How to Stop Living Paycheck to Paycheck

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Sixty-three percent of Americans have been living paycheck to paycheck since the pandemic began. However, COVID-19 isn’t entirely to blame. Forty-four percent of people say they were already living beyond their means before then. If you’re ready to break the cycle, there are steps you can take to get your finances back on track. Just know that you’re going to have to make some sacrifices and change your habits.

Create a budget and track your spending

Sometimes the problem isn’t your salary, it’s that you don’t know how to manage your money well. The first step for taking control of your money is to create a budget. See how much you’re bringing in versus what you spend each month then adjust as needed. Checking your bank and credit card statements regularly is essential to avoid overspending. If it makes life easier, you can always use a budgeting app to stay on track.

Reduce your expenses

Housing, utilities (water, gas, electricity), food and transportation are necessities. Everything else is just nice to have. Comb through your bank and credit card statements to see where your money has been going and look for free or cheaper alternatives. For example, instead of paying for a gym membership, exercise at home using YouTube workout videos. Rather than pay for cable, you can download a streaming app. You may even be able to get Netflix, Disney+, or Hulu for free through your cell phone provider.

Spend less on housing

Rule of thumb says to spend no more than 30% of your monthly gross income on housing. If most of your paycheck goes towards rent, try to find a cheaper place to live. This may mean renting a room in someone else’s home instead of getting your own apartment. You’ll have your own bedroom but share common areas like the kitchen and bathroom. Another option is to move back in with your parents until you pay off your debt and have a good amount of savings.

Start saving for emergencies

According to Bankrate, only 39% of Americans can comfortably afford to pay a $1,000 expense from their savings account. Emergencies are going to happen and you need to be prepared. The best way to build an emergency fund is to set up automatic transfers and pay yourself first. Have a set amount that you save each time you get paid. Even if it’s only $20, it’s still better than nothing. You can always bump up your savings when you have more wiggle room in your budget. The more money you save now, the less you’ll need to borrow when a surprise expense pops up.

Don’t charge what you can’t afford

Many people rely on their credit cards for things they otherwise can’t afford. Be realistic with yourself. If you know you don’t have enough money in your bank account to cover the expense, don’t swipe your credit card. If you have a hard time telling yourself no, switch to an all-cash budget. This will force you to put extra thought into each purchase you make.

Get a second job

Approximately 13 million Americans work multiple jobs. While it may not be something you want to do, the reality is you need to make more money so you can stop living paycheck to paycheck. You can work full-time at your main job and part-time at your other gig. Try to do both jobs until you’re out of debt and have a decent amount of savings.

Sell your unwanted stuff online

The next time you have a day off, go through your home and look for things you no longer want. Then download a selling app and start listing each item that’s in good condition. Be sure to take several clear pictures of the item and be as detailed as possible to help the item sell faster.

Plan your meals instead of ordering takeout

Ordering takeout is convenient, but can be pricey, especially if you’re using a food delivery app. On top of paying for your food, you’ll be charged a service fee, delivery fee, a small order fee if you don’t spend enough, and taxes. Plus, you need to tip your delivery person. Learn to cook and plan your meals so you save money and stop living paycheck to paycheck. If you visit your grocery stores website, you can usually get a sneak peek of what’s going on sale a couple days before the sale begins. Shop and plan your meals around those items. Be sure to sign up for the store loyalty program so you can add coupons to your card for additional savings. Buying the store brand can also save you more money.