Here’s a Five-Step Guide to Stop Living Paycheque to Paycheque
Do you live paycheque to paycheque? If yes, then you’re not alone. In an ME Bank survey in 2018, about 17% of Australian households could hardly pay their utilities on time. Over 10% had to sell their possessions or pawn them for their needs. Fortunately, you can stop the cycle. From emergency funds to Truebell Capital investments, here’s a guide to liberating yourself from financial bondage for good.
Step 1. Assess Your Current Financial Position
You’ll never know how much to save and what debts to pay if you don’t sit down and determine your financial position. That is why you need helps from the experts at Truebell. Here’s how to do it:
- Gather all the monies you have. Look into pockets, check your bank accounts, and collect receivables from friends and family. List down everything!
- After that, do the same for your debt/s. From the small ones to the big ones, identify each and note their payment terms, interest, and balance.
- Determine your assets, such as real property and investments if you already have one.
- Identify income you may receive within the next 30 days.
Step 2. Create a Doable Budget
From the information you obtained in step 1, you can start creating a doable budget. Now, what does this mean? It’s a budget that helps you to live within your means without restricting you from a few wants.
You can follow many styles for your budgeting system:
- Allocate 70% to expenses, 20% to savings, and 10% to investments or debt payments.
- Sort your expenses to essential and non-essential and make the former your priority during payday.
- Consider savings as an expense to ensure you’ll have money for the rainy days.
Do what you think will work for your needs and financial position as of the moment.
Step 3. Pay Your Debts First
There’s no doubt you need to save money or even invest in companies such as Truebell Capital, but there’s no point in doing any of these if you have high-interest debts. These loans will only eat your savings and returns at some point.
When paying your debt, you can:
- Follow the snowball method. You pay off the smaller debts in full and some of the large debts.
- Consolidate your loans.
- Refinance your mortgage to take advantage of a possibly lower interest rate.
- Transfer credit card balances with high interest to a card with a lower interest rate.
Step 4. Build an Emergency Fund
Some expenses and events can drain your finances fast. These include illness, job loss, car trouble, and property tax. You can prepare for these by having an emergency fund.
The ideal emergency fund is 6-months worth of your monthly expenses. For those who depend on a single fixed income, that’s difficult to reach.
Now, what you can do is to take baby steps. Aim for at least a month. Once you achieve that, set your goal to three months.
Automate your savings as well. Place your money in a high-yield savings account and do not link your debit card to it.
Step 5. Invest
After doing all the steps above, you may realise you have extra money, which you can now use for investments.
Where should you invest your money with the help of the likes of Truebell? Here are some few good places:
- Insurance — This can help protect your assets such as your home, business, property, and health. Life insurance is ideal if you’re the breadwinner of the family.
- Diversified Portfolio — Look for fixed-income securities for low-yield but low-risk investments. You can then complement that with high-risk but high-yield investments such as stocks. If you don’t have enough cash, companies such as Truebell Capital can pool funds from various investors.
- Salary sacrifice — You can contribute more than what you regularly set aside for superannuation. Request your employer to add more to your account from the pre-tax salary. Right now, the maximum salary sacrifice including the compulsory contribution is $25,000.
You may be under a lot of financial stress right now, but know you can change your circumstances. This guide will hopefully help you slowly step away from the paycheque-to-paycheque lifestyle. Or, you can visit Truebell Capital for more information.