Stop Living Paycheck to Paycheck
Tips for breaking out of the paycheck-to-paycheck cycle.
If you’re putting off writing the check for your rent or mortgage, paying your bills, or even buying food until your next paycheck, then you’re probably living paycheck to paycheck. The good news is that, so long as your paychecks cover your expenses, you’re technically living within your means. The bad news is that it can be difficult to get ahead this way, and an unexpected expense or sickness, injury, or job loss could quickly derail things.
If you’re looking to break the cycle of paycheck-to-paycheck living, here are a few tips to help get you started.
1. Track Your Spending
Before you can figure out where to cut spending, you first have to know where your money is going. So, rather than guess at it, if you aren’t doing so already, make a note of every expenditure over the course of a month to see in black and white exactly how much you’re spending and on what.
You may be surprised by what you see. For example, if you’ve been telling yourself that you really only eat out a couple times a month but your expenditure tracking shows you actually eat out or get take-out several times a week, you have identified an area in which you can cut your spending. But you have to know what you’re actually dealing with before you can actually deal with it.
2. Create a Budget
If you’ve been playing things loose and the result is a paycheck-to-paycheck existence, then it’s probably time to tighten things up. By actually establishing a budget and adhering to it, you’re interjecting more discipline and more intention into your daily living and how you’re spending your money. It’s not unlike making a formal workout list before heading to the gym. If you have a list, and you’re crossing off your exercises as you complete them, you’re probably going to get more out of your workout than just showing up to the gym and playing it by ear.
There are lots of budgeting methods out there. Do some research to find one you think will work for you—and that you’ll actually stick to. Remember, it doesn’t matter how good a budgeting system is if you don’t actually adhere to it.
3. Start an Emergency Fund
According to a Federal Reserve study done in 2018, four out of 10 American adults said they would not be able to cover an unexpected hypothetical expense of only $400. If you’re living paycheck to paycheck, that probably puts you in the same boat. While having an emergency fund won’t prevent you from a paycheck-to-paycheck existence, it could provide a buffer from an unforeseen expense and provide you with some peace of mind.
Building an emergency fund doesn’t happen overnight, especially if the majority of your paycheck is already spoken for. You’re going to have to start small and build your emergency fund over time. But once you get it to a respectable level—many experts recommend three to six months’ worth of living expenses—it could help prevent you from having to stretch your paycheck even further than normal to cover an expense you didn’t anticipate.
4. Pay Down Your Debt
Making debt payments can eat up a big portion of your budget, so the sooner you can pay off your debt, the sooner you should be able to apply those debt payments toward beefing up your savings. There are multiple debt-reduction strategies to choose from, but the key to success, just like with a budget, is finding one that works for you and sticking to it.
5. Use Credit Cards Only as a Substitute for Cash
That said, there are several potential advantages in using credit cards, including but not limited to earning rewards, purchase protection, not having to carry cash, and more. So, if you’re going to use a credit card and make your paycheck go further, use it as a substitute for cash. Which means, if your credit card has a grace period, use it to make purchases and then pay your balance on time and in full each month to avoid paying any interest or late fees.
6. Find Obvious Savings
Most people are creatures of habit, so we tend to fall into patterns that are comfortable and familiar. But, if you’re looking for savings, you may have to step outside of your comfort zone and do some homework and belt-tightening.
Reevaluating what you’re paying for automobile insurance is a good example of this. If you’ve stuck with the same policy and insurance carrier for years, you may be missing out on savings you could realize by going with different coverage or another carrier.
Take a look at other services you take for granted as well. Do you have multiple content-streaming services when one would suffice? Are you paying for a recurring monthly gym membership that you never use? It may require some legwork and tough choices, but there may be some low-hanging potential savings you’re not currently realizing right in front of your eyes.
7. Find Ways to Increase Your Income
Realizing savings is only half the picture in breaking free from paycheck-to-paycheck living. The other half is looking for ways to bring in more money. This may involve finding a better job, finding a second job or side hustle, figuring out how to monetize a hobby, or more.
Another way to bring in more cash is to sell things you no longer want or need. This can be done the old-fashioned way, with a garage or yard sale, or by listing items on any of the plethora of online selling websites available to sellers these days.
8. Embrace the Suck
The truth is that cutting back, doing without, working more, or departing with your stuff are going to be more difficult than doing nothing and staying in a paycheck-to-paycheck rut. But, if you can find a way to tolerate or, dare we say, even enjoy the sacrifices you’re making and the successes you achieve, it makes the journey even more worthwhile.
So, challenge yourself to succeed and be motivated by your successes to look for even more ways to put living paycheck to paycheck behind you and build toward a more fulfilling financial future.