Although it may seem like money can solve the majority of life's problems, that's not always the case. In fact, even the wealthy sometimes struggle with keeping their head above water financially.
Around 25% of American households earning $150,000 or more per year say they are living paycheck to paycheck, a survey from Nielsen Global Consumer Insights discovered. For those earning between $50,000 and $150,000 per year, that number jumps to one in three households, and half of those earning less than $50,000 per year also report living paycheck to paycheck.
When you're barely able to pay your bills each month, saving for the future can feel like an impossible task. And considering retirement is probably still decades away, you may decide to hold off on saving until you can get other areas of your financial life in order. But the longer you put off saving, the more you'll need to save each month to reach your goal. So it's in your best interest to start stashing something away now, even if you don't have much to save.
The good news is that it's entirely possible to save more money even if you're living paycheck to paycheck. It won't always be easy, but it's not as difficult as you may think as long as you follow a few simple steps.
Step 1: Establish a thorough budget
These days, budgeting is made easy through apps that track your spending with next to no effort on your part. You can also do it the old-fashioned way, though, by going through your bank and credit card statements over the last few months to figure out exactly where your money is going.
You don't need your budget to be 100% accurate down to the penny, but it should be as accurate as possible. In other words, don't just wing it here. If you only estimate what you're spending, it won't give you the full picture of how much you're spending and where you have room to cut back.
As you're creating your budget, it's helpful to break down your spending into various categories. For example, you may want one big category that includes all your fixed costs each month, such as your rent or mortgage, car payment, student loans, etc. You can also include utility costs here, but since they often fluctuate month to month, you may have to estimate the best you can what you spend on average each month (while erring on the higher side).
While you're establishing various categories, try to be as specific as possible. For instance, instead of lumping all food expenses under "food," divide them up into "groceries" and "dining out." That will give you a better idea of whether your money is going to the right places.
Step 2: Trim the fat
Once you have a good idea of what you're spending each month and how much of your money is going to each spending category, it's time to make some cuts. Even if you feel like you don't have a penny to spare, chances are there are at least a few areas where you're spending more than necessary.
Start with the non-essential spending categories, such as dining out and entertainment. Do you have subscription services you're paying for but never (or rarely) use? Slash them first. What about a gym membership you've used twice in the past year? Consider whether that money could be spend better elsewhere. Are you overpaying for cable when you could switch to a streaming service? Cut the cord and save some money.
As you're making these cuts, keep in mind that you don't necessarily have to cut everything that's not absolutely essential. If you're spending $500 per month on takeout, it's probably a good idea to cut back. But you don't need to completely eliminate it from your budget and never eat takeout again. In fact, it might be smart to not cut everything you love. If you do, you'll likely be miserable within a week or two, making it easier to fall back into your old habits.
For a more sustainable way to save money, sticking to a budget needs to become part of your lifestyle. So you can still splurge occasionally on dining out, going to the movings, or ordering your morning latte -- just cut back to a couple times a week or so instead of every day.
Step 3: Save money on the essentials
When you've trimmed the fat from your budget and cut back on the things you don't truly need, the next step is to see if there are ways you can save money on the essential expenses.
For example, you probably can't live without a phone or internet, but maybe switching to a different provider or joining a family plan could help save some money each month. Or if you live near a couple of your coworkers, maybe starting a carpool to work to save money on gas could be beneficial.
If you're prepared to make some major sacrifices, you may even choose to downsize to a smaller or less expensive home to save hundreds of dollars each month on your rent or mortgage. This is a big step, though, so make sure you've thought through all the pros and cons. But if you decide it's the right move, all that extra money can go straight to your savings.
You don't need to make any drastic cuts in your budget to save more money; sometimes just trimming a few dollars from each spending category can amount to hundreds of dollars per month in savings. And even if you're living paycheck to paycheck and stretching every dollar, saving just a little is better than saving nothing at all.