When I did the latest reader poll here on Celebrating Financial Freedom a few months ago, the biggest problem most of you said you were facing is that you are living paycheck to paycheck. It’s a problem that I see almost daily when readers contact me for financial advice.
Unfortunately, living paycheck to paycheck seems to be the norm for the average family, and the research backs this up.
Most people are living paycheck to paycheck not because they’ve experienced some kind of financial disaster that set them on their heels. For the most part, the paycheck to paycheck life is caused by one of these two things:
- You’re not making enough money
- You make enough, but don’t manage your money well
Most people fall into the latter category.
Read on and I’ll show you how to stop living paycheck to paycheck. I’ll also hook you up with some excellent resources to help you get started.
Living Paycheck to Paycheck is Normal, Not Necessary
Now, the interesting thing is that most people who live paycheck to paycheck will tell you the reason they live that way is that they don’t make enough money. However, that’s usually not the case.
In 2020, the median family income in the US is $78,500. Of course, that’s not a massive income, but it’s enough to get by comfortably if you manage your money well. Yet I’ve seen people making six figures have trouble keeping the lights on.
I’ve also seen people with very little income stretch a dollar so far it would snap back and put their eye out if they weren’t careful. But even with a low income they managed to stay out of debt, save money and live within their means. Sure, they live paycheck to paycheck, but they don’t have a ton of debt weighing them down, limiting their choices and freedom.
What’s the difference between these people?
It’s because one manages money well, and the other doesn’t.
Debt is Usually the Cause
For most people, living paycheck to paycheck is simply a consequence of how well (or unwell) they manage their money.
Most are in debt.
Most believe that debt is a necessary part of life.
And most are spending more than they make because of that debt.
So How Do You Stop the Paycheck to Paycheck Cycle?
There are several things you’ll need to do to get out of the paycheck to paycheck cycle for good. The absolute first thing you have to do though, is change how you view debt.
Change Your View of Debt
Debt is a cancer to your finances that spreads over time and will completely take over if you let it. Once you understand that all the interest and fees are causing you to spend 10%, 20%, even 30% more for your stuff, then you will have enough incentive to start changing your finances for good.
Manage Your Money Better
Once you change your perspective on debt, then it becomes a matter of changing the way you manage your money. Most people who are living on the edge financially don’t have a concrete plan when it comes to managing money. They operate on more of a general idea of their finances instead of a clearly laid out plan.
This lack of organization is why the average family can’t seem to get ahead.
I’ll show you how to start putting together a solid financial plan below.
The Plan for Managing Your Money Better
Once you change how you view debt and understand that you have to have a plan for your money, then you can start your journey out of the paycheck to paycheck lifestyle. Here are the necessary steps:
Evaluate Your Income
If you have a low income, it may be all you can do just to meet your immediate needs. However, when you are proactive and have a plan for your money, you can at least avoid getting into debt and making your situation worse.
If you don’t have a low income, a good financial plan is just as important. Actively managing your money allows you have a clear plan for every dollar so you don’t needlessly waste money.
I recommend an excellent money management platform called Personal Capital. You can easily manage all of your financial accounts in one place, and best of all, it's FREE!
Find out more about Personal Capital's excellent money management features here.
Make a Budget
Doing a monthly budget is the key to stopping the paycheck to paycheck cycle. Spending your money on paper before you spend it in the real world allows you to have complete control over your money. Yeah, I know it doesn’t sound like a lot of fun. But hey, living paycheck to paycheck is no picnic either!
You can find a list of my posts on budgeting here
Check out my easy to follow book on how to make a budget that works here
Make a Plan to Get Out of Debt
Once you start using a budget to get complete control of where your money goes, then you can start tackling debt. Your goal should be to stop using debt and eliminate it for good.
Let’s face it, debt is the top reason that most people are living paycheck to paycheck. Once you eliminate those credit card bills, car payments, and such from your life, it’s incredibly freeing! You have more choices, your stress level goes down, and you have more peace because bills aren’t ruling your life
It’s very easy to make a workable get out of debt plan that you can stick to if you’re motivated.
Here’s how to get started with a solid get out of debt plan.
Keep Moving Forward
As you start budgeting and paying off debt, it’s likely you will run into an obstacle or two along the way. No matter what happens, keep moving forward with your plan. You may feel like you’re making little or no progress at times when you’re leaving the paycheck to paycheck life behind. But when you stick with it, use discipline, and relentlessly pursue your goal, you will come out on the other end smelling like a rose!
Living Paycheck to Paycheck is a Choice
Some people may disagree with me on this, but I believe that for the vast majority of people, living paycheck to paycheck is a choice.
For too long we’ve been convinced that debt is a necessary part of life!
For too long we’ve fallen prey to the marketing that tells us we should buy things we can’t afford!
It's time to stop having limited options and less personal freedom because debt has kept us in bondage!
Now is the time to fix your money problems, and tell the paycheck to paycheck lifestyle to take a hike!
Now is the time to regain the freedom, the choices, and the money that the paycheck to paycheck life has taken from you!
Come on, you can do it!
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