8 Genius Ways to Escape Living Paycheck to Paycheck
Living paycheck to paycheck is a less than ideal lifestyle. Here are 8 genius ways you can spend less than you earn (and make more) and find yourself on the road to financial freedom.
Living paycheck to paycheck is stressful, and millions of us are doing it.
You work hard but you keep finding yourself in this vicious cycle because you're either not making enough to cover your regular expenses or you're spending too much.
No matter how much money you make, you could still find yourself broke at the end of the pay period.
This cycle decreases your quality of life.
It can lead to impulsivity.
And force you to take shortcuts and quick fixes that increase your chances of falling victim to credit card debt and scams.
But guess what?
The cycle doesn't need to keep repeating.
If you start making changes to your spending and saving today and start saving more, living paycheck to paycheck can be a thing of the past.
10 Relatable Experiences For Those Who Live Paycheck-to-Paycheck
Many people find themselves in this less-than-ideal situation by not setting goals, failing at budgeting, spending on needless things, not saving enough (or at all), and not investing in themselves.
According to MarketWatch, 50% of people are unprepared for emergency situations, whether it be medical, personal, or home-related.
Thankfully, many of us who have lived paycheck to paycheck have learned how to end the pattern and start saving money.
The stress we forgot was there is suddenly relieved and a certain financial optimism is injected toward future success.
You can stop living paycheck to paycheck and live with less worry and more security by setting goals, implementing some lifestyle changes, and learning savvy ways to save and earn!
Even if you've tried getting out of this vicious cycle before, we have proof that these 8 genius ways to stop living paycheck to paycheck listed below will work.
Here are 8 genius ways to stop living paycheck to paycheck
1. Achieve big results by making mini choices
Rome wasn't built in a day.
Neither are major savings accounts or financial milestones.
Setting mini goals, not big ones, is how geniuses break the cycle of living paycheck to paycheck.
Think, this month, I am going to add $100 to my savings account. Next month, $200.
You don't have to plan a lifetime of financial decisions at one time.
You just have to take a step in the right direction. Then another.
It was not that long ago that I was paying off student loan debts while trying to save for a wedding and a new home.
Focus on the little things first. Don't say, "I'm going to pay off my credit card this month." Instead, say, "I'm going to save $100 on coffee and lunches this month."
It takes a lot of time and work to pay off a credit card.
Instead of giving yourself such a big job, take on a little one.
Zero in on where you can cut your expenses down.
A great place to start is rethinking your coffee and lunch strategy.
By making the decision to forgo your coffee ($3) and lunch ($12) two times a week and save instead, you will have an extra $120 your savings account at the end of the month.
Put that $120, or more, toward your credit card debt, for example.
You will find that if you start with small sacrifices, your bank account will grow into big savings each month.
2. Set up a simple budget that doesn't micromanage your daily choices
When you find yourself pinching pennies and counting down the days until your next paycheck arrives, you should get on a budget.
Creating a budget is easy with so many great digital tools out there to help you.
It only takes a few steps to set one up.
And with the help of our smartphones and computers, you won't have to wonder where your money is going when the paycheck comes in.
The 50/20/30 budget - one technique to rule them all
If you're frustrated with your inability to budget, then this one is for you. It is super popular because it's simple.
Rather than fix you into spending X dollars on this and Y dollars on that, the 50/20/30 budget just clumps all your expenses into three easy categories.
Your goal is to keep the amount spent in each category consistent each month.
First take 50% of your paycheck for fixed expenses. This is the money you'll need to pay the rent/mortgage, your loans, health/car insurance, and the utilities, for example. These expenses aren't surprises and are the foundation of your budget strategy.
Next, take 20% and put it toward your financial goals. These goals can include paying off your credit card debt, student loans, building an emergency fund or something else like a down payment on a condo.
Use no more than 30% of your paycheck for everything else. Giving yourself a spending limit for your discretionary expenses will help you make sure you don't eat-up your paycheck with entertainment, toys, and other of life's fun but costly habits.
Here's how it works. Let's say you get paid on the 15th and 30th of every month. Each paycheck is for $2,000. Half (50%) that total ($2,000) should go directly to paying for your fixed expenses.
Next, take 20%, or $800, and put that directly toward your financial goals, like paying off a credit card balance or building a savings account.
This leaves you with your "fun money," or discretionary income.
Use no more than $1,200 for all the things you think you need and want.
Just because you may have $1,200 to spend on discretionary income does not mean you should blow it all.
It may be that you have a lot of debt that you need to pay off.
In this case:
You can reverse the 50/20/30 to see where you're spending your money
We learned where our money should be going. Now, let's see where it's actually going.
You know you get a paycheck for $2,000 twice a month.
Now, before you download a great app to help you track your spending (which we'll show you below), make sure you collect ALL your receipts for one month.
Analyze your receipts to fine-tune your budget.
What you'll discover is amazing.
You know you should be spending 50% of your paycheck on rent, insurance, and utilities, for example.
But lo and behold!
You're only spending 35%!
Don't rejoice just yet, though.
When you add up how much you put towards paying off your debts and growing your savings, you realize you only put 7% of your paycheck there.
This means that you spent 58% of your paycheck on non-essential items.
Keep your eye on the price and your chin up.
You're not alone, remember that.
Many people put too much of their income towards things other than rent and savings, for example.
What makes YOU different is that, because you're budgeting, you know where you can change to help you break the cycle of living paycheck to paycheck.
If you have credit card debt, you can see that you could be putting at least 13% more of your paycheck to paying it off.
You could even take the 15% you're not spending on fixed expenses and pay off that credit card debt.
What makes this tough is that we're the masters of our own choices.
We realize that we're spending too much on the "fun" things in life.
Don't make the groceries excuse.
You may be saying, "Wait, most of my 58% goes toward groceries!"
But it may be that you're buying brand name items or paying for too many processed meals (pre-made salads, for example) when you could potentially be eating healthier and for less money.
Most people discover that they are buying things they just don't need.
Cutting out coffee, Diet Cokes, and lunches are the steps I always say should go first.
Cooking at home is healthier, more fun, and far cheaper.
The point is, you know where the problem is now, and you can take steps to correct it.
Here are some free budgeting software and apps to stay on budget track.
Thanks to technology, sticking to a budget is easier than ever.
You can monitor your income, spending, saving, and expenses easily in the palm of your hand.
We have some great suggestions for budgeting apps that will help you break the cycle of living paycheck to paycheck:
This free and easy to use app allows you to create a budget and manage your spending.
Mint links directly with your bank accounts and allows you to see your budget in real time.
By setting up a budget, Mint will automatically deduct from your spending totals in each category.
This allows you to have better control over your earnings, spending, and bill pay.
You can effortlessly stay on top of your expenses by setting up bill alerts and schedule payments through the app, saving you the time and effort of logging into different sites for bill-pay.
Instead do it all at once, in one place.
Besides allowing you to categorize what expense is fixed, a saving goal, or for "fun," Mint can even calculate your credit score!
Oh yeah, and it's free!
Here are a few other apps to consider:
With You Need a Budget (YNAB), every dollar counts.
Very similar to Mint, YNAB allows you to create a monthly budget based on your income, expenses, and savings goals.
Fudget does the basics of budgeting for you.
By sharing your income and expenses, Fudget will categorize your spending and keep track of what's left in each category in real time.
You'll always know your balance and see what wiggle room you have in all areas of your finances.
With over 1 million users, Personal Capital is the real deal.
It is a bit more sophisticated but its financial tools make it easy to build a manageable budget and financial plan.
Everyone is different.
I recommend downloading a few of these apps to find which one works best for you.
There are scores of free budgeting apps, so trying out a few at your leisure will help you find the best tool for your personal budget and financial needs.
3. Don't put irregular expenses on a credit card
Not all expenses show up each month. Many pop up one time a year or even less frequently.
You need to prepare for these costs or you'll find yourself putting these relatively big costs on your credit card.
When you put them on your card, you'll set yourself up for paying it off later.
That interest is a paycheck killer!
Expenses come in many different colors. As Christi Posner from MyMoneyCoaches says, "you must save for these [irregular] expenses in advance, and not feel guilty when you 'spend' the money."
She offers a number of examples of irregular expenses, including:
- Property taxes (if paying quarterly or annually)
- Income tax (if you're a freelancer)
- House insurance (if paying annually)
- Vehicle insurance (if paying quarterly or annually)
- Clothing & shoes (if you shop once or twice per year)
- Health expenses
- Vet bills
- Birthday gifts (speaking of, here's a great piece about how much you should spend on birthday presents)
- Vehicle maintenance
To pay for irregular expenses, you need to budget to "spend" on these expenses.
Add up the total cost of the irregular expenses you know of.
Use the list here to help you. As you discover more, add them to your list.
Divide the total cost of irregular expenses by 12.
This number is what you need to put away into your savings account and not touch.
Keep updating the total cost and dividing by 12 as you go along.
You may want to add 10% extra to that number because, unfortunately, things that you can't control are going to pop up.
Why not be prepared instead of pinched?
Put the money for irregular expenses into a sub-savings account.
And, if you need more help, you can search your bank's website to come up with additional answers easily.
By having money set aside for irregular expenses, you won't suddenly need to pay home insurance on your card and fall into expensive credit card debt.
Again, it's this debt and probably some lifestyle choices that is forcing you to live paycheck to paycheck.
4. Pay yourself first
This strategy will help you build wealth and financial freedom in the long-term.
Simply make it routine to put at least some money in your savings account every pay period.
This strategy helps you keep your financial goals as your top priority.
It's as simple as setting up an automatic transfer if you have regularly scheduled paydays and allocating at least 20% of your paycheck directly to a savings account.
Pro tip: You can even instruct your bank to move a percentage of that money into a sub-savings account, so that way you're both putting money towards credit card debt as well as irregular expenses.
Often times, it's simply a matter of having your money organized in designated accounts that help you more clearly understand what it's for (savings) and what it's definitely not for (that new phone).
AND since you're already budgeting, you'll know how much you need to pay towards it.
Now,pay your bills immediately
Your monthly bills are due on the same day each month.
Yet, too many of us don't pay them on time, which hurts our credit score and our wallet.
It's these sort of mistakes we're making that cause us to live paycheck to paycheck.
Get out of this habit of not paying on time by paying your bills immediately when payday rolls around.
Just like setting up direct-deposit to pay yourself first, you can set up automatic payments for your bills.
Electric, phone, and car payments (and more) can be paid easily online by picking a day each month to have money directly taken from your checking or savings account.
Visit your bank's website to learn how to set this up this great trick.
By picking a day that coordinates with your paydays, you can rest easy knowing that your bills are taken care of.
5. Use the snowball method to pay off your debts so your money isn't wasted on interest
You work hard for your money, and in order to get ahead, you need to pay your credit card debt off strategically.
The snowball method helps you pay-off your credit cards one at a time.
You start with your card with the smallest balance or your card with the highest interest rate and pay it off first.
So, let's say you have two credit cards: Card A has a balance of $500 and an APR of 20%, while Card B has a balance of $2,000 and an APR of 12%.
Without getting into the nitty-gritty of the math, the snowball method says you should focus on Card A first since it has both the lower balance and the higher APR.
By focusing any extra income you have on tackling the smallest debt, you pay it off quicker than trying to pay each card equally.
You will eliminate taking more time on paying each card equally, which will eliminate interest on each card, one-by-one.
The snowball method will boost your morale.
Just think about it.
By honing in on one card, you will knock-off entire debt balances quicker than without this approach.
Amanda Krill, a writer for the site, The Penny Hoarder wrote of a mother's success story paying off $64,000 in credit card debt in two years using the snowball method.
"First, I stopped spending. Cold turkey. No more mystery shopping. No more credit cards," says the mother of three.
"Then, I sat down with a calendar and mapped out when each payment was due I figured out which card had the highest interest rate and started throwing the majority of my income at that balance."
She paid her debt off in two years.
Don't forget to pay the minimum on your other balances.
Just because you're focusing all your extra income on a single debt source doesn't mean you should completely neglect the other sources of your debt.
In fact, doing so would hurt your credit and your wallet!
So make sure you make the minimum payment on all your balances each month, and avoid those late fees and credit score dings.
6. Cut out recurring costs, then keep on hunting for savings
Get creative with the ways you pay to stop living paycheck to paycheck even faster.
Find one recurring payment you are making and stop it.
Perhaps you added a Wifi-Hotspot to your cell phone plan, cut that out and save $15.
You might be billed monthly for apps you don't even know you have.
Cancel your iTunes or Google Play subscriptions.
Head over to the settings and cancel anything not vital to your life.
You'll want to go to the Google Play Store or App Store and head over to your Account page to see a list of your subscriptions.
Unsubscribe from email subscriptions.
An easy way to achieve this is by downloading the phone app, Unroll.Me.
It's quick and easy and will help demote your spontaneous spending.
Find good advice on your credit card usage. Last, but not least, you have to check out Trim.
This software connects to your credit cards and gives you fantastic advice on how to save money.
It may tell you that you are paying higher for cable TV than the average person in your neighborhood.
Or it could let you know that you've got the following subscriptions set up, allowing you to choose which to cancel.
Touted by the New York Times and others media companies, you have to try this popular app out.
Cutting out subscriptions is the fastest way to help you stop living paycheck to paycheck.
Pro tip: Set aside a specific time, like 1-2 hours, where you can download these apps, and look at your receipts, etc. By giving yourself time to be organized, you'll find new ideas and ways to save just by slowing down and thinking about your finances.
7 more ways to lower your monthly expenses
Spending less gives you more money to save and pay your expenses.
It also will help you get out of debt faster because any accumulated savings from spending less can go to debt repayment.
Create more predictability in your food bill. Set a weekly routine of planning your meals for the week.
By tactful planning, you can save big at the grocery store, and you won't be spending frivolously at restaurants during the week because you have meals already made.
For example, if there are tomatoes for sale, buy in bulk.
Make an abundance of tomato sauce. Freeze what you don't use, and save it for spaghetti, pizzas, lasagnas, veggie bakes etc.
Starches and carbs like noodles are inexpensive and shelf-stable.
This will save you money and time as you will already be prepped and ready to go for lots of dinners in the future, according to Sarah Roe at Money Saving Queen.
Purchasing veggies and proteins in bulk and that are on sale can help you substantially.
These items can be frozen for months.
Get creative in the kitchen while saving money.
It might not be what you're craving, but it can save you the $20 you spend every time you order take-out.
Start caring for the environment. Make choices to save energy and in turn, you'll save money, according to Carrie from the Ready for Zero Blog.
Utilize ceiling fans, turn off your lights, do less laundry, hang-dry your clothes, walk more places.
By making small changes in your everyday life that help the environment, you'll also be helping your wallet by spending less.
Hit up your local library or other resources for free family entertainment. Libraries offer free entertainment — from books, magazines, movies, and more.
Oftentimes, they even offer free classes from pottery to book clubs.
You may even find yourself watching less TV, which can help you to cut cable (saving you over $500 a year!).
Stop eating out and learn how to cook. The average American spends $232 a month eating out at restaurants.
Learn how to cook and enjoy more affordable meals at home.
Odds are you'll have leftovers, which you can take to work or enjoy for another meal at home. One financial blogger saved $1,700 in a year by enjoying leftovers.
Cut back on drinking alcohol and smoking cigarettes. One pack of cigarettes costs on average $5.50 and smoking a single pack a week is costing over $286 a year.
Rethink your booze consumption, because if you drink as little as 4 drinks a week, over a year that will cost you over $1,800, or $139 a month.
If you drink or smoke more than that, then you're spending significantly more.
Carpool to work. By carpooling to work with neighbors, coworkers, or your significant other, you can save hundreds of dollars a year on gas and car maintenance.
You also lessen your carbon footprint and help the environment.
It's a win-win.
Downsize your home. If you have more space than you need, downsizing to a smaller house or apartment can greatly reduce your mortgage or rent.
You will also have less square footage to heat and cool and save on energy costs.
Rely on the kindness of strangers or the internet to learn how to do things for yourself
Many of us think we need to pay people to do tasks we could do ourselves with some education.
You may even have friends or neighbors that are handy or know a thing or two about cars.
Expanding your skill set can help you perform home maintenance yourself.
Utilize YouTube to learn the basics. YouTube is a site everyone is familiar with.
There's a lot more there than music videos and puppy videos.
Many channels exist to teach you basic life skills that cost you big in your lifetime.
You can learn to change your oil and other basic car maintenance skills, which cost an average of $20-$55.
Add that up over a couple of checks in a year, and that's savings over $100.
Need to replace your kitchen tile?
On average that will cost you a couple thousand dollars. There's a YouTube video for that!
Find a Meetup group. Meetup is a killer app that can help connect you with like-minded people.
Whether it's for social outings, or skill-building workshops, expanding your network is a great way to learn from the world new and clever ways to save.
Ask friends for help. If you're moving, doing an extensive spring cleaning, or perhaps you are doing some major lawn upkeep, ask your neighbors.
Hauling services and movers cost you hundreds of dollars.
Friends and neighbors often will help when asked, but you miss opportunities by not asking.
Give back to them when they need and the cycle will save you big in your lifetime.
7. Cutting will only get you so far, you're going to need to make extra income
Make the most of your skillset to make more money.
Whether it be asking for a raise or starting a side-hustle, there are ways to stop living paycheck to paycheck that start with earning extra income.
Ask for a pay raise. Talking with your boss about a pay raise is the easiest and quickest way to boost your income, according to I Will Teach You To Be Rich.
Be sure to start by doing your research and compare your salary with others in your field.
You need to sell yourself.
So, tell your boss why you deserve to make more money, show how your accomplishments benefit your employer, and describe your plans for the future based on your skills.
Start a side-hustle. You can find many ways to make extra income after your 9-5, and on your own schedule, too.
By using your creativity and knack for crafts, you can refurbish cheap finds with stain, paint, and sandpaper and sell it for double!
Utilize free online classes. The internet is home to scores of classes that can make you more marketable, which can make you eligible for a higher income.
For instance, you can learn how to write great cover letters, business emails, and more.
Learning a second language can exponentially increase your salary over your lifetime.
Adding to your current skill-set will set you apart from others and make you eligible for a higher paying job or a pay raise.
Having more money, while making sure you don't spend it (that's what a budget is for :-) is an essential ingredient to breaking free of the paycheck to paycheck cycle.
8. Fall in love with someone who manages money better than you
If you're struggling to manage your money, besides all the advice here, you can consider finding someone to team up with — to help you manage your spending and saving.
The hard truth is: some people come from backgrounds where discussing and managing money was healthy and helpful.
I'm not talking about gold digging at all. In fact, hard-working families that didn't have it so easy often have a more solid sense of managing money than those who came from well-off homes.
Inspired by Laura Shin writing over at Forbes, here's what you should be looking for, with my own thoughts added in.
Questions to find your financial better half
When you look over these questions, keep in mind that a "no" doesn't need to be a deal breaker.
How they answer is just as important as what the answer is.
When I met my wife, I did not know just how financially savvy she was.
I saw a woman who worked hard, dressed well, and had a plan for the future.
But we never had a financial heart to heart until we moved into our first home together.
I asked questions - lots of questions - and paid attention to her responses, including her emotional tone.
Of course, you don't want to grill your potential future love on money issues.
Try and figure out the answers to these questions in a sensitive and thoughtful way, perhaps over a drink or walk in the park?
Did you talk about money and where it came from in your family?
- Did you earn an allowance growing up?
- Did you pay for college?
- Do you know your credit score?
- How much do you spend to pay off debt each month?
- What are your retirement plans?
- What do you think [insert your life dream]?
If you don't find the partner you want, or if it's too sensitive, then check out these places where you can find a financial partner-in-arms.
There's more fish in the digital sea
Having conversations about money whether it be online, or in face-to-face has benefits you can reap such as getting advice on how to save and guidance on how to manage what might seem like a mountain of debt.
Download Meetup to find your next friend group. Join over 90,000 people interested in personal finance, and hundreds of thousands of more who might share hobbies or skills that you're interested in.
Check out myFICO for a talkative finance community. There are probably tons of questions that you have about your personal finances that we weren't able to answer here. On this forum, ask your question and have smart strangers offer answers.
Jump down the Reddit forum rabbit hole. Reddit might be notorious for trolls and crude language.
But believe it or not, there are many smart discussions going on worldwide about investing, debt repayment, and living paycheck to paycheck.
Build up your financial knowledge with YNAB (You Need a Budget). This personal finance tool that we've already mentioned, beyond its ability to build you a budget, includes forums revolving around everything finance-related.
Spend and stress less, so you can save more
The journey to breaking the cycle of living paycheck to paycheck won't happen overnight.
But with a little bit of effort, you'll start to see these genius strategies begin to pay off.
Find your forum.
Cut your small expenses.
Lay out a budget.
Build up your skills and start a side hustle.
There are so many ways to get out of the paycheck to paycheck cycle.
All it takes is a bit of creativity and some solid patience and persistence.
Quit stressing and overspending today!
Your journey to sounder sleep and financial stability starts as soon as now.
Have any extra ways to save or side-hustles to share?
Let us know in the comments below.