Throughout the pandemic, Americans received an unprecedented amount of money from the federal government in the form of stimulus checks. When each of the three rounds hit my bank account, that financial boost always gave me a rush of excitement as I determined how to best spend it. On bills? Loan payments? Groceries? Something impulsive?
These extra payments were designed to strengthen our financial safety nets and provide relief during tough times, and they certainly helped many stay afloat and even thrive. With fewer businesses open during the early days of the pandemic and travel at a standstill, some people were lucky enough to save more than they might have during a “normal” year.
Most of my stimulus cash went toward paying ahead on bills and home improvements, although my family was also able to take a mini vacation. But eventually, those extra payments will stop, and we’ll all be expected to resume our normal, day-to-day activities. For most of us that means living within our means. We’ve all heard the term before, but what exactly does it mean to live within your means?
1. Know your income — and where it’s going
The net income number on your paycheck is the money that’s available to spend. It’s also helpful to know how often you get paid — whether it’s weekly, bi-weekly or monthly (or perhaps on a less frequent freelance basis) to help coincide with the timing of your bills. Multiply your weekly paychecks by four and bi-weekly by two to figure out your monthly pay.
PRO TIP: BUDGETING: Budgeting can be a useful tool to keep you on the path toward your financial goals. Read more to learn how to budget for your pay cycle.
2. Don’t overspend
If there’re more toys in your garage than money in your bank account, perhaps it’s time to assess your lifestyle choices versus your finances. Take a page out of the “backwards budgeting” method: subtract your expenses from your income and you’ll be left with your savings. If it’s a negative number … you’re probably overspending.
PRO TIP: USE OUR TOOLS: Use the Creating a Budget playlist on Compass to learn strategies, tips and tools to stick to your budget and improve your financial health.
3. Think before you charge it
Credit cards are often safer than cash, convenient and a great way to build credit. But consistent spending sprees can put you in a real pickle if you’re buying things you can’t afford. Every swipe counts against your available credit limit, not to mention the interest you’ll pay if you carry a monthly balance. If you can’t afford to buy that TV now, don’t reflexively pull out your credit card. Instead, save up to be sure you can afford it in cash and consider watching your shows on a tablet or laptop in the meantime.
4. Build an emergency savings
An easy way to start an emergency fund is by automatically transferring a few extra dollars per week to a savings account. A good rule of thumb is to sock away three to six months’ worth of living expenses, but even just a few hundred dollars is a great goal to get started.
PRO TIP: BALANCE BUILDER: Enroll in the IHMVCU Balance Builder Savings + Checking program to earn money while you build your savings.
Above all, find ways to be comfortable in your lifestyle and content with where you are in your journey to live within your means. Stop comparing yourself to the Joneses and the “glamorous” influencers on social media and make your own highlight reel of memorable moments. When you learn to unplug from time to time, you’ll likely improve your attitude, have more quality experiences and better enjoy real life. Your budget will thank you later!