Do you feel like you’re stuck in a paycheck to paycheck cycle? Have you always dreamed of having financial freedom, but just don’t know how to achieve it?
In this video, I’ll show you 6 easy yet actionable steps on how to break out of a paycheck to paycheck cycle and start investing for a financially secure future.
1. Create a Budget
Most people find it impossible to break the paycheck to paycheck cycle as they feel that everything they earn just seems to disappear every month!
When you put down your monthly income, as well as essential and discretionary expenses, on paper, it’s much easier to understand where your hard earned money is going – which is the most crucial step towards financial freedom.
Watch our video “6 Simple Steps to Creating a Budget” for a step by step guide on creating a budget.
2. Cut Down on Discretionary Expenses
Once you create a budget, you will be able to see what you spend the most money on, and where you can limit your spending.
For example, if you spend a lot of money on cable TV, you can try switching to online streaming. If you spend a lot of money on eating out, you can cook more meals at home.
This will definitely set you on the right path and free up money to start improving your finances.
3. Build an Emergency Fund
An emergency fund is money that you keep aside for unexpected financial situations like your car breaking down or a job loss.
This fund should have enough money to cover 3-6 months’ worth of expenses to sustain yourself during an emergency. Use the money you saved by cutting down on discretionary expenses to build your emergency fund.
But remember to use this emergency fund only for a real emergency, no matter how tempting it may be to spend the money on a shiny new object.
4. Pay Off Credit Card Debt
Credit card debt is the worst possible debt that’s extremely easy to rack up and puts a huge financial burden on you.
It has a very high interest rate, which means you’ll end up paying a lot of unnecessary extra money in interest. It increases your avoidable expenses, and stops you from putting your hard-earned money to good use.
If you want financial freedom, you must pay off credit card debt as quickly as possible.
Watch our video “7 Easy Ways to Get out of Credit Card Debt Fast” to learn how to get out of debt quickly and easily.
5. Cultivate a Saving Mindset
Once you have taken care of the present, it’s time to start planning for the future through good money habits. There is no point in paying off credit card debt if you’re going to go back to credit cards for your next big purchase.
Every little thing counts, and small savings can quickly add up to substantial amounts – so the next time you plan a large purchase like a vacation or a smart phone, save up for it upfront instead of using a credit card or other form of debt to pay for them.
6. Start Investing Today
It’s never too early to start investing for your retirement and other financial goals. Even if you’re very young and feel like retirement is nowhere in sight, you should still start investing for your retirement to take advantage of compounding.
You can choose a 401k, IRA, or other retirement account to save on taxes and increase your returns even further. Invest in an index fund that tracks the S&P 500 – which has proven to be a foolproof long term investment strategy.
Starting to save and invest for the future is the best way to be prepared for the future and to ensure you NEVER go back to the paycheck to paycheck cycle.
Hope you found the video helpful. Please share it with your family and friends to show that you want to help them achieve a financially secure lifestyle.
And thanks for watching!
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Podcast: 6 Simple Actionable Steps to Break Out of a Paycheck to Paycheck Cycle
Fun, informative and concise episodes by a 10-year old, breaking down complex financial concepts in a way that kids and beginners can understand. Episodes cover personal finance topics like saving, investing, banking, credit cards, insurance, real estate, mortgage, retirement planning, 401k, stocks, bonds, income tax, and more, and are in the form of a conversation between a cowboy (a finance novice) and his friend, a stock broker. Making finance your friend, only at Easy Peasy Finance.
A little bit about me: I have been fascinated with the world of personal finance since I was 6! I love to read personal finance books, and keep myself updated on the latest by reading various personal finance magazines. My friends often ask me questions about finance because they find it complex and intimidating. That’s what inspired me to start my YouTube channel called Easy Peasy Finance when I was 8, and this podcast 2 years later.
Stuck in a paycheck to paycheck cycle, and desperately want to get out? Here are 6 actionable steps you can take.
Show notes and transcript at: https://www.easypeasyfinance.com/steps-to-break-out-of-paycheck-cycle/