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Learn how to stop living paycheck to paycheck. This guide will tell you exactly what you need to do to break the cycle once an for all.
How to Stop Living Paycheck to Paycheck
Are you living paycheck to paycheck and struggle to make ends meet every week?
You know the drill, you get your paycheck, pay some bills, buy groceries; then the money is gone until the next payday.
You then do it all over again, week after week.
It is a very stressful way to live, and one little unexpected expense could truly turn your finances upside down and send you into debt.
You know as well as I do that this is no way to live your life. You need to start to live below your means to make ends meet.
Even if you feel you can’t get ahead, there are many things you can do to turn this around. With a bit of hard work, you can break free of this vicious cycle.
How to Know if You’re Living Paycheck to Paycheck
Did you know that 78% of American workers live paycheck to paycheck? Pretty crazy huh? What amazes me even more, is that many of them don’t even know it.
How can that be? Well, when people have a back up plan such as using credit when money starts getting low, the realization that they are living from paycheck to paycheck doesn’t really cross their mind.
They think that since they’re still able to afford things, that it’s not an issue. Well until those cards get maxed out. Then they have to deal with a bigger problem when they can’t get out of debt.
That’s just one reason. If you’re not 100% sure you’re living from paycheck to paycheck, here are 13 telltale signs that you are.
You can’t pay off your credit cards in full every month
You don’t have an emergency fund to fall back on when unexpected expenses arise
You spend your entire paycheck days before your next payday
You have to wait until payday to be able to afford necessities
You don’t save for major purchased
You are dipping into your savings to pay for things you need
You apply for more credit because your other cards are maxed out
You worry about not being able to pay bills on time
You have to check your bank balances before heading into a store
You borrow money from friends or family
You have to juggle bills around to avoid being cut off
You can’t control your impulse spending
You accumulate late fees and overdraft charges regularly
If any of these sound familiar, then keep reading to learn how to stop living paycheck to paycheck and break the cycle once and for all.
How to Stop Living Paycheck to Paycheck
10 tips to break the cycle for good
1. Identify Where Your Money is Going
Knowing where your money is going is the first step you should take when trying to stop living from paycheck to paycheck. When you know where it’s going, you are able to see what needs to change to make ends meet.
If you typically use cash, you should track your spending for a while. Once you do, you’ll have a better idea of what’s going on with your spending habits.
If you use a debit or credit card to make purchases, it should be pretty easy to backtrack. Pull out your statements or request them if you don’t have them readily available.
Identify the things that you buy that are not necessary expenses. Are there things that you spend money on that you simply don’t need? Can you find ways to reduce the amounts spent in other areas to save money?
2. Create a Budget
Learning how to budget is a way for you to control where your money is going and what you’re spending it on. When you don’t have a budget, you are letting your money control you.
I know, most people hate to think about creating or sticking to a budget. The thing is, you need a budget to keep track of where your money is going and to stay on track with your finances, there is just no getting around it.
The reason so many people fail at budgeting their money is that they create such an unrealistic budget. It’s so strict that they are doomed to fail right from the start.
The key to creating a budget and sticking to it is to make one that will give you some wiggle room. This way you won’t throw your hands in the air and give up after a few weeks.
A budget is a work in progress, especially when you first start out. So if you see that certain areas are just not working for you, then you should make some changes and tweak it until you find what works best for your financial situation.
If you want to learn how to budget your money the right way. Sign up for the FREE 5-day build a better budget bootcamp today.
3. Build an Emergency Savings
Having an emergency fund is critical. As you know, if you are living paycheck to paycheck, one or two unexpected expenses could throw your finances into a downward tailspin.
Then you end up creating debt that you don’t need or having to skip paying a bill or two to pay for these expenses. This will end up wasting more money when you get hit with excessive late fee charges and interest rate hikes.
You need to make sure you add a line item to save for emergencies into your budget. If you can contribute at least $20 a week, you will have over $1000 saved in one year. Of course the more the better.
Better yet, open up a high yielding savings account to grow your savings even faster. I use CIT Bank because they pay quite a bit more in interest than a traditional bank. Why not take advantage and earn free money to build your emergency savings?
Cit Bank is the best option and my recommendation.
- Currently, they pay 2.25% APY through their savings builder account.
- Have no opening or maintenance fees.
- Compound interest daily to maximize your earning potential.
- Only require a $100 minimum deposit to open an account.
4. Get Rid of Your Debt
If you have debt then you need to get rid of it. This is the reason you have to live paycheck to paycheck. You are wasting your money by paying high-interest rates. It’s like taking your money and burning it.
Get rid of your debt as fast as you can. You need to make sure that any spare income in your budget goes towards your debt. Once your debt is gone, you’ll see how much more money you’ll have to pay for the things you actually need.
Even if you can only pay a small amount more on your debt right now, it still helps to reduce the amount of interest you pay every month. Make an action plan to get your debt paid off and stick to it!!
5. Change Your Money Mindset
To change your financial situation, you need to change your whole attitude about money. Money should not be ruling your life. Take a good hard look at how you handle your money.
Have you ever thought to yourself, “it’s only five bucks a week, it’s not going to make a difference.” What about “man, our cable bill just went up another $20 a month. Oh well, there isn’t anything we can do about it anyway”.
The truth is all those five bucks adds up over time!! In fact, if you say this to yourself a few times a week, you’ll end up wasting over $500 in one year.
And guess what? You can do something about the rising cost of your cable bill. You can shop around for a better rate, you can give up some of the costly cable packages you are paying extra for. You could even get rid of cable altogether.
The point is, start valuing money for what it’s worth. Money is not everything in life, but when it’s preventing you from happiness right now. So, it’s a big deal.
6. Stop Using Credit
Stop using credit to pay for everyday purchases or your monthly expenses. When living from paycheck to paycheck, you need to be aware of where your money is going and how much you have remaining to last until next payday.
When using credit, you really don’t have that kind of awareness. If you want to purchase something, you just charge it. There is really no thought about how much you have left to last the week.
You need to keep this awareness at the front of your mind. Instead, use cash to pay for purchases.
If you don’t like to use cash, then using a debit card is just as good. Just keep an eye on your balance to make sure you know where you stand throughout the week.
7. Earn More Money
Earning more money is the most obvious tip. It just makes sense, you don’t make enough money to last the week, then just make more of it.
Of course, this is usually easier said than done. We are all so busy, to begin with, and there are only so many hours in a day.
With that being said, there are many things you can do in your spare time to earn some extra money. Even if you don’t have a lot of time to spare.
Every little bit that you can do now will help you on your mission to stop living from paycheck to paycheck.
8. Save for Major Purchases
When living from paycheck to paycheck, you really can’t afford to make any major purchases. But of course, sometimes we really can’t get away from having to.
Say your refrigerator breaks down and it doesn’t make financial sense to have it repaired. You can’t get away with not having a fridge. You need to eat. Right?
Of course, many times this is where your emergency fund comes in. But, if you know that you will eventually need to replace it, then save for it so you don’t need to use your emergency funds.
9. Consider Downsizing
Living large is one of the biggest reasons many people have to live paycheck to paycheck. In fact, many people who make really good money end up struggling to make ends meet because they live above their means.
They buy more house than they can afford or drive an expensive car that they really don’t need. They try to keep up with the Joneses. Could this be you? If so, consider downsizing to help keep more money in your pockets.
You can trade in your car for one that still fits your needs but doesn’t leave you broke. You could also sell your home to buy one that still serves your needs without the extra cost.
10. Find Cheaper Alternatives
Finding cheaper alternatives to things that we need and spend money on daily, weekly, or monthly is one of my all-time favorite ways to cut back on spending.
Look, nobody wants to have to give up everything that they enjoy just to have to make ends meet. When you find cheaper alternatives, you don’t feel as deprived because you don’t have to give them up altogether.
For instance, take those specialty coffees daily, you could buy flavored coffee for less than $10 a can or creamers in your preferred flavor for less than $5.
At the rate of one specialty coffee a day, these two options would last you over a month so you will spend $15 dollars a month making them yourself compared to roughly $90 a month. Cha-Ching…$75 a month saved on one item alone.
Breaking the cycle of living from paycheck to paycheck is not going to be easy at first. Trust me when I say that it will get easier as time goes on and it’ll all be worth it in the end.
Don’t give up! There is so much more to life than worrying about paying the bills.