How Paycheck Management Prevents Future Debt
Properly and regularly managing your paycheck maximizes the power of your earnings. Mismanaging it, on the other hand, can lead to years of stress and frustration resulting from the accumulation of consumer debts. You may be among those who already manage money well, balancing your accounts regularly, budgeting monthly, and tracking your spending, yet you still ended up in debt, perhaps for some of the reasons beyond your control as mentioned in the previous lesson. Maybe your household lost income, you were involved in an accident, experienced major health challenges, or went through a divorce.
Regardless of the source of your prior debt, you likely already know that when consumer debt mounts in your household, you can lose the financial ability to achieve some of your top priorities.
Important Steps
Managing your paycheck involves just three general steps:
- Secure access to your funds
- Prioritize your expenses
- Systematize your spending
Securing Your Funds in a Federally-Insured Account
While it seems unbelievable that nearly a quarter of the way through the twenty-first century there would be any business that does not offer direct deposit, this sad truth remains. Many employers still have not set up a direct deposit option for their employees.
The resulting problems are twofold:
- Employees are disincentivized to open and maintain a checking account.
- Employees end up losing between 3% and 10% of their paycheck to fees for loading prepaid cards, cashing checks, and taking on non-traditional loans like payday and vehicle title loans.
Prioritize Your Expenses
Also known as budgeting, prioritizing your expenses means you identify which of all your possible purchases and bills for the upcoming month should be paid before others. A complete commitment to this way of thinking can make a formal budget unnecessary in many households.
