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Breaking the paycheck-to-paycheck cycle

Dear Steve,
My husband and I live paycheck to paycheck each week and struggle to save any money due to bills that are always due. I realize that I have credit card bills and school loans that are extra bills floating around each month, but how can I pay them each month and still save toward unexpected expenses or a new home someday? What is it that I am doing wrong? I talk to many people who are in the same boat as I am and still have money to go on vacation and buy or build a new home! I don't understand! Please help! -- Kimberly

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Dear Kimberly,
You seem to know what you should be doing, and I will be glad to help you find a way to save. You really don't know how others spend their money or what kind of debts they may be carrying to take vacations and have new homes. You might be surprised if you knew your friends' complete financial stories. For instance, I have a friend who tells me how much money he wins gambling. Funny thing is, he never mentions his losses. Well, you know your whole situation, so here goes.

  • Set a goal. This may seem a strange way to start, but it will give you and your husband a common reason to do this and will provide a shared encouragement to keep it up. One goal could be that vacation you were mentioning, as well as a savings account for unexpected expenses.
  • Track your spending. The next thing you both need to do is find out exactly where your money is going. You will be surprised if you track your spending closely for two months. I want you to account for every dollar spent, especially the cash-out-of-pocket expenses. I call them "money gobblers"!
  • Watch what you eat -- and where. Eating out has become a way of life for many families. Setting a limit of one meal out per paycheck may help. Eat all of your meals at home, brown-bag it every day, and have a coupon contest to see how much you can save in a week using them. Remember to always shop with a list, and never shop when you're hungry.
  • Pay your bills on time. Pay close attention to the due dates on your bills so that you do not get hit with late-payment fees or have your interest rates raised.
  • Build a spending plan. After you have tracked your spending, it's time to sit down as a family and come up with a budget that you can live with. It doesn't do any good to have a budget if you can't stick to it. By tying the goal you set to your budget, you will have a powerful motivator and tool to get what you want.
  • Start saving at work. Now that you have your expenses under control and have probably snipped from 10 percent to 20 percent out of your usual spending, ask your employer to direct deposit that amount into a savings account. Also ask that half of any raises, bonuses or tax refunds go into the savings fund and the other half to you for current expenses. Do more than half if you can. Once you start to save, it will snowball.
  • Sell something. Nearly everyone has something they don't want or need. A garage sale can generate some extra funds. So can the sale of more expensive items such as unworn jewelry or vehicles. If the garage-sale idea doesn't work, consider eBay or some other online auctioneer. Put the money you make into your savings account.
  • Seek other employment. Second jobs are rarely fun, but they are a way to get to your goal. Every strategy listed here has that goal in mind -- to maximize income and reduce expenses.

Kimberly, I hope this helps. Good luck!

The Debt Adviser, Steve Bucci, is the president of Money Management International Financial Education Foundation. Visit MMI for additional debt advice or click here to ask a debt question.'s corrections policy
-- Posted: June 24, 2005
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