Debt Pay 1

Avoid the #1 Cause of Payday Lending: Stop Living Paycheck to Paycheck

July 8, 2011 at 9:30 pm | Posted in Uncategorized | 2 Comments
Tags: get out of payday loan debt, pay off payday loans, payday loan consolidation, payday loan harassment, payday loan help, payday loan settlement

Part of a payday loan consolidation company’s job is to help each applicant assess their financial situation before signing them up in a payday loan relief program.  It is important to understand what causes an individual to turn to payday loans in the first place because to create a solution, you must first identify the problem.  

Over the past two years, Debt Pay 1 has encountered hundreds of applicants seeking payday loan help.  Not surprisingly, the reason for payday loan abuse is almost always the same.  No matter what reason it is, one word always come up: unexpected.  Unexpected car repair, unexpected medical bills, unexpected emergency, etc.

Seemingly, payday loan consumers have one thing in common: lack of savings.  These are common people who live their lives paycheck to paycheck but do not set money aside for unplanned expenses.  They pay for their monthly bills and have enough money left to get by until their next paycheck.  But what happens if their car breaks down all of a sudden?  What if the house heater stops working during winter?  Where will they get that $500 they need within 24 hours?  These reasons cause people to fall into payday loan debt in the first place.

As we realize the problem, we can turn our focus on how to change the way we spend our money.   Here are five simple steps you can take that can help you stop living paycheck to paycheck:

1. Create a budget.  You will not fully understand where your money is going until you keep track of every single dollar you spend and write them down.  List your expenses such as utilities, gasoline, and food, and how much you spend on them each month.  Obviously, your expenses should come out to be less than your income.  Once you compare your income against your expenses, you will see how much money you can set aside for emergencies.
2. Start cutting back.  If the amount left for your savings is less than what you prefer (or none at all), you could cut back on some of your unnecessary expenses.  Once you know where your money is going, you can easily determine what you can spend less on. Start eating in more often or pack your own lunch instead of dining out.  Rent a DVD instead of watching a movie at the theaters.  Simply cutting back on unnecessary things can go a long way.
3. Take advantage of automatic deduction.  Almost all banks today provide the option of automatic deduction on your accounts.  Take advantage of it by paying your bills and moving money to your savings account automatically.  This way, you can avoid those pricey late fees should you forget to pay a bill.  Plus, you are automatically setting a part of your paycheck aside for emergencies.  Once your bills are paid and your savings are set aside, you can clearly see how much money you have left and you don’t spend it unnecessarily.  The less you think about your bills and savings, the easier it will be to manage your finances.
4. Set rewarding goals.  It is hard to make sacrifices, which is why you need to reward yourself.  What do you want to accomplish?  If you like to travel, plan a vacation by setting aside money for a trip.  Don’t you think it will be easier to avoid the mall when you know that the less money you spend on clothes, the closer you will be to your trip to Hawaii?
5. Earn more income.  If you still find yourself struggling, increase your income.  The easiest way to do this is adjust the amount being withheld from your taxes.  Of course, this means that you will get less on your tax refund, but at least you will have more money to spend each month.  You should also take advantage of your 401(k) plan.  The more you contribute to your retirement plan, the more free money you will receive from your employer.  You may not see its benefits now, but look at the big picture and think about how it will help you in the future.

If you have been living paycheck to paycheck for years, it may seem like it is impossible to break this habit.  It might be hard to get through these changes at first, but it will keep getting easier as you stick to it.  Just imagine how great you will feel once you have the financial security you have been working for.