{"id":108942,"date":"2019-03-23T11:00:15","date_gmt":"2019-03-23T17:00:15","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=108942"},"modified":"2024-02-24T13:09:03","modified_gmt":"2024-02-24T20:09:03","slug":"stop-living-paycheck-to-paycheck","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/stop-living-paycheck-to-paycheck","title":{"rendered":"Stop Living Paycheck to Paycheck\u2014Here&#8217;s How"},"content":{"rendered":"<p>Want to stop living paycheck to paycheck and find yourself with extra money that you can invest in a better future for yourself? I can show you exactly how to do that\u2014without eliminating all the fun from your life.<\/p>\n<p>While today I earn way more than I spend and live a pretty cool life on Maui, doing the things I love to do with the people I love, it wasn\u2019t always that way.<\/p>\n<p>For the first half of my 20s, I lived paycheck to paycheck. If it wasn\u2019t for the lessons I\u2019m about to show you, I\u2019d still probably be living paycheck to paycheck.<\/p>\n<p>Let\u2019s get to it.<\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/hjnEHEOsFfI\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p><em><strong>Related: <\/strong><\/em><em><a href=\"https:\/\/www.biggerpockets.com\/blog\/3-ways-cut-back-stop-save-money\/\" target=\"_blank\">3 Simple Ways to Cut Back &amp; Save Money Without Feeling Deprived<\/a><\/em><\/p>\n<h2>How to Stop Living Paycheck to Paycheck<\/h2>\n<h3>1. Own It<\/h3>\n<p>The first step in getting out of paycheck to paycheck living is the least tangible but most important step. Listen close: you have to OWN IT. In other words, you have to take 100 percent responsibility for your financial position in life, right now.<\/p>\n<p>Maybe you got into money problems because of a medical issue or being laid off. It doesn&#8217;t matter who or what&#8217;s at fault. It\u2019s not about that; it\u2019s about responsibility.<\/p>\n<h3>2. Assess It<\/h3>\n<p>You need to assess the situation, in detail, and understand exactly where you stand financially\u2014to the penny. Right now, could you write down exactly how much money you made last month and how much money you spent? What\u2019s your net worth?<\/p>\n<p>Sadly, most people wouldn\u2019t even know how to begin looking that stuff up.<\/p>\n<p>To truly get a firm grasp on exactly what your finances look like, I want you to fill out a personal financial statement. It\u2019s really a simple document that helps you list your income, your expenses, your assets\u2014which are things that add to your net worth, like the value of properties you own, the value of your stocks or bonds or mutual funds, the value of any businesses you own, etc. And then list your liabilities\u2014which are basically things that you owe, like debt.<\/p>\n<p>You can download a really <a href=\"http:\/\/BiggerPockets.com\/paycheck\" target=\"_blank\" rel=\"noopener noreferrer\">easy-to-use personal financial statement here<\/a>.<\/p>\n<p>List every bit of income you currently have. If you\u2019re self employed, average the last six months. Then, you\u2019ll list all your expenses and separate them into one of three categories:<\/p>\n<p><strong>1.) Fixed Expenses:<\/strong> These are your regular bills that don\u2019t change much (i.e., rent, credit card payments, and the like).<\/p>\n<p><strong>2.) Variable Expenses:<\/strong> These are bills that we all spend money on every month but can fluctuate (i.e., stuff like eating out, gas, groceries, medical bills, and clothing).<\/p>\n<p><strong>3.) Other Expenses:<\/strong> This is totally optional stuff, like movie tickets, Starbucks, or vacations. For most people, there is quite a bit in this category. It\u2019s basically stuff that you spend money on, but you could have survived without it.<\/p>\n<p>But we\u2019re not done. Knowing something isn\u2019t the same as doing something, right?<\/p>\n<p>Now, soon we\u2019ll explore some ways to increase your income to help you make significantly more each month. BUT the reason I never want to start this discussion there is because people have a strong tendency to increase their spending to whatever level of income they find themselves in.<\/p>\n<p>I call that \u201cThe Income Creep.\u201d\u00a0 You get a raise, you spend more. We need to fix that behavior before we increase our income, or else the extra income will simply mean we are living paycheck to paycheck with nicer couches and a nicer car.<\/p>\n<p>So, let\u2019s go on to step three\u2014what most people don\u2019t have the willpower to do with their money.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-71986\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/04\/low_budget_real_estate_marketing.jpg\" alt=\"low_budget_real_estate_marketing\" width=\"702\" height=\"337\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/04\/low_budget_real_estate_marketing.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/04\/low_budget_real_estate_marketing-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<h3>3. Dominate It<\/h3>\n<p>Dominating your money begins with understanding how your cash flows through your life. To do that, think of a cash flow funnel (it&#8217;s something I talk about in detail in my book <em><a href=\"https:\/\/www.biggerpockets.com\/store\/how-to-invest-in-real-estate-ultimate\" target=\"_blank\" rel=\"noopener noreferrer\">How to Invest in Real Estate<\/a><\/em>).<\/p>\n<p><strong>Most people\u2019s expenses flow through them like this:<\/strong><\/p>\n<ul>\n<li>Money is spent on fun stuff without thinking<\/li>\n<li>Then on variable expenses<\/li>\n<li>Then on fixed expenses<\/li>\n<li>Then maybe if there is something left people will give to charity or save it in an investment<\/li>\n<\/ul>\n<p>But this is not how wealthy individuals filter their money. Instead, wealthy people flip the chart upside down.<\/p>\n<p>The first thing they do is tell their money to go into savings to be invested. In other words, they pay their future self first.<\/p>\n<p>Rather than giving your future self \u201cthe leftovers,\u201d you\u2019re giving it the prime rib. Rather than treating your future like a second-class citizen, you\u2019re treating it like royalty. You get the idea.<\/p>\n<p>OK, so they save money first. Then, wealthy people filter their money through giving money away. Then, they pay their fixed expenses, followed by their variable expenses. Then, with what they have left, they spend on fun stuff.<\/p>\n<p>And here\u2019s the great thing: you don\u2019t have to be wealthy to begin thinking this way. Maybe you start with saving just $10 per month or giving away $10 per month. The point is changing your mindset, the way you approach money. You\u2019ve got to flip that triangle.<\/p>\n<p>To dominate your money, it\u2019s time to get in the driver\u2019s seat and tell your money where you are taking it. How much do you want to set aside, this coming month, for savings? I\u2019d encourage you to do something, even if you don\u2019t think you can.<\/p>\n<p>What about giving money away? You might be wondering WHY giving away money is even being talked about now. Well, research has shown that by giving away money, it actually changes the way you think about money and can actually help you earn more because of it. So, it\u2019s important.<\/p>\n<p>Now, what about those fixed expenses\u2014your rent, your car payment, etc.? You might be tempted to think that these bills can\u2019t be changed. They are fixed, after all. But while these bills are not always the fastest to change, they CAN be changed and usually they\u2019ll result in the biggest impact.<\/p>\n<p>Move into a cheaper place, get rid of your car, do something. These changes might seem drastic at the time, but they\u2019re not forever.<\/p>\n<p>In terms of variable expenses, go out to eat less, shop smarter at the grocery store, don\u2019t buy the cool new gadget or wardrobe. You\u2019ll survive without it.<\/p>\n<p>And finally, we get to the fun money. If you were spending $1,500 total on random stuff, from your manicure to your weekend trip to the lake to fancy coffee, what if you dropped that to $1,000 instead of $1,500? There\u2019s another $500 in savings, and you still get to enjoy most of what you had before.<\/p>\n<p>So rather than being miserable, rather than feeling like you\u2019re sacrificing, recognize that you\u2019re empowered, in control.<\/p>\n<h3>4. Grow It<\/h3>\n<p>Chances are, you have dreams in life that are going to require more income than what you currently make. Or maybe you\u2019d like to reduce your hours or travel more or spend more time with family and on hobbies.<\/p>\n<p>Whatever the reason, you now have the necessary foundation for building wealth. You know how to own your money. You know how to assess your money. And you know how to dominate your money. Now, it\u2019s time to grow it.<\/p>\n<p>There are an infinite number of ways to grow your wealth and income\u2014both actively (earning per hour) and passively (earning always\u2014even while you sleep). It\u2019s not just about real estate. Real estate has a lot of cool things going for it, but it\u2019s not the only way to make money.<\/p>\n<p>I actually have numerous income streams that I\u2019ve built. I make money from rental properties, each and every month. I make money from products that I\u2019ve designed and sold. I make money from book sales, from websites, from speaking, and so on. And because you are no longer living paycheck to paycheck, you can afford to venture into some of these income streams.<\/p>\n<p>I hope at this point you can see how this all works together to create true financial freedom.<\/p>\n<p>Because when you OWN your money situation, you put yourself in a position to make real change happen. Then, when you ASSESS your money situation, you see exactly where you are at\u2014no more hiding. Then, when you DOMINATE your money situation, you put yourself in the driver\u2019s seat and begin directing what happens. You have total control. And finally, when you GROW your money situation, carefully and with the extra income you\u2019ve freed up, you have the ability to build a great life that gives you time and money for the things you truly want to do.<\/p>\n<p>And that\u2019s how to stop living paycheck to paycheck!<\/p>\n<p>Watch the video above, where I go into\u00a0<em>way\u00a0<\/em>more detail about how you can stop living this way and start building your wealth.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-91217\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg\" alt=\"\" width=\"700\" height=\"85\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg 700w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01-300x36.jpg 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/p>\n<p><em>Was this video helpful? Do you have any tips to add?\u00a0<\/em><\/p>\n<p><strong>Like this video, subscribe to the BiggerPockets YouTube channel, and leave your comments below!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you want to stop living paycheck to paycheck and find yourself with extra money that you can invest in a better future for yourself, I can show you exactly how to do that\u2014without needing to eliminate all the fun from your life.<\/p>\n","protected":false},"author":710,"featured_media":108949,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7396],"tags":[],"class_list":["post-108942","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-budgeting"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/108942","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/710"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=108942"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/108942\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/108949"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=108942"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=108942"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=108942"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}