How To Make Your Paycheck Go Further When Bills Keep Going Up
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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Americans’ bills are rising a lot more quickly than their paychecks, which makes it challenging to keep up with basic expenses, much less save for an emergency or vacation.
In lieu of adding extra income, however, finance experts offered some ways to be creative with budgeting and spending to make those paychecks stretch further.
Tackle Your Budget in One of Two Ways
Michael Sullivan, personal finance consultant with Take Charge America, said the two main ways to balance a budget are to increase income or decrease expenses.
“So, first decide if income can be increased. Are there second job possibilities? Overtime? Some kind of extra gig? If not, it’s time to decrease expenses,” Sullivan said.
He recommended recording all expenses for 30 days to find areas to cut. “This always means doing something unpleasant, like saying no to yourself or others, which is why it’s easier to increase income.”
Adopt a Weekly Budget
One of the simplest but most overlooked budgeting tricks is switching from a monthly budget to a weekly one, according to Damian Dunn, a CFP and principal financial guide at Your Money Line.
The shorter time frame makes it easier to see if you’re overspending in time to dial it back and is “the financial equivalent of checking your GPS every few miles instead of at the end of the trip,” Dunn said.
Shop Your Fixed Bills
Another fast way to free up money is to “shop your fixed bills once a year,” Dunn said. Compare rates on insurance, cellphone plans and internet service to see if you can get the same quality for less.
“Cancel subscriptions you forgot about or no longer use. Even saving $10 or $20 on a few different bills can add up to hundreds a year. It’s not about cutting your lifestyle, it’s about cutting the waste.”
Monitor More Carefully
If budgeting feels overwhelming, Geri Hopkins, COO of Skyla Federal Credit Union, recommended regular monitoring of online banking to help pay regular attention to income and spending.
“To get budgets under control, it’s crucial to understand how much money is available and where it’s going,” she said.
Regular monitoring reveals spending patterns, pointing out areas where you can cut back to establish a realistic budget going forward.
Consider a Flexible Spending Account
If you’re paying a lot out of pocket for medical or child care costs with “untaxed dollars” then you may be missing out on a smarter way to pay, Sullivan said: with flexible spending accounts (FSAs), in which you put untaxed dollars.
These savings can add up to as much as 20% to 30% of the cost of these expenses, he explained.
Change Your Withholding
Consumers often miss out on money by withholding too much in taxes. Sullivan suggested that rather than waiting for a tax refund, it’s better to keep more of your money throughout the year by reducing your withholding.
“Anyone getting more than $1,000 refunded each year should reduce their withholding and increase their take-home pay.”
Pay With Cash
Consumers who find themselves spending too much on wants rather than needs may find success in turning to cash, Sullivan said.
“By not using credit or debit cards, they can eliminate overspending; when the cash runs out, there can be no more spending,” he said.
Hopkins suggested the envelope system, setting aside a specific amount of cash for different categories like groceries, gas, travel and entertainment, saving any leftover.
Address Debt Habits
For those with a lot of high-interest credit debt, Sullivan insisted that “it is important to understand how the debt was incurred to avoid this scenario in the future.”
Debt repayment often requires sacrifice and strategies “like the snowball method and avalanche method, and any consumer serious about repayment will get help and employ a strategy.”
Utilize Apps and Automation
Apps have simplified many aspects of finances, Hopkins said, from those “that promote mindful spending” to those that identify and cancel recurring expenses, round up transactions and deposit the difference into savings and more. Take advantage of these tools.
Refinance or Consolidate Debt
If simple budgeting changes just aren’t enough to cut it, try refinancing or consolidating debt, Hopkins suggested.
Those with good credit can consider a lower-interest personal loan or a balance transfer credit card with a 0% APY promotional period to reduce monthly interest payments and pay off debt quicker. Additionally, refinancing loans to a lower interest rate will also significantly reduce monthly expenses.
Take a Problem-Solving Mindset
To stretch your paycheck, become a problem solver and literally take control, Hopkins urged.
Dunn concurred, adding, “Constantly feeling behind can be exhausting … Small wins build momentum, and momentum builds confidence. Progress beats perfection when you’re climbing out of a hole.”
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