Savings and budgeting tips: How to avoid living paycheck to paycheck

With the rising cost of living and interest hikes squeezing more Aussies than ever, it's no wonder that some are struggling to make it from paycheck to paycheck. 

According to data from earned wage access provider Paytime at the end of last year, a little over half of Australians who were paid on a fortnightly basis say they’re struggling to pay their bills between paychecks.  

So, the question is then, what can you do to avoid getting caught out?

Set some money saving goals

One way you can start to move away from paycheck to paycheck living is by setting money saving goals. This can be as basic as a certain percentage of your regular income or a specific amount of money that you need for a holiday or home deposit.

If you’re saving a certain portion of your income every payday, one suggestion would be the 50/30/20 method. Basically, 50% of your income goes to your needs, 30% goes towards wants, and 20% is saved. However, this might not be realistic if you’re new to saving—so, it’s important to keep in mind that even a small amount of money saved (such as 5%) is worth it.

Review your spending habits

Another way you can save money, especially if you have a lot to spend on your needs, is by cutting out discretionary spending. This could be something as simple as pausing your subscriptions for the month or having a sober month.

By reviewing your spending habits, you’ll also be able to take a good look and decide what you actually want to spend your money on. Then, from there, you can make a budget.

Make up a money budget

Budgeting is one of the best ways you can plan out your income and expenses. Budgets can also be a really good way of finding out what you might be spending way too much on. For instance, you might be spending too much on eating out, which would lead you to think about more cost-sustainable ways of eating.

Reduce any debt that you might have

Having a lot of debt can weigh on your budget, acting as a leaky pipe that haemorrhages cash away from you. By making extra repayments, you reduce the length of your loan which can get you to a debt-free life faster. 

Another way, if you have lots of different debts, is by consolidating these debts. By consolidating your debts, you can give yourself a singular repayment that could be at a better interest rate than your other debts. 

Use a high-interest savings account or term deposit

Once you’ve begun saving, you’re probably wondering where to keep it. In general, you want to see your money not just sit around but actually grow over time with compound interest. One of the best ways to do this is with a high-interest savings account. 

With the recent rate rises by the RBA, there’s been a fair amount of savings account providers hiking their rates as high and even higher than 5%. Alternatively, if you wanted to lock your cash away in a term deposit, there are some accounts with some good interest rates—and the benefit? It’s a fixed interest rate for the length of the term.

Not sure what savings account you want? At Mozo, we have comparisons on dozens of high-interest savings accounts so you can compare and get the account that works best for you.