4 Ways to Stop Raiding Your Savings


Are you constantly digging into your savings to make ends meet month after month? If so, it is time to reassess your monthly living expenses to improve your financial health and prevent stressful debt . Learn about four ways you can stop raiding your savings each month in this RealEstate.com article by Stefanie O’Connell.

If you consistently find yourself with more month left than money, dipping into your savings account to cover essential monthly living costs like food and housing, it’s a good indication that you’re living beyond your means and need to reassess.

Spending less than you take home each month is the foundation of financial health. Without that foundation in place, you can’t afford to fund short-term needs like emergencies or longer-term goals like buying a home or retirement.

Over time, this pattern can also lead to big debt and major stress. So breaking the cycle of paycheck-to-paycheck living needs to be a priority.

Here are four steps to help you do just that…

1. Quantify the Gap Between Your Income and Your Expenses.

Start by adding up your take home pay for the last 90 days. Then go back through your credit card statements, receipts and bank account transactions to see how much you spent over the same period of time. How do those numbers compare?

Without a full picture of how much you earn and spend each month, there’s no way to set and stick to the savings and debt repayment goals that will help you break the cycle of paycheck-to-paycheck living going forward.

2. Cut Your Costs

If you’re consistently spending more than you earn, it might be time for some drastic measures, like cutting your vacation budget or your gift giving allowance.

Until you’re in a position where you consistently make more than you spend and are making steady progress on financial goals like paying down debt and building savings, every non-necessity should be on the chopping block.

Even your essential expenses can be reconsidered. While you can’t cut these costs entirely, you can probably make some major reductions.

Your housing cost, for example, can be significantly reduced by downsizing, moving to a cheaper neighborhood or getting a roommate. The impact of a 20 to 50 percent reduction in your housing cost is going to be a lot greater than the $5 you save by skipping your morning coffee.

As you’re considering these cuts, remember: They’re temporary. You don’t have to give anything up forever. You just need to get to a place where your monthly expenses are less than your monthly take-home pay so that you can start rebuilding your cash cushion.

Once you’ve broken the cycle of living beyond your means and have started to rebuild your savings, you can begin reincorporating the expenses that are most important to you back into your spending plan.

But only as you’re able to afford them. Meaning, as long as your expenses stay well below your income and you continue to make progress toward your fundamental financial goals, like rebuilding your savings.

Continue reading full article HERE.


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