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By: AgFed Credit Union

Welcome to AgFed Credit Union's MoneyDig blog! 

Get confident about your personal finances with a number of articles, tips, advice and more.


Know Where Your Money Goes

 Jul 12, 2021
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Saving money is hard, especially when the majority of Americans are living paycheck-to-paycheck. It's a sobering statistic considering most American households are labeled as middle class. Some families have dealt with an unexpected situation that has caused them to fall behind financially. Others may simply not make enough to keep up with their increasing bills. Regardless of the reason, not making enough money to pay bills or deal with an emergency is a serious problem millions of Americans are dealing with today.

The truth is that most Americans don’t have the money management skills necessary to budget effectively. But don’t worry, these are skills you can learn and master with some time and effort. Learning these skills will help you better understand where your money goes, which is the first step in having financial control.

If your family has been living paycheck to paycheck, your best option is to create a budget and get back control of your finances. Most people cringe at the thought of having to stick to a budget, but having a budget is the difference between having to scrape by and finally having enough to save. You need to be aware of where your money is going so that you can take steps toward making better decisions. We’ve put together a guide on how to evaluate your expenses and create a budget; money management skills we know you can master!

Here’s how you can stop living paycheck-to-paycheck by building an accurate and effective budget:


Track Your Spending

Getting control of your finances starts with knowing where your money is going. Tracking your spending will open your eyes as to what expenses are necessary and which are unnecessary. You may be surprised by what you discover.

You should start by tracking your spending for a few weeks, or even an entire month. If you pay with cash, use a daily planner or a note app on your phone. Whatever tool is easiest for you to keep up with. Mark down every single transaction, including bills that go out automatically from your checking account, and things like gas and food.

To effectively track your spending, you’ll need to compile a list of your current monthly expenses. Break your expenses into two types of expenses, fixed and flexible. Fixed expenses will be things like rent/mortgage, car payment, cell phone bill, insurance, etc. Flexible expenses are variable costs, such as groceries, utility bills, gas, fast food/restaurant workday lunches, entertainment, etc.

Building a budget will also help you better prepare for irregular expenses, such as holidays, birthdays, auto maintenance, etc. These types of expenses may only pop up two or three times a year. Budgeting will allow you to manage your money effectively so that when the irregular expenses come around, you’ll have money to spend! Your budget should be monthly so that you can plan for yearly expenses.


Calculate Incoming Funds vs. Outgoing Funds

This is the part where you’ll be able to see whether you’re living within your means or not.  Add up all your monthly expenses, both fixed and flexible. Then, calculate how much income you earn every month. This is easier to calculate if you are paid an annual salary. If you’re paid hourly, you’ll need to multiply your hourly pay by the average hours you work in a month. (Note: It’s even easier to simply review your pay stubs as taxes will already be taken out and you can get a more accurate monthly income). Now you’ll need to subtract your expenses from your monthly income. Is there any money left?


Analyze Your Expenses Closely

If you have barely or no money left once you’ve calculated your incoming and outgoing funds, it’s time to face the music. It’s important to be honest with yourself and your expenses, and expect it may be time to make some sacrifices.

Are you going out to lunch every day? Have you been spending money on clothes but struggling to buy groceries? Do you have an expensive cell phone plan or cable package? Are you paying $50 a month for a gym membership but only going to the gym once a month?

Ask yourself one question, “Can I live without that?” If so, make the necessary adjustments. That’s not to say you get rid of your cell phone but maybe switch to a more limited plan. You don’t have to stop buying clothes entirely, but you can give yourself a budget and build up your wardrobe slowly, such as one top and bottom per month or one dress. Those are just examples, but you can make whatever adjustments you are comfortable with. If your main goal is to have enough money every month to save, you need to do everything in your power to spend money only on what is absolutely necessary.

You’ll need to track and analyze your spending for at least two or three months. That may seem like a long time, but it will allow for enough financial activity to give you a clear view of where your money goes. It will also allow you to compare once you have made your adjustments.

Fast food restaurants charge about $8 for a meal and a drink. If you take leftovers to work for lunch every day for a month, you could save up to $160 per month. You could save another $50 each month if you stop your gym membership and begin jogging in your neighborhood or working out at home. If instead of buying $100 worth of clothes every month, you only bought one outfit a month for $50 you could save another $50. Again, these are just examples.

Depending on the types of adjustments you make, you may be able to save up and stop living paycheck-to-paycheck finally.


Increase Your Income

If you have already made all of the adjustments possible, but you’ve still got an empty wallet, you may want to consider looking for an additional source of income. While working a second full-time job might be impossible for you, there are other options available. Look in your local neighborhood and online for freelance or hourly jobs. If you have a specific talent, you can monetize it. If you don’t have any special skills, you can opt for an easier gig, like becoming a driver or running errands.


Maintain Your Budget Long Term to Keep Yourself Accountable

Your budget will be your key to financial stability. It will keep you accountable and allow you to manage your funds effectively. You can even use your budget to plan a vacation, saving a little bit each month. Making financial decisions will become much easier as you see what benefits or hurts you financially.

Your budget will also help you shift spending as necessary. For example, if you pay off your credit card bill and suddenly have an extra $50 available, you can either shift that into your monthly savings or utilize it to increase another payment (such as a car loan, etc.) so that you can pay off that debt faster.

Keeping a budget means you are more mindful of your spending and will no longer make impulse buys. If you are ready to stop living paycheck-to-paycheck, you must determine what is truly important to you and prioritize your spending accordingly. You must be honest with yourself. If you’re spending too much on something, you should find a way to change that (if possible). Your budget will need tweaks here and there, but if you work with it and not against it, you’ll be able to manage your finances successfully. You may even find yourself with a little spending money on months that you would normally be struggling to keep up with your bills. Reduce expenses a little at a time so that you can adjust as necessary.

If you know where your money goes, you’ll finally be able to manage it better and stop living paycheck-to-paycheck!


We’re Here to Help!

If you have questions on budgeting or would like more personal advice on reducing debt, email us at or give us a call at 202-479-2270.

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