Do you ever find yourself thinking, "I work so hard, but I'm still struggling with money!" If that sounds familiar, you're not alone. According to a recent report by LendingClub, the majority of Americans live paycheck to paycheck. But don't worry; Vermont Federal Credit Union is here to help. We have some valuable tips on building an emergency fund and other strategies to make your money work for you so you can finally break free from the cycle of living paycheck to paycheck.
Start by Creating a Budget
If you don't already have a budget, now is the perfect time to create one! Calculate your monthly income and then add up all your monthly expenses. Ideally, your income should exceed your expenses, leaving you with extra cash each month.
If you find yourself under budget, start stashing away that extra money. On the other hand, if you're over budget, it's time to take a closer look at your expenses. We understand that cutting back can be challenging when you're barely making ends meet, but we have some creative solutions to help you get back on track.
Cut Expenses and Increase Income
Carefully examine your budget and identify areas where you can trim costs. Start by eliminating non-essential expenses like unused gym memberships or unnecessary streaming services. Consider cooking at home instead of dining out, and try to save a few dollars on groceries by buying generic brands or using coupons. If you own a home, consider refinancing your mortgage to reduce your monthly payments. You can also consider transferring your high-interest credit card debt to a lower-interest-rate card to save on monthly payments.
If you're already living on a tight budget and can't cut costs any further, try finding ways to increase your income. Can you take on an extra shift at work or pick up a side hustle? Every little bit helps, making it easier to build an emergency fund even on a tight budget.
Build an Emergency Fund
Once you have some extra cash, begin saving it in an emergency fund. While the ultimate goal is to have three to six months' worth of living expenses saved up, start small! Consider selling some items you no longer need on platforms like Facebook Marketplace or OfferUp or even organize a rummage sale. Building an emergency fund is crucial in breaking free from the paycheck-to-paycheck cycle.
Stop Accruing Debt
Your emergency fund is full of unknowns, so quickly building up your funds is critical. Building up your emergency fund is essential because it allows you to cover unexpected expenses without relying on credit cards.
Credit card debt can quickly spiral out of control, leading to a cycle of living paycheck to paycheck. By prioritizing paying off your debt and avoiding new debt, you can start putting that money towards other financial goals, like saving for a down payment on a home or contributing more to your retirement fund. Breaking the debt cycle is key to building a solid financial future.
Open a High-Yield Savings Account
Consider opening a high-yield savings account, such as a Term-Share Certificate, to make your money work for you. These accounts typically earn higher interest rates compared to traditional savings or checking accounts. By depositing the minimum amount required to earn interest, you can watch your money grow as the interest compounds over time. It's important to note that Term Share Certificates have limited liquidity, so ensure you're comfortable with the terms before opening one.
Join a Credit Union
Many people miss out on the benefits of making their money work for them by not joining a Credit Union. Unlike banks, Credit Unions are not-for-profit organizations focused on empowering their members' financial future. Credit Unions can help you save money through low-interest rates on loans, high yields on savings, and other perks and benefits. If you're not already a member of a Credit Union, consider applying and experience the difference firsthand.
Use Free Financial Wellness Resources
Managing your finances can be challenging, but utilizing financial wellness tools can make it easier. Vermont Federal Credit Union recently launched its Financial Resource Center, dedicated to helping individuals and families improve their financial health. You'll find articles, videos, and other resources to guide you on your journey toward meeting your financial goals and breaking free from the paycheck-to-paycheck cycle.
Just like our physical health, our financial health requires attention and care. If you need assistance pulling yourself out from just scraping by, we're here to support you every step of the way. Let's create a customized plan together and help you break free from the paycheck-to-paycheck cycle once and for all!