Living Pay to Pay – How to Avoid It

Living pay to pay can be a stressful and worrying way to live, and, unfortunately, 63% of New Zealanders are living this way. Counting down the days until pay day because you have $1 in your account can mean you are constantly scrambling to make ends meet, struggle to pay bills and it makes it nearly impossible to get ahead financially.  

It’s also likely that you don’t have any funds set aside for unexpected costs that may come up, which of course (if the unexpected does happen), everything is going to get a whole lot harder as you then try and pay for that as well. 

If this is a trap you find yourself falling into, we’ve put together a list of things you can do to try and break this habit and start making moves towards being in control of your finances. 

1 – Recognise you are living pay to pay 

This might sound a bit cliché, but recognising there is a problem is 100% the first step you need to take to fix the problem. If you don’t think there’s an issue, it’s pretty much guaranteed that you won’t be disciplined when it comes to budgeting and spending. Once you recognise the problem, try and determine where it’s stemmed from. Majority of time it’s simply that you are spending more than you earn. And, often, addressing your spending can be an easier task than addressing your income. 

2 – Track your spending habits and match these with your income

Once you’ve determined there is a problem that needs to be addressed, the next step is to track or have a really good look at your spending. And by this we mean EVERYTHING. Every little cent. Sure a $5 coffee here and there is all good, but if its multiple times a week this starts to add up and can very quickly end up as a total of $50 or more per month.

Start by listing your expenses that are set – such as power, insurances, petrol, vehicle costs etc. These are costs that must be paid and aren’t really something you can control (although, you should regularly check in on these as well, in case there are better deals that you can get). Then look at all the other expenses and determine where you may be able to cut back. 

Some examples are: 

  • Do you splurge on your groceries? Are there some items that you could go without, or simply swap for a cheaper brand? 
  • Are you a habitual coffee drinker? Don’t worry, so are we, so we aren’t saying you cannot buy your Caramel Latte’s anymore. But, if you are living pay to pay check and purchasing more than a couple of coffees a week, then maybe this is something you should be cutting back on or finding cheaper alternatives to. 
  • Do you or your better half (or friends) have a habit of dining out a lot? Check out our Cheap Date Night Ideas blog for some ideas to still have lots of fun, without the massive hit to your account. 

3 – Create a budget 

Not everyone enjoys budgets, and we get it. They can be confusing at the least and confining at best. But this can be very important if you’re trying to get in control of your finances. It doesn’t need to be a big fancy (or even strict!) budget, but simply knowing your upcoming expenses and what you plan to spend in a week, fortnight or month is one way to help feel more in control of your finances. It can be too easy to think you have enough money for that new dress or pair of jeans when you actually don’t have an idea of what might be coming out of your account or due to be paid in the coming week/s. 

4– Create and grow an emergency fund 

An emergency fund, if you haven’t heard of them already, is different to savings. This money is set aside for those unexpected, often expensive costs that inevitably come up in life. Think emergency trip to the vet, unexpected mechanical bills, or like in Amy’s recent case; having to fork out for a new hot water cylinder for your home! Not ideal. 

You have savings accounts to achieve your goals such as a holiday, new car or buying a home, whereas emergency funds are there to get you out of sticky situations, without putting you into debt or stressing about how you will find the money to pay for it. 

5– Stop using credit to pay for things and get out of debt 

Having to pay regular amounts on any short term debt will no doubt have an effect on what you have left at the end of your pay week. And of course, the less of these debts you have to pay, the easier it will get to set money aside, save and ultimately make progress in achieving your money goals!  

6– Pay your bills, pronto 

If you aren’t good at managing money, make sure that you pay all your bills as soon as the money becomes available. If the bill isn’t due yet, put the money aside in another bank account, and organise for the cost of the bill to be direct debited. This way, within a day or two after you’ve been paid, you’ll know exactly how much money you have available until the next pay period. By using this method you should be able to better manage your money, and not be hit with unexpected bills. 

7– Set goals and create a plan to achieve them 

By having clear goals in front of you, you will automatically feel more determined and passionate about achieving these goals. And often you will find any way possible to get you closer to your goal – whether it be putting aside a small amount of your income each week towards it, or encouraging you to think outside the box on how you could earn extra income to pay for the goal. Having the goal post in front of you will motivate you. 

In short, if you can get out of living pay to pay, you will have less stress and worry about money, you’ll feel more in control of your finances and ultimately start living a more enjoyable life! Hopefully these tips help you and if you have your own money savings tips and tricks, feel free to share them with us on social media, we love hearing others experience and journeys.