You friends just asked if you want to catch a movie over the weekend but you have to decline. Not because you don’t want to see the new action flick, but because your wallet is telling you that you can’t. It’s either go the movie or pay your phone bill. In other words, you’re living paycheck-to-paycheck.

You’re not alone. In fact, a large number of American households live from one paycheck to the next. This number has decreased since September 2016, according to a survey conducted by McKinsey & Co., where consumers expressed more confidence in their financial stability compared to the last 8 years.

However, about 24 percent of the participants in the McKinsey study reported still living paycheck-to-paycheck. They said they struggled to cover their basic expenses and had empty checking accounts until the next pay period. With families to support and unexpected additional expenses, this can be a difficult experience for anyone.

The problem happens for several reasons, but the main cause is not having enough financial knowledge. When you are financially knowledgeable, you more readily understand the essentials of budgeting and how managing your money will help you be stable, reduce anxiety and stress.

Create a Budget

If you are living from one paycheck to the next, consider making up a budget. What are your expenses? Which ones are necessary? How much do you need to have every month for your required expenses (rent, food, insurance, etc.)? When are these payments due?

Cash flow also can affect payments and your stress level. If you are getting paid only on the 15th but your payment is due on the 1st, you are always going to be behind.

The first step you can take to budgeting and healthy money management is to monitor your expenses. In other words, know how you are spending your money, down to the last dollar. It is key that you know how you are spending your money and on what.

Begin by monitoring your spending for a couple of weeks to gauge your spending habits. Keep track using an Excel spreadsheet or a notebook or, create a format that works for you. The most important thing is that you are keep abreast of all of your transactions.

Tracking Additional Expenses

Budgeting will also help you prepare for those unexpected expenses, emergencies and other expenditures. You can see from your prior spending where your dollars are being used. The more you prepare, the better off you will be. You can also include gifts, holidays, vacations and other miscellaneous expenses.

Next, do the arithmetic. What is essential? See where you can cut costs. This is easier if you have a salary of course since you may be getting a fixed amount every month.

After you subtract your essential expenses such as rent, food, insurance, etc., see if you have any funds left. If so, be smart and deposit this money into a savings account that can be used for other expenditures when needed.

Reduce Personal Spending

Now, see where you can lower your spending, and do realize budgeting takes time. No one is a perfect at the beginning. You will need to adjust your budget based on your lifestyle and what you’re learning about your spending habits through tracking.

If needed, find ways to increase your income by working an extra job, extra hours at your current job, or other ways to get paid.

Lastly, be realistic. If you are too drastic in your spending cuts, you’ll find it hard to stay motivated and might miss any target goals you have set for yourself. Also, do give your budget some flexibility so you can stay on track and keep moving forward.