11 March 2011

How To Stretch Your Paycheck

Are you fed up of receiving your pay check, only to see the money completely gone before you have a chance to blink? How frustrating is it when your salary disappears so quickly that you have to struggle on for the last few weeks or days before you get paid again, only for the process to repeat itself?

Just before I decided to get serious about accumulating wealth my situation was exactly the same. My pay check simply didn’t stretch. Weeks before the end of the month areas of life would come to a standstill, simply because there was no income to do anything. After paying off all my bills the rest of the money would somehow evaporate and I would be left broke!

Nowadays however that is no longer a problem. Any flow of income that comes in effortlessly stretches until the next inflow comes through. So how do I achieve it?
First, it begins with a little pre planning and preparation. Without doing this there is no plan of action and the money is filtered away before you can recall what is was spent on. 

Budget beforehand

This fundamental has been repeated so much that it’s very boring, but it works! In your budget, before ANY money goes out, squirrel away 10% of what you’ve earned. If saving this much doesn’t pile on the pressure, increase the percentage until it makes you a little hot under the collar. This will force you to summon your creativity skills, which just so happens to be vital for wealth accumulation. 

The next step is to take some time to prioritize what is most essential and balance out your cash to meet your requirements to the best of your ability. Even if you can’t pay everything off fully, you can get creative with how you can meet your obligations afterwards. Remember, your 10%, followed by your stretch cash are the most important things to build your wealth and ensure you have a comfortable month, month-in, month-out. 

Now, decide how much will be enough so that you have cash from week to week for at least a modest lifestyle, even if its just a few clothes or outings. As an example, based on a four week month £200 as a starting point would work out at £50 a week for clothes, outings, concerts etc. 

Open a very basic bank account

The next thing to do is open up a bank account with no bells, whistles or fancy interest rates and throw all of your stretch income for the month in there [In this example, £200]. This is very important, as it completely separates your stretch cash from everything else that the rest of your pay check will be covering, such as bills, food, petrol etc.   

Kick the card habit

The debit/credit card is simply not your friend when it comes to making your pay check last.  The money that goes in your separate account should be separated evenly for each week of the working month. Every Sunday, before the working week begins, take out the allocated amount for the upcoming week and hold it in cash. Using our example, £50 cash will be taken out each Sunday and will act as our allowance for those 7 days. 

Holding money in cash and seeing it frittered away on newspapers, cups of coffee etc, has a very powerful effect which is 100 times stronger than the emotion involved with placing your expenses on a card, which is one of the main reasons a pay check disappears rapidly. 

Remember to condition yourself to stick to the weekly allocation so that if the cash disappears one week, you are broke until that Sunday when you can remove cash for the following week!

By following these instructions, you will see positive changes immediately and you’ll be surprised at how effortless money stretching becomes. You’ll never have to struggle from pay check to pay check again!

After you have been successfully stretching your paycheck you may be pondering how you can leverage your cash better so that reaching financial freedom starts to seem like a possible reality, for you guys, check out the 'Income To Make You Rich' series.

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