Feel like everyone else is getting ahead while you’re financially stuck on a hamster wheel? You’re not alone. One in three people say their finances have gotten worse this past year, and difficulty making ends meet is a leading cause of rising debt.
You may not see a way out of living paycheck to paycheck, but a brighter future may be closer than you think. The truth is that money follows us like a shadow, reflecting the way we act and make decisions. If you’re stuck in a rut, you may have fallen into one of these common financial pitfalls. Here’s how to get out.
Obsessing over tomorrow’s troubles will rob you of today’s peace. But living every day like it’s your last will heap unnecessary troubles on you down the road.
The best approach is somewhere in the middle, where you aim to meet short-term needs with an eye on the future. For many, planning for the future involves setting aside savings every paycheck to build an emergency fund and grow an income pool for retirement.
If that sounds boring, be assured that the great feeling you get from reaching long-term goals and being able to afford life without going into debt runs deeper than the superficial high you get from eating out and splurging on items you don’t need.
Write down your needs and wants under two lists, “short-term” (up to one year) and “long-term” (more than one year). Combine the lists, and prioritize items from the most to the least important.
Then create a budget that allocates funds to each item on the list—you may need to increase your income or reevaluate your priorities to make your budget balance.
Whipping up solutions to solve tough problems on the spot says something about your resiliency. But if you find yourself “getting creative” and “juggling” to make ends meet month after month, it says more about the absence of a plan than it does about your ingenuity.
Imagine riding smoothly through each pay period without worrying about unexpected expenses pounding on your door—and maybe even having a little extra at the end of the month. That’s the benefit of designing a roadmap for your money.
Everyone needs a budget, which is simply a plan for what to do with your income. A basic budget lists ongoing expenses like rent/mortgage payments, car payments, utilities, groceries and gas. It should also include savings and a reasonable amount for personal spending.
If everything in your budget adds up to more than you earn, something has to change—either your income or your lifestyle.
Ever notice that the moment you get a little extra cash, it flows right back out of your hands? The tendency to spend more when we earn is called “lifestyle creep,” and it’s more common than you think.
MarketWatch reports that the average income increased between 2020 and 2024, but personal savings rates decreased. Of course, unavoidable situations like the pandemic likely impact this statistic. But the fact still stands that spending more while making more does not get you further ahead financially.
The previous solutions—making a budget and identifying your financial priorities—are key barriers against lifestyle creep. If extra cash comes your way, don’t thoughtlessly leave it in your checking account or recklessly commit to a spending spree.
Take a moment, revisit your list of financial priorities and ask yourself where the extra money can make the greatest impact. Should you save, invest or perhaps pay off debt? If you prefer, split the bonus between a need and a want, so you can treat yourself while making headway towards your long-term goals.
An uncomfortable truth about money is that it ultimately boils down to numbers, which don’t adjust to match your feelings, personal values or circumstances.
Hitting financial limits when you want to help a friend or family member, donate to charity, reward yourself or pursue a life-long dream feels threatening. In these moments, it’s as though money is a bully standing between you and a meaningful life.
It’s worth remembering that money isn’t a person; it only goes where you tell it to. The power to pursue a meaningful life is in your hands, and, with patience and maturity, you can use money to build the life you want.
Your wallet is as smart as you are, so make sure you handle money wisely by learning about personal finance from the ground up. There are loads of highly-recommended, time-honored financial books at your library and available online.
Aim to understand how to think about money, how saving and investing work, where you stand financially and where you think you should be. There’s no one-size-fits-all financial plan for everyone, but search for advice that works best for you and just let the rest pass on by.
As you gain financial stability, you’ll free up funds to give and spend as you see fit without risking you or your household’s security.
After accepting that money boils down to numbers, not feelings, the next (also hard-to-swallow) reality to accept is that, regardless of how you got into a financial hole, it’s up to you to get yourself out of it.
Don’t be misled into thinking that random chance drives your outcomes—that others have all the luck or that you’re a magnet for misfortune. While we can’t control everything impacting our budgets, you’d be surprised by how powerful your small decisions can be.
For example, if you saved $10 a week in a checking account, you’d have $2,600 after a year. But if you saved this money in an account that pays 3% interest, you’d have $2,806 instead. Alternatively, invest in a S&P 500 index fund, which has yielded an average 6.9% annual return (with dividends reinvested, adjusted for inflation), and you could have over $3,000.
It’s certainly not enough to retire on, but it beats having nothing when car repairs come up or you suddenly become unemployed.
Focusing on your financial guilt or blaming others won’t get you on the path to financial freedom. Give yourself some grace and accept where you’re at. Then set one or two reasonable, near-term goals and start making small changes to cut back spending and save a little.
Every dollar of debt you pay down and every dollar you put back in your pocket will help motivate you to set and reach even bigger goals.
As the saying goes, there’s no such thing as a free lunch. If a business is giving you money with one hand, they’re probably reaching into your wallet with the other. So, when lenders come around with magic keys to unlock everything you dream of but can’t afford, never forget that their help comes with a cost.
The cost isn’t just monetary, it’s psychological. With personal loans, payday loans, buy-now-pay-later (BNPL) apps and cash advances flooding the market, debt is easier to access than ever.
But when you start mentally shifting responsibility for your spending onto an ever-elusive “future you,” you may be tempted to stop tracking your spending and shell out a lot more than you need to.
Loans are always an obligation and never a gift. Never borrow money without knowing exactly what it costs to repay and budgeting for it accordingly. If you know your spending habits are a problem, avoid high-cost types of debt like payday loans, BNPL apps and credit cards.
Accountability will make it harder for you to rationalize debt you can’t afford. Consider partnering up with a friend or family member to complete “no-buy” challenges or race each other to pay down debt. Gamify your efforts with rewards like a little self-care, a day out with friends or a small purchase.
Many of the most common financial traps and pitfalls essentially boil down to not stepping back to look at the bigger picture and create a rational plan for your money. When trying to dig out of a financial hole, make decisions with your mind, not your feelings. With time, patience and education, it’s more than possible to live the life you envision.
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