Americans Are Running Low on Money Before Payday — 7 Ways You Can Avoid This
The cost of living is going up at high speed. Wages aren't.
According to recent research from FinanceBuzz, Americans spend 40% of their paychecks within 48 hours of receiving them, and 54% admit they frequently run low on funds before payday. With 88% of Americans looking forward to payday and about a third calling it their favorite day of the month, it’s important to explore options for breaking out of this cycle.
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Here are seven ways to get started.
1. Set Aside Some Funds To Build an Emergency Fund
Dana Hummel, the senior manager of Digital PR at FinanceBuzz, recommends setting aside a small buffer each payday to offset a surprise expense before the following paycheck lands. The goal is to build an emergency fund you can rely on, so you don’t end up using your credit card or getting stuck in the cycle of always feeling behind.
Leslie Rea, MBA and CFP with AG Wealth Management, also supports steadily contributing cash to a growing emergency fund.
“The key to getting past the cycle of running out of money before payday is to create a repeatable system for yourself,” she said.
You can start with $100 or $20 from every paycheck to prepare for unforeseen expenses. While experts often recommend saving up to six months’ expenses in your emergency fund, you have to start where you can for now.
2. Look Into Early Access
You can check if your bank offers early access as a temporary measure to help you gain control of your finances. Many people have this option but aren’t aware of it, and it’s an opportunity to receive your funds a few days early so you’re not feeling stretched.
3. Try To Align Bills With Your Pay
Hummel suggests aligning bill due dates with payday if your service providers allow it. While this won’t close the underlying gap, it reduces the number of days your money has to stretch. The goal is to figure out your due dates for your fixed expenses so that you know what to plan for.
4. Figure Out Exactly How Much You’re Spending
“A tedious but necessary exercise is to review your current expenses and separate fixed bills from discretionary spending,” said Rea. “Review your last bank statements to help identify fixed recurring expenses and note the due date next to each expense.”
You want to get a sense of how much you’re spending and where your money’s going so you can make a plan. You want to know how many reliable expenses you have (cell phone, insurance, rent, and other bills that you pay consistently) and your variable expenses (things like dining out or entertainment). The biggest issue for many people is that they don’t realize how much they’re actually spending, which causes them to lose track before payday.
5. Spot Your Problem Areas
The experts agreed that you’ll want to review your discretionary spending to identify where you spend the most and decide whether any changes are needed. Review your accounts to identify where you’re overspending and see if you can make any changes to help your paychecks last longer. You may discover that your casual habit of grabbing a bite to eat after work is affecting your budget more than you realized. You could notice that you haven’t factored in certain price increases caused by inflation into your budget yet.
6. Try To Cut Your Bills To Create a Buffer
You’ll want to do your best to eliminate a few bills and negotiate some so that you can decrease how much you’re spending every month. For example, you may find you’re still paying for a subscription you forgot about, and you may notice you haven’t renegotiated your insurance in a while. The end goal is to bring your expenses down so your paychecks go further, and you’re not stuck waiting for payday.
7. Build Your Savings Slowly
It’s important to remember that you may not see immediate results from changes to your budget, but it’s crucial that you slowly build a savings buffer so you can get ahead on your bills. While some sacrifices will have to be made, you’ll eventually break out of the cycle where you’re stressed before payday.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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