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13 Strategies to Help You Stop Living Paycheck to Paycheck

How To Stop Living Paycheck to Paycheck | How to make more money | How to budget

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Living paycheck to paycheck means having little to no money left over at the end of each month. It means you’re having trouble covering expenses, especially if you miss a day of work. When you live paycheck to paycheck, there’s a lot of stress around money in your life. As a result, you might not be able to cover an unplanned expense.

In 2020, nearly 78% of Americans were living paycheck to paycheck. Part of the issue is earning insufficient money to cover your expenses, and another part is spending too much. When you find ways to curb your spending and increase your earnings, you’ll begin working your way out of the paycheck to paycheck grind.

In this article, we’ll go over what it means to live paycheck to paycheck and how to get out of the cycle. We’ll also talk about the benefits of improving your financial well-being by breaking out of living paycheck to paycheck each month.

What Does Living Paycheck to Paycheck Mean?

Living paycheck to paycheck means that you aren't saving any money at the end of a given month. You are spending just as much as you're making, and you may not have anything saved up in a bank account for an emergency. If you're living paycheck to paycheck, missing a single day of work due to sickness or a personal reason could cause you to sink further into debt because you can't afford not to get paid for that day.

Another way to look at it is, if you're living paycheck to paycheck, a single missed paycheck can put you in financial turmoil, such as being unable to cover rent, food, or your utilities. 

Living paycheck to paycheck can be scary when it's going on for a long time because when you're unable to save, you're forced to use debt to cover unexpected expenses. Below, we’ll go over several tips to help you save money each month and remedy your situation.

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1. Create a Budget

Learn to create a budget when you live paycheck to paycheck. This is helpful to everyone, not just those looking to break the paycheck to paycheck cycle. Use Clean Cut Finance’s home budget spreadsheet to write up your income and expenses.

You'll want to account for all of your monthly living expenses, such as rent, utility bills, groceries, loans, subscriptions, transportation, etc. Fill in all of that information, and you'll be left with what you have after your paycheck minus those expenses. Check your checking account and credit card statements to see how much you're paying for everything.

Now, start deducting other expenses, such as how much you're spending on entertainment, going out to eat, new clothes, games, haircuts, hobbies, and anything else that might be either less common or variable each month. With variable expenses, take 6-12 months' worth of spending and average it into your monthly budget.

Once you’ve filled in all of your spending information, the budget template will show you how much you have leftover each month. If you're having trouble sticking to your budget, you'll need to identify what you can cut back on. By tracking your spending, you can see that perhaps you eat out too much or spend too much on entertainment.

It could be something more elusive like your internet bill is too high, and you haven't negotiated it recently. You can lower many of your everyday living expenses with a few phone calls or by using the app Trim, which will negotiate bills for you. You can also use a cash envelope budget system to keep your finances tight.

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How to Budget When Living Paycheck to Paycheck

When you're living paycheck to paycheck, it makes sense to budget right down to every dollar spent. Even freeing up a small portion of money can help you chip away at your debt, your bills, or create a small emergency fund in case you miss a day of work or have an unexpected expense.

Find places where you can cut costs, such as entertainment and other discretionary spending. Consider options where you can increase your income, as combining more income with cutting expenses, will help you get out of a paycheck to paycheck situation.

2. Cut Back On Spending

Having fun once in a while is key to keeping us happy, and if you’re living paycheck to paycheck, it makes sense to cut back on discretionary spending to some extent, even if temporarily.

Discretionary spending is anything you're spending on things that you don't genuinely need. These can be things like gym memberships, video games, fashion or beauty boxes, or going out to eat and drink.

Look over your budget and find ways to tweak your spending. For example, can you go out to eat one less time per month or per week? Can you cancel a subscription or membership that you aren't using much? Using an app like Trim can help.

Trim helps you find recurring charges to your bank account and credit cards and will either negotiate these charges or cancel them altogether. For the charges that Trim can't do automatically, you will be alerted to the charges and the amount, which will allow you to cancel them manually should you choose.

After you've decided on what you can cut back on, remove (or reduce) those items from your budget. This should improve your situation, but it may be that you're still in the red or in the green, but not by a lot. Let's look at the next thing to do.

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3. Go on a Spending Freeze

To boost your savings while living paycheck to paycheck, one thing to try is to go on a spending freeze. A spending freeze is when you stop all spending for a pre-determined amount of time, such as a few days or a week. When you stop spending, you force yourself to stop doing things you may do regularly, such as impulse buying or dining out.

One way to go on a spending freeze is to pay all of your bills on the first of the month and spend nothing for a week. By doing this regularly, you'll have extra money in your wallet each month that can go towards paying down debt or increasing your emergency fund.

Spending freezes can help curb impulse spending and make you rethink purchases that you may not need. They can also slow down daily spending, such as breakfast on the go or soft drinks at work. Spending freezes can also encourage you to do things such as making your own lunch instead of buying something each day.

4. Pay Down Credit Card Debt

When you’re trying to improve your financial situation by getting out of the paycheck to paycheck cycle, it makes sense to tackle your debt, This might be hard to do if you're already struggling, but once you lower your spending, you can take your extra money and pay down credit card debt. Paying down debt is great across the board, but credit card debt is often the worst due to high interest rates, making it more challenging to get your balance to zero in a reasonable time.

If you believe it will take you over a year to pay down your credit card debt, then you may be living above your means. To remedy this, you may need to cut back on spending even more or find a way to earn more money. 

Credit card debt affects many people, and tackling this debt is a key to better financial health.

How To Pay Down Debt When Living Paycheck to Paycheck

When you have no spare money at the end of each month, it can be challenging to pay down debt, especially paying more than the minimum payment each month. After you've used your budget to find ways to save, use your spare money to build an emergency fund of $1,000 minimum. This will help protect you from further sinking into debt.

Once you have some money saved, use your spare money to pay down debt with the smallest balance (the debt snowball method) or the debt with the highest interest rate (the debt avalanche method). Even an extra $20 per month aimed at a credit card each month can go a long way for money not spent on interest.

When you pay off a debt, use the money you've freed up from that monthly payment to go towards your next debt payment. For example, if you were paying a minimum payment of $50 per month on a credit card, and you added an additional $50 each month to that payment, you'd be paying $100 per month to that credit card. Once that card is paid off, you've freed up the $50 minimum payment as well as the $50 additional you were applying. Now you have $100 to put towards your next debt to pay it down faster. Repeat until you pay off high interest debt, such as your credit cards, personal loans, and possibly your auto loans and student loans.

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5. Lower Your Fixed Expenses

Fixed expenses are bills that are consistent each month. This includes expenses like your rent or mortgage, cable, internet, phone, and similar. You may not be able to eliminate these expenses, but you may be able to lower how much you’re paying. You might be overpaying for things such as cable, internet, and auto insurance. Reaching out to your service providers and asking for a lower rate can be enough to get an arrangement.

There are many methods to lowering a particular bill. Sometimes citing competitor rates can convince a company to lower the rate they’re charging you. Other times, being a loyal customer who always pays on time might work. Sometimes, simply stating you’re struggling financially, and proving it, may temporarily get you a lower rate. Alternatively, you can use an app like Trim to automatically negotiate your bills. Trim will make these calls for you to save you the hassle.

The Zebra is a website where you can find lower rates on auto insurance and homeowner's insurance. This site works by pairing you up with several providers in your area who might be willing to give you comparable insurance for a better price. This site is free to use, and you aren't obligated to sign up for a new plan after offers are displayed.

Take a look at this article for some more ideas on how to lower your monthly living expenses.

6. Increase Your Income

It’s only possible to save so much money before we can’t cut our expenses anymore. In this case, it makes sense to start earning more money. One way to earn more money is to pick up a side hustle. A side hustle is something you can do a few hours a week, such as on your day off or a few nights here and there.

Even earning an extra $200 per month from a side hustle can go a long way to helping you get out of the paycheck to paycheck cycle. Using this money can help you pay off debts like your credit card, student loans, and other debts.

You can also use this additional money to boost your emergency fund so that you can handle an unexpected expense when it occurs.

A side hustle doesn't have to be permanent. It can be just enough to help you save money and not live paycheck to paycheck. Having a part-time side hustle is a great way to ramp up your monthly income.

If you don't want to start a side hustle, another way to increase your income is to look for a job that pays better or ask for a raise at work. It's often easier to get a raise at work when you make yourself more valuable to the company. Solve your boss's and boss's boss's problems and help do things that others aren't able to do. This will increase your importance to the company and will give you leverage when asking for more money.

If a raise isn't possible and you'd like to find another job, check out FlexJobs.com. On FlexJobs, you can find thousands of vetted positions that are primarily remote and flexible, which may help you cut job-related expenses as you won't need to commute or spend money on as many work clothes. 

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7. Save Money Every Month

Make it a habit to save every month. Put that money into a high-yield savings account. If you don't already have an emergency fund, begin accumulating one in a high-yield savings account. 

When you save money every month by improving your spending habits, you’ll improve your financial situation long term. As time goes on, you’ll have a fully-funded emergency fund and be able to cover unexpected expenses.

Automating your finances can help you save money and get you out of the paycheck to paycheck grind. When you automate your finances, you put your bills on autopay, and you set up recurring savings from your checking account to your savings account. This will take the micromanagement out of your money and allow you to focus on the big picture.

Consider using your tax refund to fund a high-yield savings account or to pay off some of your debt.

Even saving $5 a week to start will help you form great new habits and help you eliminate habits like spending too much money.

Gradually increase how much you're saving as the importance of saving money can't be overstated. 

How to Save Money When Living Paycheck to Paycheck

When you live paycheck to paycheck, it can seem daunting to save any money whatsoever. In this case, even starting small with $20 per month can get you into the habit of saving. Treat every dollar like it counts and put as much money into your savings account until you have saved $1,000. From there, consider using your savings to pay down high interest debt.

Make behavioral changes about your discretionary spending. For example, do you need to buy lunch at work or can you spend 15 minutes each evening making yourself lunch for the next day? That alone could save you $5 per day, which adds up to approximately $110 per month if you work five days per week (assuming 22 workdays in a month).

Making sacrifices now to better your financial situation will pay off later. Do you have habits you spend a lot of money on that could be reduced or removed? Think of things like:

  • Alcohol
  • Cigarettes
  • Coffee on the go
  • Games
  • Beauty boxes
  • Visits to the salon
  • Eating out and Take out
  • Jewelry
  • Extraneous clothing purchases

Most people have something they spend a lot of money on, whether a habit or a hobby. That's not saying you shouldn't have any fun whatsoever, but if you're living paycheck to paycheck, it will make sense to reduce your spending on things that aren’t vital temporarily.

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8. Make A Savings Goal To Stop Living Paycheck To Paycheck

Try to meet or exceed a monthly savings goal every month. Pick something reasonable, whether it's small, like $20, or large, like several hundred dollars or more. The idea is that your goal will be something to shoot for, and it will encourage you to keep at it.

It’s important to have goals so that you have direction in everything you do. Start small and make your goals incrementally higher until you reach a point where you are in a much better financial place.

Use your savings goal to help push yourself to further live below your means. When you live below your means, you are able to save more each month.

Create short-term, mid-term, and long-term goals. A short-term goal might be, “I will save $10 each week for 3 months.” A mid-term goal might be, “I will pay down the balance of one credit card in 9 months.” Lastly, a long-term goal might be, “I will save 3 months' of living expenses in my emergency fund so I'm no longer living paycheck to paycheck.”

9. Live Below Your Means

Living below your means is when you spend less money than you earn. This is key in order to stop living paycheck to paycheck. Whether you cut expenses or increase earnings, living below your means has many benefits, including less financial stress and the ability to reach your financial goals faster and with greater ease.

As discussed earlier, there are two ways to stay under your means. One is to cut your spending and the other is to raise your income. Combining both of these is ideal however it may not be possible or feasible to do both for every person. 

Identify whether you can save more money or make more money, or both.

10. Learn to Say “No”

Saying “no” to yourself, your spouse, or your kids is an important ability, especially when it comes to saving money. Sometimes you have to forego buying something for yourself or one of your family members in order to keep your finances in order. Not only is this a good practice to do, but saying “no” to your kids and explaining to them the importance of saving money will help them with their finances as they grow up.

Oftentimes, it's hard to say no, and that leads to impulsive spending. We buy things without thinking of the result, and when we get our credit card statement, we realize we've not helped ourselves. Saying “no” takes practice, but it's an ability that will help you and your family spend less money and get control of your finances, especially if you're living paycheck to paycheck.

11. Drive a Used Car

With new cars often costing $30,000 or more, it may make a lot of sense to buy a pre-owned or used car. Better yet, can you sell your new car that you currently have a monthly payment on and use the earnings to buy a used car where you have little to no monthly payment? How much money would you save per month if you did that, and what would you do with that money?

New cars lose up to 20% of their sticker price after one year, and some can lose up to 10% of their value when you first drive them off the lot. With this in mind, buying a car that’s already a year or two or older can save you a lot.

The average car payment in America is $568 per month, but only $400 for used cars and less for older cars. Even the difference between $568 and $400 saves you $168 per month that you didn't have before. If you buy a used car with over 100k miles, you could end up spending $10,000 or less on the vehicle. If you do so, make sure to get it checked out by a mechanic you trust.

A car you spend $10,000 on may only have a car payment of $186, assuming a five-year loan with $0 down and a 4.5% interest rate. This is considerably less than a new car, and if you find a good used car out there, even one that only lasts for a few years, you'll save loads of money doing this.

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12. Go Out To Eat Less and Cook More

Going out to eat is an expensive activity that runs the average American household $3,000 per year, or $250 per month. For some, this number is significantly higher. By cooking, you’ll pay a fraction of the cost for food. 

Of course, going out to eat or ordering takeout once in a while is a good way to reward yourself, but making a habit of cooking more will save you significant cash.

One great way to learn how to cook is to order from a food service like HomeChef. HomeChef sends you all the ingredients and instructions to making meals, which not only tastes great, but the process will teach you how to cook. You can expect to pay between $8 and $9 per dinner meal with HomeChef, which can be quite a bit less than going out to eat.

If you really need to save on food, then doing things like clipping coupons and using cashback apps can be greatly beneficial. Ibotta and Swagbucks both have cashback features when you shop at hundreds of retailers and grocery stores around the US.

It's possible to eat an entire day's worth of food for less than $5 a day per person. That assumes foods like oatmeal for breakfast, a deli meat or peanut butter sandwich for lunch, and pasta, rice, or beans for dinner. When you consider how much it costs to order out or go out to eat, spending $5 per day to feed yourself doesn't seem like much at all.

This article discusses many ways to save money on groceries.

13. Be Patient When Forging New Habits

Creating new habits takes time. With that in mind, you may slip now and then and spend more money than you intend to. The good news is, this is normal, and you don’t need to beat yourself up over it. 

Push yourself to stick to your new habits but be patient with yourself as you adjust to them. In the end, your new financial habits will help you stop living paycheck to paycheck.

A new habit takes time to form, and it's okay to give yourself some leeway while you get used to your new spending approaches.

 

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Benefits of No Longer Living Paycheck to Paycheck

Let’s talk about three direct benefits of getting out of the paycheck to paycheck cycle. These benefits may motivate you to continue to work on your financial well-being.

Reduced Financial Stress

When you’re no longer living paycheck to paycheck, you have less financial stress in life. You’re no longer worried about not having enough money to cover your bills. You have extra savings in case you miss a day of work or you have an unexpected expense.

You can sleep better at night knowing that you have flexibility with your money. You now have some breathing room.

Experience More In Life Due to More Money

You’ll be able to experience more in life because you have more money each month. This could be little things like taking your spouse out on a date or taking your kids out for more fun activities. It could mean saving for a larger purchase like a car or, eventually, a home.

Over time, you may build a larger savings, which could mean paying off all of your debt or going on refreshing vacations.

Increased Quality of Life

Your quality of life improves when you’re not living paycheck to paycheck. You feel more confident about your finances which lets you relax a bit. You can buy and experience things that make you happy. You can hire help for things you don’t want to or can’t do for yourself, such as getting a babysitter or a house cleaner.

Wrapping It Up

It can take a decent amount of time to stop living paycheck to paycheck. It's not an overnight process, but through budgeting, lowering expenses, and saving every month, eventually, you'll begin to build up savings and have more breathing room should something unexpected come up.

What steps have you taken to get out of the paycheck to paycheck grind?