Financial Planning

Stretching Income on a Limited Budget



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Living paycheck to paycheck is difficult at best but thousands of people do it everyday. When you live for the next payday there is often no planning ahead to the next vacation because you can't afford to take one. The bills are the only thing on your mind when one missed check and cause you to either go without food or wind up without a roof over your head. There are some things that can be done to stretch your income further no matter how small it is.




Create a Budget




Take what you average each month without overtime, holiday or vacation pay and write it down. This is what you have to work with. Now take all the bills that you have each month and write them down including child care expenses if you have children. Total them up and this is the amount you must pay each month. Now you will need to see how much is left after the bills for items such as gasoline, public transportation, groceries, clothing and emergencies. Bills that come due annually or a few times a year should be averaged out and included to get a truly accurate picture of spending. Is there anything left?




Chances are when you create a budget after living paycheck to paycheck for any length of time there is very little left after you get an accurate picture of your expenses. Don't worry this is normal when you live paycheck to paycheck with a fear of losing everything and not being able to meet basic needs. So what do you do?




Check Your Tax Withholdings




Often people that live paycheck to paycheck end up with a rather large tax refund that they use to catch up and purchase much needed items. Tax refunds are great but they could be making you dependant on that large sum of money coming in all at once. People with children below a certain income level often qualify for an EIC or Earned Income Credit.




If you qualified for the EIC on your last tax return and your income levels haven't changed there is a good chance you will qualify for it again. Take a look at your W-2 forms for the previous year and you will notice a slot for Advanced EIC. This the area for payments made toward your EIC credit that you can get before filing your tax return. Speak to your employer to see if you can claim the advanced credit and increase home pay each week. You don't have to claim all of your dependants all year, doing so can help to increase the amount of bring home pay also. (Be careful though claiming too much during the year can cause you to owe taxes when it comes time to file. You want to simply reduce the amount of refund received or break even instead.)




Reduce Expenses




Now that you have increased your paychecks to make them stretch a little further it's time to reduce expenses so they go even further. Take a look at the bills you pay each month and see where you can reduce expenses. Mortgage, utilities and food are the main expenses most people have each month. While you may not be in a position to reduce your mortgage you can do something about the amount you spend on utilities. Check with your utility company to see if they have a budget billing option and start paying more attention to your usage.




There are other bills such as credit cards, telephone, cable and Internet that can be reduced as well. Take the credit cards and see how many you have. Now pick two for emergency use only and cancel the rest just as soon as you manage to transfer them to another card with a lower interest rate or pay them off. Now take a close look at the cable and Internet. If you can find a package that includes all of these for less than you pay now that's a good start. Try living without them for a while and see how you do.




Childcare is expensive no matter where you live. Do you have a child that goes to a caregiver after school? Check and find out if your child's school has an extended day program. Some public schools have extended day programs where your child can stay at school for a certain amount of time after school hours which can be a big help if you only need an hour after school lets out to finish your work day.




Grocery Bills




Grocery bills are reducible as well. There is money you spend to eat out at work and the money you send with the kids for school lunches. Try packing a lunch for you and the kids a few days a week, you'll save money on lunches and have a few more dollars for groceries. Planning ahead and watching the sales are one of the best ways to keep groceries when you live paycheck to paycheck.




Living paycheck to paycheck is difficult. There is a lot of time involved in figuring out where you can cut expenses and making sure you are living within your means. Once you have increased your paycheck and cut expenses as far as you can and notice that you are still scraping by it might be time to ask for help.

More about this author: Laurie Childree

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