Simple Financial Planning – Get Off The Paycheck to Paycheck (Not So) Merry Go Round

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Financial Planning helps relieve stress.
How to stop living paycheck-to-paycheck.

Dear Jessie,

S.O.S! I’m sick of living paycheck to paycheck. I’m a 34-year-old single mom renting an apartment in Madison. I have a decent, steady job and my daughter is in school, so no more daycare expenses. I want to do some simple financial planning so I can stop feeling that my paycheck is already spent before it’s even deposited in my account? Where do I begin?

– Hopeless

Dear Hopeless,

Living paycheck-to-paycheck is so stressful – I know, I’ve been there! As a single parent I struggled for many years to get out of the paycheck-to-paycheck routine and into the savings habit. Believe it or not, I started down my financial planning path by saving $1 per paycheck. Once I felt successful with that, I bumped it up to $1 a day, and then later to $25 into an emergency fund each paycheck. It’s great that you’re ready to get ahead and make a change. To be successful you have to be mentally ready to take on the challenge of setting your goals and planning out a strategy and it sounds like you’re ready!

Step 1 – Getting Started

To create a savings plan you first need to know what’s going on with your money. Here are a few items you will need to collect:

  1. All bill statements (rent, electric, phone, cable, child care, etc.)
  2. All loan statements (auto, personal, mortgage etc.)
  3. All credit card/line of credit statements
  4. All records of what you spent money on for the last 30 days. Collect receipts or use the last 30 days of bank statements. Highlight your miscellaneous expenses and add them up.
  5. Any monthly, quarterly, or annual payments, memberships, or dues. (AAA, auto insurance, gym memberships, magazine/book subscriptions, etc.)
  6. All income statements (paystubs, child support, any additional income you have)

You need to know where all of your money is going so you can come up with a complete budget to set your goals.

Step 2 – Organize Your Budget

Download and print out this budget worksheet. From the items you collected in step 1 fill in all the areas that pertain to your spending habits. You will also fill in all your income. Now you will see your entire financial picture and you can proceed to set your goals.

Step 3 – Setting Goals

Here is the fun step, setting goals! You know you want to save, but how much? When do you want that amount saved? How are going to get there? The biggest thing to remember is to start small which will help you focus on obtainable goals. Here’s an example: I want to save $1 per day for two months for a total of $60. Sounds reasonable, right? DCCU can help you set up a separate sub-savings account and automatic transfer through eBanking. This will help you get in the habit of savings; once you are in the habit and see your savings grow you’ll be ready and excited for the next level.

The overall goal is to set a small, medium, and large savings goal. We already did the small one above. An example for the medium goal is to save up $200 for holiday gifts. You can do this by setting up an automatic transfer to a Holiday Savings account on the days you get paid. So if you get paid every other week and your transfer amount is $25 you’ll have $200 saved up in 4 months – do it now and you’ll be ready for the holiday season! A really smart large goal would be to have $500 saved up in an emergency savings account. DCCU has a special Emergency Savings account that earns higher interest than a regular savings account to get you there faster. Transfer $30 into that account each time you get paid and you’ll have $500 in less than 9 months!

Step 4 – Tracking, Patience and Adjustments

eBanking is a great way to look up account balances and track savings growth. You can make transfers at any time so if you have any extra change, go ahead and put it into one of your sub savings accounts. Be patient and keep tracking daily spending then adjust your plan or goals as needed. Try using The Hub in eBanking which is a great online tool that automatically keeps track of the spending targets you set up.

Other ways to increase your savings is to increase it incrementally when you get a raise or your insurance rate drops. When you pay off your car loan, keep paying the loan amount, but put it into you savings account instead.

Step 5 – Get Creative and Reward Yourself

Find other fun ways to add to your savings efforts. Why not collect all your change for a week, a month, or a year and deposit that to your savings account? Start couponing and put the money you save from the coupons away in a savings. You could save between $1 – $100 dollars a week depending how much you use coupons. If you buy a soda or coffee each day, cut back one day a week, then two days a week and put the money you saved in to your savings account.

Don’t forget to also reward yourself for completing a goal or reaching a milestone, like half of your goal. Start with small rewards. One I did was to buy a new nail polish once I saved $100. When I got to $500 I treated myself to a Tuesday night $5 movie. Make the rewards your own. They can be low cost or even free depending on what makes you happy! The point is to save when and where you can, and make it a fun challenge that includes rewarding yourself for doing a good job.

Ready, Set, Go!

Now that you are ready to end the paycheck-to-paycheck cycle and get ahead I recommend sitting down with a Member Service Representative at Dane County Credit Union to help you sort through all the information and set goals. We can also help find other ways to save you money like lowering interest rates on loans or lines of credit you may have at another lender. You could be saving money in more ways than you think!

Once I was in the routine of saving small, I looked into my bigger options. I added more into my 401k every time I earned a raise and I opened a second Emergency Savings account. It is now part of my regular budget to save for small things like Holiday gifts and for big things like an entire vacation before we even hit the road. What a relief I feel to have a financial cushion and I wish the same for you, Hopeless.

Happy saving!

$ Jessie $

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Jessie C.

Jessie has been with DCCU since 2005 and has a HUGE passion for helping others. As Branch Manager she enjoys motivating staff to live out DCCU’s mission of building lifetime relationships with personalized financial solutions. When she’s not helping staff and members become successful, she’s busy raising her two kids and a dog. Her passion of helping others keeps her busy outside of work by volunteering with two local non-profit organizations: No Excuse Mom, and Friends of the State Street Family. Her favorite place to unwind is at the beach or next to the campfire.