Stop living paycheck to paycheck

Mismanaging money, for that matter mismanaging anything comes easy to most people. However, this mismanagement may cost us very dearly especially when it comes to money matters. More often than not, people can afford to live with a less flashy lifestyle, a less expensive mobile handset and certainly a less expensive car. Not to be: they end up living hand-to- mouth and paycheck–to-paycheck.

The key is to start monitoring your spending, build up a budget, lay down goals and make sure you are not paying any more than you have to, on your debts.

Make a budget

The simplest way to create a budget is to create a worksheet with one column listing each type of debt or expense and a second column listing the monthly payments. Prioritize your expenses starting from mortgage and utilities first to clothing to entertainment and so on.

Track expenses

Track your spending on a daily basis, down to how much you are paying for a cup of tea. The idea is to know how you're spending your money before you develop a spending plan. Don't stop with the obvious expenses such as food, clothing and entertainment. Track the interest rates on credit cards and loans which can force you to pay more than you have to over time.

Set Objectives

Set financial objectives for yourself. These should be time bound and quantitative. “I will save a lot of money” is a useless objective. “I will save 100$ every month for the next 5 years” makes much more sense. Remember that achieving that objective shouldn't require you to make radical changes in your life or take out the zing out of your life. Make it attainable and something you can get excited about.

Distinguish between wants and needs

While establishing goals, be sure to differentiate between wants and needs. Simply put, you may want a very cool, big plasma television, but do you really need it, is the question to be asked. Likewise, you may want to take a vacation and tour Europe, but are there other more important concerns that could use that money. If you are married, make sure you set and prioritize your goals together, without criticizing one another's spending habits.

Keep costs low

A very important aspect is to cut costs. A dollar saved is a dollar earned. Even a small income can go a long way if you make minor changes in your lifestyles. A good way to do that is to shop at fair price shops, use discount cards, find deals, lower insurance costs, pay off high interest rate debt and avoid overspending on credit cards.

Boost your income

The best possible way to avoid living paycheck to paycheck is to increase your income. Look for other ways to keep more of your paycheck going into your pocket instead of the government treasury by way of taxes. Employer-sponsored programs that allow you to contribute pre-tax money toward routine expenses such as health care, child care or retirement savings can help your paycheck go further. Finally, you can look for a change of job that is more lucrative.

It is imperative that when you receive your paycheck, your money should not only be going to pay bills and other nonessential expenses, but to investing for your long-term financial future.