Nobody sets out to live paycheck-to-paycheck, but for countless Americans it's a fact of life nonetheless.
Managing your finances month-to-month without any chance of catching a break can be extremely stressful, especially as you run out of money and await the next pay period, hoping to get by without debt until then. Not to mention the limitations of living without being able to grow savings, and the many sacrifices generally needed to successfully do so.
Living paycheck to paycheck can have long-term implications. After all, with little cash flow, you are more apt to put bills and expenses on credit cards, which have an interest rate attached to them. That can spur a cycle of racking up debt and only paying the minimum, never getting ahead.
Unless you win the lottery or get a better paying job, living paycheck-to-paycheck may feel like a foregone conclusion—but it doesn’t have to be. With hard work and dedication, you can break the cycle of no savings and no cash flow until the next paycheck arrives.
Stop Surviving Month-to-Month and Start Thinking Long-Term Savings
Create a Budget That Works and Stick to It
One of the best ways to break the paycheck-to-paycheck cycle is to create a budget that is realistic enough that you can stick to it. You might want to slash your monthly expenses in half, but that may not be an achievable reality anytime soon. You may vow to rein in all your spending on dinners out and entertainment but can you resist for an entire month?
Your budget has to take into account all of the spending you do in the month—not just your housing, transportation and utility outlays, but your spending habits around food, how much you pay for your phone, what kinds of things you like to shop for, how much does your gym or sports class cost, etc. Compare that to the money you bring in every month, and you will have an accurate picture of your actual cash flow.
Armed with that you can go about finding ways to reduce your expenditures to shore up money into a savings account. That may require you to overhaul your lifestyle a little and sacrifice some, but if it means not having to live paycheck-to-paycheck, then it's ultimately worth it.
Chances are you won’t miss that second cup of coffee each day or bemoan your brown bag lunch during the work week. When crafting your budget, try to think about expenses that may be coming up but are not a regular occurrence, such as your car registration or your next vacation. The more you put on paper and include into your budget, the fewer surprises you’ll face when these bills come due.
Curb Your Spending
A looming reason so many people live paycheck-to-paycheck is that they simply spend too much. Sure it's hard to resist the temptation to splurge, especially when you just got paid, but do too much of that and you won’t have any money left for bills and other expenses. That's why it is important to rein in spending if you want to free up more money to save or to pay down debt and break the cycle of paying only the minimum due.
The aim, which can be tough, is to find ways to save money in each category of spending you have. Take food shopping, for example. If you spend $150 a week purchasing goods for the house, try to lower that to $125 or even $100. That strategy can be applied to anything from your cable company to your electricity bill. Vowing to shut off lights when you leave a room can go a long way in reducing your electricity usage and thus your utility bill.
Shaving off a little bit of spending from each category can be more effective than trying to slash a huge amount of spending in one go. By doing the latter you're setting yourself up to fail, while the former has known success stories.
Stop Using Credit Cards
A cornerstone of living from one paycheck to the next is filling the gaps with credit cards. Countless people who survive paychecks will turn to their credit card to purchase everything from the mundane to life’s emergencies, not realizing or caring about the interest they're also paying on that purchase.
The bill gets covered and they survived another month, the thinking goes. But a bunch of little charges on a credit card can add up—that pack of gum just got a lot more expensive if you factor in the interest you're paying as a result of using a credit card.
A better option—one that will not only reduce the debt but will force you to live within your means—is to forego using your credit card altogether. In order to reduce your debt and thus free up more money that can be saved, you have to stop spending and credit cards can be a tantalizing way to impulse buy. You also have to refrain from putting monthly bills on your credit card unless you're in a position to pay the entire balance each month.
Get a Side Gig
Thanks to the gig economy there are plenty of ways to earn extra cash that can free you from the paycheck-to-paycheck survival mode you're in. There are a host of part-time jobs that afford you the ability to earn extra money and are flexible enough that they fit into your schedule.
While driving for a service such as Uber or Lyft is top of mind for many people looking to raise extra cash, there are other options, from working at a retailer or waitressing in a restaurant, to becoming a virtual assistant or using any kind of specialized skills to find small freelance projects.
Even selling used or upcycled things, from bikes to furniture, can boost your savings or debt reduction goals. If you enjoy doing some kind of creative, crafty work such as knitting, consider opening a small Etsy shop and/or selling your wares at a local market.
One of the reasons a company-sponsored 401(k) is so effective is because contributions happen automatically, with money coming directly out of your paycheck. Making it automatic can be a powerful way to save as well.
If your bank is automatically withdrawing money from your paycheck each period and placing it in a savings account, it will require no action on your part—which means there’s no opportunity for you to spend the money elsewhere. Not to mention that you likely won’t notice the missing money.
This strategy can apply to even the smallest amounts of savings. Even a sum as small as $25 can help you build up that nest egg in order to give you some wiggle room as you await your next paycheck.
Don’t Beat Yourself Up
Altering any behavior is going to be difficult. We may like what change brings, but that doesn't make it any easier to actually face. Be kind to yourself if you end up caving and spending more than your budget allowed for.
Instead of beating yourself if you overspend compared to what you budgeted for, take a step back. Breathe. And own the fact that you made a mistake, but move on and try again. Never forget, success comes not from ‘not failing,' but getting up and trying one more time than you've failed.
Living paycheck-to-paycheck is the norm for scores of people around the country, and for lots of reasons—carrying college debt, buying a house beyond your means, trying to live a lifestyle your income can't actually afford, a huge medical emergency that's eating away at any chance to save you had, etc.
But in order to break the cycle, you have to take a hard look at yourself, your lifestyle and your spending habits. In some instances, it may require drastic downsizing while in others a spending tweak is all it takes. Either way, in order to break the cycle of living paycheck-to-paycheck you need to bring in more than comes out each pay period.
Stop surviving and start living thanks to the advice shared here.
This post is from Marianne Parry, a digital marketing strategist on her way to an early retirement. But she wasn’t always so successful—right after college, she was working a minimum wage job and trying to pay off her student loan debts, surviving from one month to the other, barely. She began rethinking her spending and budgetary habits and has since successfully managed her money and launched a lucrative career that she plans on working in until she can retire at 38 on a sunny beach somewhere they don’t speak English.