  If you do not have the cash flow to save $100 a month then do not attempt to do that.  It will only frustrate you.  Set aside what you know you can faithfully commit to.  If it ends up only being $5, then let it be $5.00.  The point is to establish the habit.  Once you establish the habit, you will be able to increase the amount as time progresses or as you find new ways to drive your income upward.

Automate Your Savings

I also recommend taking advantage of your direct deposit options if you are on payroll with a company. Have money automatically transfer over to a saving account that you do not see often. I have  saving account with a bank that is completely separate from my daily use bank. This way, I don’t see my savings account, and most times, I may actually forget that it exists.

Other ways to save is to invest in stocks. Use the Robinhood app to get started with putting your money into the stock market. Gudiance suggested.

Lastly, make good use of lump sums of money that you encounter. If you are getting a tax refund or a bonus from work, take that money and instead of squandering it away on some large purchase. Skim a small percentage of it to treat yourself to something good, and then store the rest of it away in a savings platform. Like I stated, put it away in a place that you don’t have access to.  An online bank account is a good start, and they usually have higher interest dividends than savings accounts at brick and mortar banks.  You can also talk with a banker about short-term deposit certificates, etc.

If you need help with building credit, check out my article, How to rebuild Credit. Being able to leverage credit is another way to help you increase cash flow change dry finances.