How to Stop Living Paycheck to Paycheck

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Living paycheck to paycheck is a common reality for so many people these days. If you are working like crazy to support yourself and your family, and still barely getting by, you might feel better to know that you are far from alone. As many as 78% of American full-time workers are living paycheck to paycheck to make ends meet, according to a 2017 survey done by CareerBuilder.com, a leading job site.

According to this same survey:

Nearly one in 10 workers making $100,000+ live paycheck to paycheck
More than 1 in 4 workers do not set aside any savings each month
Nearly 3 in 4 workers say they are in debt – and more than half think they always will be
More than half of minimum wage workers say they have to work more than one job to make ends meet
28% of workers making $50,000-$99,999 usually or always live paycheck to paycheck, and 70% are in debt

They also found that, 56 percent of Americans can barely save $100 per month. All things considered, when you break it all down, it only takes one missed payment or unexpected expense to collapse your finances.

Another very recent survey conducted in this June by PYMNTS and LendingClub, found that sixty percent of millennials making over $100,000 a year said they’re living paycheck to paycheck. It also found that about 54% of Americans live paycheck to paycheck, and nearly 40% of high earners — those making more than $100,000 annually — said they live that way.

What Does Living Paycheck to Paycheck Mean?

Living paycheck to paycheck simply means that after paying all of your bills for the month, you have nothing or almost nothing left in your wallets or accounts. One paycheck can’t cover all your fixed expenses until your next paycheck arrives. If you need to spend even a small amount of extra money on something, you won’t be able to pay for it without getting into some kind of debts.

For most people living paycheck to paycheck is one of the most stressful things they can do in life. And the stress can be felt, more or less, by everyone in the family. But if you are stashing away adequate money in your savings account and you have a healthy emergency fund, living paycheck to paycheck isn’t necessarily a disaster. In the recent time, Americans have become better at savings, but still a quarter of Americans have no money saved for an emergency, and 20% have less than three months of living expenses in the bank according to Bankrate,.

Not being able to pay your bills on time and having to pay late fees and the fear of not having enough money week to week is awful. They say – “Money can’t buy happiness”, but it can certainly buy you some peace of mind and better physical and emotional health. How? Living paycheck to paycheck is incredibly stressful. According to the American Psychological Association (APA), financial stress is the top cause of stress for Americans. And it’s a well-known fact that stress affects our health and well-being seriously.

How to Stop Living Paycheck to Paycheck:

Breaking the paycheck to paycheck cycle is different for everyone. Some people are living paycheck to paycheck because they earn less than what they need. Some have poor spending habits and need better understanding of their finances. They need to learn how to budget and stick with it. Others are living paycheck to paycheck because their cost of living is simply too high, and they need higher wages. Others can’t break the paycheck to paycheck cycle until their debts are fully paid off.

Breaking the paycheck to paycheck cycle takes a plan, discipline, consistency, and commitment. You can take the following steps, recommended by the financial experts, toward more financial freedom:

Track Your Expenses:

Before you do anything to break your paycheck to paycheck cycle, you first need to take a careful look at your finances. One major reason of your paycheck to paycheck living is you aren’t paying attention to your outflow of money.

Many people are deluded into thinking that they are aware of where their money is going. But the reality is often the opposite. That’s why, you need to find out where your money is going, how you are spending your hard-earned money, whether you are over spending, and where you can cut back and save some money to meet your important financial goals to reduce stress. You might need to adjust your spending habits to meet a financial goal such as getting rid of debt, building an emergency fund, or saving for retirement.

Related post: 20 Silly Things You Are Wasting Money On

Create a Sustainable Budget:

You might be living paycheck to paycheck just because you don’t have a proper budget. Yes, having a budget is that important. It helps you hold yourself accountable. Without a budget, even if you have a very good monthly income, instead of saving money, you will most likely overspend and end up being in debt. Because saving money has very little to do with the amount of money you earn. It needs you to develop some healthy financial habits. Creating a budget is one of them.

Without a budget, you really can’t make your dollars stretch because you might not even know how much money you have to work with! When you have a realistic budget, it’s easier to track your spending, cut unnecessary expenses, and live within your means. On a budget, you only buy things/services you can afford, and won’t add more to your debt.

Embrace Simple Living and Live Below Your Means:

This is one of the most important steps you can take in order to break the paycheck to paycheck cycle and live a financially stress-free life. Financial stress comes about when your lifestyle doesn’t match up with your income. You begin to finance your expenses using some form of debt, like high-interest credit card, a personal loan, or a home equity line of credit. Some of you might even tap into your long-term savings or retirement funds to pay your current bills.

“We must consult our means rather than our wishes.” —George Washington

Take a hard look at your fixed monthly expenses. Sometimes a paycheck to paycheck existence means you have locked yourself into a lifestyle you can’t really afford. If your housing expense is a source of financial stress, consider downsizing or relocating to a less expensive neighborhood or town. Taking a similar or better job in a less expensive area is another solution to get ahead financially. If your total housing expense, which includes your rent or mortgage, insurance, property taxes, maintenance, and utilities, is 40 percent or more of your total income, you are most likely under financial stress.

The same goes for your brand new luxury car. How would it impact your budget if you sold it and purchased a more affordable vehicle?

Without living below your means and without making the most of what you have, you can’t reduce your financial stress. It doesn’t matter how much money you make if you are busy spending it all. So, be content with what you have, and focus on what is truly important and meaningful in your life. Get rid of the things that neither serve any true purpose nor add value to your life .

Be Smart With Your Spending:

Once you track all your expenses and create a sustainable budget, be smart with your spending. Don’t buy anything that will put you in debt or cause you further financial stress by not having enough money to pay the bills. From now on, before you buy something new, take some time to think about whether they will really improve your quality of life, or they will just cause you more stress.

Increase Your Income:

If you are living paycheck to paycheck, you probably need to bring in more income – consistently. Financial stress usually results from either earning less money or spending more than your income or the combination of both.

In order to meet some of your important financial goals and reduce your financial stress, you might need to create an additional source of income. With a modest boost to your income, you can save more money for the things that matter to you or you can use the money to pay off debt and stop living paycheck to paycheck.

There is no shortage of side hustle options to earn some extra money. Consider starting one that fits into your lifestyle. Increasing your income at your current job isn’t always a possibility. Instead of waiting for the next promotion and salary increase at your full-time job, you might need to do something to increase your income sooner. If you typically get a tax refund, you may be able to change your tax withholding and get more money in your paycheck each month.

Do understand that money management plays a significant role in how much your paycheck covers. Making more money won’t solve your paycheck to paycheck problem if you simultaneously increase your spending.

Get Rid of Your Debt:

If you want to break the paycheck to paycheck cycle for good, you have to make a decision to kick debt to the curb once and for all. Even if you don’t have the extra money to reduce the debt balances faster, you can significantly cut your interest expenses.

Consider options such as refinancing, doing a balance transfer at 0% interest, consolidating your debts, or changing payment plans on student loans to make debt more manageable.

Start Building an Emergency Fund:

An emergency fund is a savings account meant to cover unexpected expenses and financial emergencies. Having an emergency fund will reduce your financial stress to a large extent. When you know that you have a cushion to fall back on in case of an emergency, a lot of your stress will go away, you will sleep better at night, and enjoy great peace of mind.

You might be wondering why you need to save right now for an emergency when you are busy trying to make ends meet and survive. But believe me, having even $1,000 saved can get you out of many financial scrapes. Knowing you have this buffer between you and life will make you way less reliant on that next paycheck coming in.

Start small. In the early days of saving, it’s all about consistency, not amount. Start putting something away now by trimming or cutting expenses like advanced meal planning, opting for generic brands, and cutting any monthly expenses you can live without, and build your fund over time. Whenever you receive a salary raise, tax refund, or bonus cash of any kind, use it to build up your emergency savings. You may also consider selling any unused items around the house to build up that cash as quickly as you can.

Related post: An Emergency Fund and Your Peace of Mind

Make Your Savings Automatic:

If you have your financial priorities defined, such as saving for retirement, building emergency fund, saving for your kids’ college education, or buying a home, making your savings automatic can make that happen. If you plan to save “whatever’s left over” after you spend the rest of your paycheck, you’ll never put anything away.

Whether you are building up emergency savings or putting money away for retirement, that money should come out first, ahead of the rest of your spending. So, pay yourself first, and set up an automatic transfer on paydays from your checking account to the savings account of your choice, and forget about it.

Shift Your Mindset:

It’s important to remember that breaking the paycheck to paycheck cycle is a slow process. It will not happen over night. Being on a budget often means a lifestyle change, and you need to be intentional about it.

You have to shift your mindset and focus on your goal. Money mindset dictates many of your everyday spending decisions. Make up your mind that you won’t be a victim to your circumstances, and that you’ll do whatever it takes to handle your money the right way. Setting a realistic budget and being more intentional about your spending can help you get back on track.

You may also like to read: Best Frugal Living Tips to Save a Lot of Money