Q: How can I get out of debt if I live paycheck to paycheck?

It may seem complicated, but you have two options – cut back expenses, or bring in more income. A combination of the two is even better. This “extra” money is not for spending on luxuries. Where possible, don’t even count it into your income. Instead, use it to pay down debt or bolster your emergency fund. In a pinch, you can use it to buy essentials if your only alternative is to buy on credit. The danger of viewing it as part of your new income is that you’ll increase your spending level to match. If you want to get out of debt, put every dollar you can spare into your accounts.

Question 1

How can I get out of debt if I live paycheck to paycheck?

Accepted Answer

It may seem complicated, but you have two options &#8211; cut back expenses, or bring in more income. A combination of the two is even better. This “extra” money is not for spending on luxuries. Where possible, don’t even count it into your income.  Instead, use it to pay down debt or bolster your emergency fund. In a pinch, you can use it to buy essentials if your only alternative is to buy on credit. The danger of viewing it as part of your new income is that you’ll increase your spending level to match.  If you want to get out of debt, put every dollar you can spare into your accounts.

Question 2

What is the 30-day rule?

Accepted Answer

The 30-day rule relates to changing your habits. Your current monetary behaviors don’t serve you, so change them. The 30-day rule helps you do this by making it more manageable.  Commit to being more financially responsible for the next 30-days. Maybe you can decide not to buy take-out or spend money on clothes. Perhaps you can make your work for lunch every day. Intellectually, taking on small changes for a month is a lot easier than committing to something for the rest of your life.  The upside is that 30 days is enough time to engrain the new habit.

Question 3

What is a good percentage to save from your paycheck?

Accepted Answer

Experts recommend saving at least 20% of your paycheck every month. More is better, but make sure that you leave yourself a discretionary budget as well. That is your mad money, and you can use it for what you like.  It’s good to have some discretionary spending because it helps to motivate you. If you don’t spend something on yourself, you’ll start to question why you’re working at all.  If 20% is too high for you at the moment, save what you can afford. Even putting away a dollar a month is a start. It helps you create a saving habit, and, as you see the balance grow, you’ll feel more motivated.

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