It can really add up when you count up all of your expenses each month. You need to pay for groceries, gas, rent, insurance, phone, and many other weekly or monthly bills. It also seems like things are more expensive each month.
Each carefully planned trip to the grocery store is becoming more and more costly. But you’re not crazy. You’re experiencing inflation. In the real world, you experience inflation when your money buys less over time. There are ways you can handle this, read on to see our strategies for keeping more money in your account.
Who’s running out of money between paychecks?
If you’re running out of money between paychecks, you’re not alone. About one-third of all Americans experience regular financial stress. That stress is based on reality because one in five workers runs out of money before their next paycheck.
How inflation is affecting Americans
Inflation hit an all-time high of 7.9% in February. This affects all Americans for all types of goods and services purchased. To put this into perspective, if you typically bought $100 of groceries a year ago, your groceries would now cost $107.90 today. And it’s true– wages are growing. But they are not growing as fast as inflation. Wages grew by just 5.7% in January. Americans feel inflation in some areas more than others. These areas include gas, energy, cars, airfare, and groceries.
Living paycheck to paycheck affects all income levels
Living paycheck to paycheck affects all income levels, and 64% of Americans report doing just that. If you break that down even further, 48% of six-figure households report living paycheck to paycheck. It seems like no income level is immune to being on the brink of running out of money.
Living paycheck to paycheck is harder on lower-income brackets. They are putting a higher percentage of money into necessities like food and gas. It’s harder for them to cut back on these expenses.
Inflation vs income
Inflation has eroded income by 1.7% over the last year. What this means in simple terms is that the money you are earning feels like 1.7% less. This is called purchasing power. Even though your pay stub says you’re making the same amount, the money is buying less at the pump and stores. It can add up big over time.
What do I do if I run out of money?
If you find yourself running out of money regularly, you need to find ways you can decrease your spending or make more money. Here are some ideas.
- Look at your expenses: There is always a place in your budget that you can consider cutting back on to save money. Consider reducing the number of times you go out to eat or cancel an unused membership.
- Ask for a raise: You have seen “help wanted” posters everywhere. Now is the perfect time to consider asking for a raise to increase the amount of money in your account each month.
- Get a side hustle: Nowadays, there are so many ways to have a side hustle. Consider working for Uber, pet sitting, or flipping furniture. Even just investing a few extra hours into your side hustle can add up.
- Rent out a room: Having a roommate can cramp your style. But living paycheck to paycheck is worse. Consider renting the extra room in your apartment or house to help pay bills.
- Hold a yard sale: As the weather gets warmer, it’s the perfect time to hold a garage sale. You can clean out your house and make some extra cash. You can also do this online through Facebook Marketplace or Craigslist.
Build up a saving safety net
Also known as a rainy day fund, a financial safety net is the best way to protect yourself financially. It takes time to build up an emergency fund. But a savings safety net prevents you from going into debt when you don’t have enough money for your everyday expenses.
One method to start saving is to set up direct deposits into a high yield savings account. As money from your paycheck enters your account, it is automatically routed each month to this savings account.
You will save without even thinking about it. Soon you will have a nice emergency fund to give you peace of mind.
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How much money do you have at the end of the month?
Discretionary income will be different for everyone. Experts say to have between 10-20% of your paycheck remaining after you pay bills and expenses.
What is considered living paycheck to paycheck?
Living paycheck to paycheck means that all the money you earn each month is immediately spent on your expenses.
What to do if you run out of gas and have no money?
Try calling AAA, your insurance company, or a friend to get your car moving immediately. Then consider increasing your financial safety net so this does not happen in the future.