If you’re wondering how to get ahead financially, know that it’s not an impossible task. Implementing budgeting and savings habits can even help you get an entire month ahead. Let’s talk about the steps you need to take to relieve some money stress and get ahead financially.
How to Get Ahead Financially in 5 Steps
With forethought and planning, it is possible to escape the paycheck-to-paycheck cycle. Here’s how to get ahead financially.
1. Get real with the numbers.
In order to reach your goals, you first need to know where you stand. That means getting really real with the numbers. You’ll need to know your income and expenses, but you’ll also want to know exactly how much debt you’re carrying. You’ll want to figure out how much you need to save for a full emergency fund and comfortable retirement.
These numbers might not be pretty. But you can’t get on the right track until you confront them.
2. Create a budget or a financial plan.
Now that you know where your money stands, you can start to give it direction. Create a budget that will allow you to cover your expenses, allocate money towards your emergency fund and invest for retirement.
If you have more money left over, great! Use it to build up a cushion to get one month ahead financially.
3. Cut back where you can.
If you’re like a lot of people and don’t have money left over at the end of the month, take a hard look at your expenses. Are there areas where you could cut back?
Here are some common areas of overspending:
- Dining out. Cutting meals at restaurants altogether may be unrealistic. But you could start by packing your lunch. Even if you still join your coworkers at a restaurant once a week, cutting your lunch expenses by just $5/day four days per week can net you $80 per month. It’s not going to pay your rent. But it might cover the electric bill next month.
- Subscription services. How many subscription services do you pay for? Because these services are typically billed automatically until you cancel, they’re easy to forget about until you take the time to wade through your bank account statements. Find the services you’re no longer using, and allocate your savings towards your getting-ahead-financially goal.
- High-interest debt. There are a lot of ways to lower your interest rates — especially if you still have a decent credit score. First, you can call your creditor and simply ask them to lower the rate. If that doesn’t work, you can try refinancing.
Some expenses might be hard to cut. When you find yourself asking how you’re going to get ahead financially, remember that some short-term sacrifice can help you reach your larger goals. (It won’t be like this forever- only until you can get ahead financially)
4. Increase your income.
There will be times when you’ve cut your expenses as much as you can — and you still can’t get ahead. Increasing your income is sometimes the only way to achieve your goals. Pursuing extra income can add breathing room to anyone’s budget.
Here are some ways to get more money:
- Ask for a raise. If you add value to your company and/or your income hasn’t been adjusted for inflation for a while, asking for a raise is going to be the biggest bang for your buck. Rehearse your ask and prepare for negotiations. Hint: If you think you’re underpaid, you probably are.
- Start a side hustle. Whether you’re mowing lawns or starting an Etsy shop, starting a side hustle is a good way to round up some extra cash. Always look for opportunities without large upfront investments- those are typically MLM’s and they can be highly predatory.
- Get a second job. Unfortunately, a second job is required for many Americans just to get by, nonetheless thrive. Even when the economy isn’t booming, applying for work is still more likely to yield results than not applying. At one point in my life I had 4 jobs just to make it-so while it is not ideal for the long term- it was a way for me stay ahead financially.
There are circumstances that make side hustling more difficult and I want to acknowledge that. For example, you might struggle to get ahead financially as a single parent. With time and childcare costs competing for your resources, it might be more difficult to build a lucrative side hustle.
If you find yourself in these or similar circumstances, consider looking at benefit programs. They don’t make you weak. You pay taxes, and the money you contribute is meant to make your family’s life better.
Things like food stamps or help with your medical bills can free up room in your budget. While it’s not extra ‘income,’ it is money you can use to pay bills and stay on top of things while you strive to provide the best possible life for yourself and your family.
5. Start saving.
Once you have your expenses, emergency fund and retirement contributions covered, it’s time to start saving to get a month ahead.
Remember that saving even small amounts adds up quickly. Part of how to get ahead financially is having patience. In the lunch example above, cutting back just four days a week added up to an entire electric bill. When you ‘save’ that money by implementing a new habit, make sure you’re actually transferring the amount you saved to a savings account dedicated to getting a month ahead.
One bill may not seem like a lot. But when you change a lot of small habits to save money, those little bits start covering more and more future bills.
If you have started a side hustle or gotten a raise that reliably provides extra income, make sure you set up automatic transfers. The day the excess money hits your account, it should be transferred to savings. That way, you won’t be tempted to spend it.
How to Get One Month Ahead Financially
To truly break the paycheck-to-paycheck cycle, you need to have an emergency fund and figure out how to get at least a month ahead financially. The first step is budgeting. You need a budget to get through this month that also has a spot for you to save one month’s expenses.
Your typical budget is a snapshot of your monthly expenses and planned savings. Add up all these costs. The sum will be the total amount you need to save to get a month ahead.
Chip away at that number with small savings habits and any increases in income. Track your progress as you go so you can see just how quickly those little numbers add up to your big goal. We were able to get one month ahead by using funds from a bonus and severance- so if you have a windfall of cash consider this option as well.
Challenges that will Help You Get Ahead Financially
If you want to take things to the next level, try one of these challenges that can help you figure out how to get ahead financially.
No Spend Challenge
A no-spend challenge is exactly what it sounds like. Over a set period of time, you don’t spend any money. Your no-spend challenge can last a day, a week or even a month. Depending on the length of your challenge, you may decide to cut only non-essential spending or you may cut spending altogether.
Save on Fridays Challenge
If one no-spend day isn’t enough for you, but a month seems a little impossible, you can take the middle road. Pick one day a week and make it your no-spend day. Picking Friday or another day when you’re tempted to blow off steam can be particularly effective. Transfer any money you are tempted to spend into your savings account.
Transferring money to savings first can also be viewed as paying yourself first. Challenge yourself to prioritize your savings as your number one goal. Set it aside before you spend any money, and you’re more likely to reach your goals.
50/30/20 Budget Plan
With the 50/30/20 budget plan, you allocate 50% of your income to essential expenses, 30% to your wants and 20% towards savings.
To be fair, the 50/30/20 budget is only practical at a certain window of income. If you’re super high income, you probably don’t need to spend 50% of your income on essential expenses. Conversely, in most American cities housing costs alone make the 50/20/30 budget near impossible for those earning a median income or less.
Match your spending
Have a shopping habit? Reframe it as a way to actively save money. Every time you engage in retail therapy, look at your receipt. Whatever you spent, you must transfer the exact same amount towards your month-ahead goal.
How to Stay Ahead Financially
It’s true that getting ahead financially is possible. It’s also true that life has a tendency of wrecking even the best-laid plans. You might get ahead financially only to slip back into the paycheck-to-paycheck cycle.
Don’t beat yourself up about it. When inevitable setbacks happen, here are some resources to help get you back on track:
- Track your spending template. This template will help you get a better understanding of your budget leaks so you can plug them.
- 10-Minute Payday Checklist. Handle your money before it handles you! This checklist can help you allocate your money on payday as soon as the money comes in, giving you a higher chance for success.
- Costco Shopping List. Food is an expensive budget line item. There are ways to save on it, though. I’ve had a lot of success with my Costco savings strategy, in particular, and have decided to make it into an accessible list you can use next time you head to the store..
- Launch Your Side Hustle Course. Daniella of I Like to Dabble has a great course to help guide you through earning your first $1,000 through your side hustle.
- Personal Capital. Budgeting apps can help if you’re struggling to track your money. I like Personal Capital in particular for its ability to show you the big picture.
FAQ’s for How to Get Ahead Financially
How do I get ahead on car payments?
You probably can’t get as far ahead on car payments as you think. Depending on your lender, you may be able to pay your principal plus interest payment up to a few months ahead — if you’re lucky.
Having a car note means you’re required to make a payment every month — anything you pay in excess is applied to your principal only rather than being counted as an extra monthly payment. While this can save you money over the long-term by shortening your loan term and therefore the amount of interest you pay, it’s not going to let you ‘get ahead’ on your monthly obligations.
How do I get ahead when living paycheck to paycheck?
It is difficult to figure out how to get ahead financially when you’re living paycheck-to-paycheck. But if you budget, look for ways to save money and pull in extra income where it’s available, it is often possible. It might take some patience, but if you set aside small amounts they will add up over time.