Budgeting

How to Stop Living Paycheck to Paycheck

As many as 74% of U.S. citizens are living paycheck to paycheck, which leaves them at risk of not being able to afford the bare necessities should their pay be delayed. Luckily, there are some practical ways of resolving this issue, provided they are ready to put their best foot forward and stick to a budget this time.

In most cases, people aren’t saving enough money or are spending too much out of pure ignorance. They aren’t sure where to start and how to create a budgeting plan that works for them, not against them. What’s more, with credit cards as the favorite way of paying for everything and easy access to most stores and retailers online, they’re not just battling themselves — they’re fighting impulse shopping as well.

The best course of action now is to take a good hard look at all the expenses and start making some life-changing decisions. So here are all the dos and don’ts of managing one’s lifestyle according to their income that should put an end to living paycheck to paycheck and improve the quality of one’s life. 

Do: Track All of Your Expenses

Living paycheck to paycheck is a struggle many people share right now, but to combat it correctly, they cannot merely stop living like that. Each month, they’re left penniless because they aren’t sure where their money is going and on what. So before doing anything about the issue, they have to go old-school and track their expenses for a full month.

For this part, it’s best to get a notebook and write down each penny spent during that month. Every single dollar has to be accounted for. Thus, the list of daily expenses, as well as the monthly ones, has to be as detailed as possible.

If necessary, one can also create two lists: non-discretionary and discretionary expenses. The former are things like rent and utility bills, i.e., needs. The latter consists of stuff most people only want but could live without if need be, such as luxuries (dining out), hobbies, and travel.

By the end of the month, the list should provide enough insight as to where the whole paycheck goes. The revelation may not sit well with most people; it will make them seriously consider how impractical their lifestyle is. Nevertheless, it has a purpose. Once they know where the income goes, they can begin allocating it better.

Do: Find the Most Suitable Budgeting Plan

Some of the most popular budgeting plans today include the zero-based budget and the 50/30/20 plan. However, before deciding on one, those looking to stop living paycheck to paycheck have to sort out their expenses first.

Having a reliable overview of both fixed and variable expenses is necessary here. They might have to allocate a different amount of money each month. Because of that, all the fixed costs ought to be taken into account first. Then, the variable expenses should be dealt with by going over past bills (such as utility bills, which won’t be the same each month) or any quarterly or seasonal expenses.

To ensure there’s enough money each month for those expenses, it’s best to calculate the yearly costs and divide that by 12. Once there’s a solid number to rely on, it ought to be added to the budget.

Depending on the strategy one goes for, there are going to be a variety of categories to account for. A mere spreadsheet with only a few columns will do to make the process a bit simpler and to jump-start the savings. 

One should make a list of all the monthly expenses, taking into account everything, including the seasonal ones and any entertainment or miscellaneous funds. Then, to understand how much they can save every month, they should just subtract the amount from their monthly income.

In some cases, the result might be zero (which bodes well with the zero-based budgeting strategy), or there might be a few dollars left. Those shouldn’t be spent on anything; they ought to go into savings.

If there is a negative result, though, that means it’s time to cut some expenses; one’s lifestyle simply doesn’t match their income.

Do: Cut Expenses Whenever Possible

Non-Discretionary

As mentioned, non-discretionary expenses are those people have to find some money for, such as rent, bills, insurance premiums, etc. However, that doesn’t mean there isn’t a way to save on them if one figures out that they’re taking a massive chunk out of their income.

Rent

For one, most people live way beyond their means by renting apartments in affluent areas of their cities. Because of that, they’re paying a small fortune in rent and cannot seem to shake off living paycheck to paycheck. If housing takes up more than 30% of one’s gross pay, perhaps it’s time to look for a cheaper apartment.

Cars

Another expense to take into account is the car, or more precisely, how much repairs and fuel cost every year. If it makes a huge dent in the budget, there are other means of transportation to look into, like buses and bicycles. In fact, walking to work and back (or at least a part of the route) could not only cut some of the expenses, but make people healthier overall.

Health Care

And speaking of health, it’s necessary to mention the overall expensive health care U.S. citizens are accustomed to. Some of them may not know that they can lower the premium and consequently save some money by switching plans or raising their deductibles. What’s more, they could practice preventative health care by actually taking better care of their bodies and going to the doctor’s even in the case of the smallest issues. There’s no reason to wait for those to grow into full-fledged diseases.

Utilities

As for utility bills overall, there are plenty of ways to lower them, such as avoiding to use the A/C and figuring out other ways to stay cool or by investing in insulation to prevent energy loss. 

Groceries

Finally, if the grocery bill is eating up a considerable chunk of the budget, it’s time to let go of name brands and shop for store brands only. Additionally, it wouldn’t hurt to stick to a to-buy list, create a price book (or track the prices with one of the many apps available), and start couponing and buying in bulk. There’s a reason extreme couponers have their own reality TV show; the savings are through the roof, and they can honestly say they won’t run out of groceries to make food from scratch anytime soon.

Discretionary

Still, if non-discretionary expenses cannot be cut down right away, discretionary ones definitely can. These are also known as luxuries or things one doesn’t need; most of them are sudden wants and wishes many people like to fulfill on a daily basis.

Easy Food Options

For example, takeout and dining out are a huge problem for those who are living paycheck to paycheck. But those are the easiest to resolve; all one truly needs is to take a keen interest in cooking at least a few times a week. With batch cooking and reducing the overall grocery bill, there will be enough money in the budget to still eat out or order takeout once a week (but no more!).

Entertainment, Health, and Weekly Treats

A significant amount of money also goes on things like gym memberships, which most people don’t use, or cable TV. Streaming services are now more popular than ever, so opting for one of them could be an excellent way to manage the overall entertainment budget. As for working out, there are a ton of YouTube videos one can use to get in shape at home (Fitness Blender comes to mind). Better yet, riding a bike to work will be like killing two birds with one stone; not only will one get buns of steel, but they’ll save on transportation as well.

Other costly habits include drinking $5 lattes every morning or treating oneself to a weekly hair salon visit. Although it pays off to look good nowadays, there’s no reason to wash one’s hair at the salon only. Besides, those lattes are just empty calories in a fancy cup. They are indeed a luxury one can live without.

But with all of that said, it’s imperative not to cut out luxuries entirely. By doing so, there’s a significant chance the whole budgeting strategy will fail in a month or so. Not treating oneself at all can get quite depressing. Thus, it’s best just to cut some expenses to make room for those savings and keep cutting by finding satisfying alternatives whenever possible.

Do: Set Up Another Stream of Income

In some cases, people who are living paycheck to paycheck have already cut most of the luxuries out of their budget and are rather frugal. Therefore, if they still don’t have enough money by the end of the month, it’s clear they ought to boost their income to gain more financial freedom.

The easiest way to do so would be to start working extra hours at work or asking for a raise. Applying for a promotion would be another excellent idea, provided one has the skills necessary to do the job they’re applying for. In the end, if neither of those is possible, perhaps it’s time to find a better paying job? There’s no reason to stick with the current position if it requires living paycheck to paycheck, even with all discretionary expenses brought down to a minimum. That’s just not a sustainable lifestyle.

On the other hand, if one likes their job and would like to keep it, it would be wise to find another stream of income by looking into the various side hustles available to people all around the world. Working as a part-time virtual assistant pays quite well, and so does freelance writing. 

Again, even with side hustles, it’s possible to combine two or more motives and gain extra benefits. Imagine spending a few hours each day walking dogs; one can get their exercise in, hang out with furry friends, and earn some extra dollars on the side!

Do: Live Below Your Means 

However, if one does get a raise or a promotion, it’s necessary not to fall back into old habits. Just because there’s more money doesn’t mean it’s time to boost the entertainment budget or eat more takeout. Living below one’s means is the antidote to the current problem, and it can keep people from thinking any extra money they make is an opportunity to splurge. In fact, all of it should go toward savings, creating an emergency fund, or fulfilling some long-term goals, such as a down payment.

Do: Sell Stuff You Don’t Need

It will be necessary to downsize most of the expenses in one’s life to stop living paycheck to paycheck. While they’re at it, it might be smart to take inventory of everything they own and boost their income temporarily by getting rid of things they don’t need.

Selling stuff on Craigslist or at a yard sale would let one get rid of any clutter in their life and embrace living with less. Better yet, they’ll have some cash to put into savings right away. Consequently, that ought to motivate them to do even more to better their lifestyle.

Do: Automate Your Savings

It’s best to set up an automatic savings plan to ensure the savings are out of reach. Each month, a part of the income can be transferred there and saved until further notice. 

It’s even better if the savings account is in a separate bank and interest-based, as it won’t be easy to get hold of the money. And, of course, those dollars don’t have to sit idly forever. By adding to the amount each month, one can use the snowball effect of compound interest and create a sizable emergency nest egg for “God forbid” situations. 

Do: Set Goals to Motivate Yourself

Losing focus is the primary reason people get sidetracked and go back to living paycheck to paycheck. Simply creating a budget isn’t the same as sticking to it. One truly has to reconsider their shopping habits and lower some expenses to make it work.

Yet that won’t be possible if there aren’t any financial goals to serve as motivation. Therefore, once all the expenses have been listed and there’s a budget in place, one should consider the future. Do they want a comfortable retirement or to travel the world in a decade? How about providing the kids with Ivy League education or putting a down payment on the house of their dreams? 

All those are goals to look forward to and the ones that’ll help them keep their eye on the prize. Without them, they might feel as if they’re depriving themselves without any purpose whatsoever!

Do: Use Cash Whenever You Can

Today’s society is mostly cashless, and there are expenses people cannot cover with pure cash only. However, that doesn’t mean they should stick to credit cards even if they pay them off in full every month. When there is something that can easily tempt them, they might succumb to its charm at some point. 

To prevent that, one ought to eliminate temptation, which is where using cash comes into play. Going grocery shopping with cash could prevent people from overspending and annihilating their monthly food budget. Likewise, if they are dining out, they will think twice about ordering the second-most expensive dish.

Feeling each expense is bound to shake one to their very core and show them how meaningless some stuff is. Better yet, it limits them to a single number and makes money extremely real — and too painful to spend in one go.

Do: Find Someone to Keep You on the Right Track

Since one has to change their whole lifestyle to stop living paycheck to paycheck, it would be wise to get some support while they’re at it. They are likely to slip up a few times before they get it right, and having someone to cheer them on would do a lot for their self-esteem. That could be a financial advisor, a close friend, or a family member. It doesn’t matter as long as it’s someone they can rely on to tell them the truth and make them face their challenges. 

Don’t: Rely on Loans or Credit Cards

When push comes to shove, some people will go into debt to make up for some losses in their budgets. However, what they don’t realize is that they’re basically taking the easy way out. The budget they set for themselves is never going to work if they know in the back of their minds that there’s a plan B, C, or D. When a person perceives a loan or using a credit card as an option, they might keep making mistake after mistake, never quite reaching their financial goals.

The solution is simple, though: loans are entirely off the table. It doesn’t matter where they come from (banks, family members, or even payday loans). As long as they’re eating up the budget with all the interest, one simply won’t be able to stop living paycheck to paycheck anytime soon.

The same goes for credit cards. Most people view them as free money, but they definitely aren’t; at the end of the day, everything one borrows has to be paid in full. If that’s not possible or someone’s shopping habits are out of hand, it’s best to stop carrying them altogether. To keep a favorable credit score, they shouldn’t cancel the accounts, of course. But really, if they allocate their funds well and opt to use cash or debit cards for all purchases, they definitely won’t need them.

Don’t: Despair If You Make a Mistake

Lastly, to avoid going back to square one after a month or so, it’s necessary to cut oneself some slack. Mistakes will happen, no doubt, and that’s completely normal. No one learned how to budget properly in a day — it’s all trial and error. 

What matters is that the person is taking all the steps necessary toward living worry- and debt-free. Even if there are a couple of (small) slip-ups, such as that latte or some takeout, they ought to treat it as a temporary mistake. If it happens, they should move past it by adjusting the budget slightly and opting to do better next time.

Stop Living Paycheck to Paycheck Today

With a carefully planned budget and some insight into how much is spent each month, every person out there can stop living paycheck to paycheck today. People who know how to make the most of their income aren’t wizards by any means; they just care about their financial goals and want to give this life the best shot. So why not join them? All of these tips may take a bit of effort to implement. Nevertheless, they’ll provide more satisfaction in the long run and ensure one’s future is always bright and clear, not to mention financially stable.

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