How To Stop Living From Paycheck To Paycheck

Trapped on the hamster wheel of borrowing, spending and earning, many of us lead financial lives of quiet desperation. And with corporate India's compensation budgets narrowing since 2013, the average increment may not be enough to cover for increasing lifestyle expenditures. According to an Aon Hewitt survey conducted last year, the top 100 companies in India are likely to dole out an average increment of just 8.2% this year - a rate last seen back in the year 2009, when the world was just finding its feet in the wake of the 2008 crash.

If you're one of the many millennials who are living paycheck to paycheck, it may be time to take a break out of this pernicious and stress-inducing cycle. Here are a few steps to take.

Create a budget
You've heard it before, and it's almost a cliché, but it warrants repetition - create a personal budget. A monthly budget is the cornerstone of any good financial plan. Jot down all your spends and categorise them as essential and discretionary. Bear in mind that you cannot be in denial while making a personal budget - you need to get this right, to the last rupee, by carefully monitoring your expenses for a couple of months. Thereafter, earmark the monthly outflows which you can potentially sacrifice for a few months, if push came to shove. Having a contingency plan such as this will give you a lot of comfort.

Often, it's not a shortage of cash, but poor planning that could be leading to strife. For instance, if all your EMI's and credit card bills become due on the 5th, but your salary only comes in on the 10th, you're more likely to get stressed out at the start of each month as you scramble for cash. Alter your billing cycles or EMI dates to fit your cash flow cycle, or accumulate enough money through small sacrifices, or by borrowing from your family (if possible), to reverse this cycle once and for all.

Factor in additional expenses 
Besides your recurring monthly expenses, you'll find that hardly a month goes by without some large "outside of budget" expense or the other cropping up. When it's not your child' school fees, it could be your car insurance. When it's not your car insurance, it could be your health, home or life insurance premiums. In another month, it could be Diwali bonuses for your domestic help. Not to mention the expenses incurred for celebrating wonderful moments - such as your anniversary, or the birthdays of your loved ones. And just when you thought you were in the clear, the water bill for the past 10 months could arrive from the Jal Board and leave you reeling! The list is never ending.

There's no reason why you should be blindsided by these expenses, though. Plug these "annual" figures in the same budgeting sheet and prepare a monthly schedule of sorts. You may even be able to break a number of these large expenses (such as your premiums) into easier, monthly instalments. For the others, you should aim to put away money on a regular basis into a liquid fund, which would allow you to make easy and costless withdrawals as and when needed.

Cut out small, recurring expenses
Benjamin Franklin sure knew what he was talking about when he said: "Beware of little expenses. A small leak will sink a great ship". More often than not, it's the small, recurring expenses that develop into sneaky money leaks. Perhaps you've got a subscription or two running on auto-renew, or maybe you're stuck in a mobile plan that needlessly costs Rs. 500 per month extra. Perhaps you end up incurring finance charges on your credit card every now and then, as you fail to clear your dues in full before the payment date. Perhaps there's a cheaper commute option available for work. Or maybe, you're snacking away your savings by purchasing expensive goodies on a weekly basis. By cutting out small, recurring, wasteful expenditures from your budget, you'll invariably find that there's more left over at the end of the month.