Living paycheck to paycheck causes unnecessary stress in life. My wife and I found that out when we first started our family.
You end up depending on your employer’s pay cycle to pay your bills and maintain your livelihood.
If you ask somebody who lives in this situation the question “What is living paycheck to paycheck?”, I am sure you’d hear horror stories and not so many wonderful stories.
A better way of living is to live freely without regard to when your next paycheck is coming in. This is no easy feat, however.
There are a ton of people who live such lifestyle even when they try their best to get out of such situation. This doesn’t have to be you.
A recent paycheck to paycheck statistics reveals that half of the American families are living paycheck to paycheck. Yikes.
While living paycheck to paycheck seems to be a regular part of many people’s lives, living that way may or will sometimes lead to a ton of problems. These problems may involve not being able to satisfy the basic personal needs and some other essential things in life.
I have read and heard these paycheck-to-paycheck stories. The beginning, the middle, and the end of such stories aren’t for the faint of heart.
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Ways To Stop Living Paycheck To Paycheck
If you want to stop living paycheck to paycheck, rest assured that it won’t be easy to break the cycle but it’s always possible to cut it even when you don’t have the extra cash.
This doesn’t mean that you can’t get out of it. This doesn’t mean that you’ll be in this situation forever. No, that’s not what I meant.
It can be difficult to break but not impossible.
Here are several practical ways you can follow to stop living paycheck to paycheck.
1. Admit you have a problem.
You can’t solve a situation if you don’t acknowledge that there’s a problem at hand. Admit you have a problem and are in need a solution to it.
When I was in debt, I blamed myself for the situation that my wife and I were in. I looked into my credit card debt numbers, savings account figures, etc. and realized the math didn’t add up and that’s why I was in a big hole.
From there, my wife and I figured out ways to make things right. I got a side hustle to earn extra money, got a personal loan – saving us over $3,000 in interest payments, made a payment arrangement with the creditors, etc.
In less than three years, we paid off our 40K debt (story here) and stopped living paycheck to paycheck.
2. Understand your money.
Be intimate with your money and it’s always best to start with a budget. You need to know where the money is going before you can make any changes to your spending.
You can use an MS Excel sheet as a starter. That’s the most basic tool and probably, one of the best tools to track your budget.
Another tool that a lot of people are raving about is Spentapp. My family uses it, too.
Spentapp will analyze your expenses, find your money mistakes, and will eventually make financial recommendations you can consider.
To get out of the paycheck living cycle, you need to make financial improvements where it makes sense. Spentapp will help you with that. It provides you with what you need even without you lifting a finger.
If you want a hassle-free way of understanding your money and what decisions to make, click here to get Spentapp for FREE.
Note: Spentapp can also help you earn cash back up to 45% for doing things you normally do. This and it’s ability to help you pinpoint those money suckers makes Spentapp a very useful tool to get back on a financial track.
3. Be responsible for using credit cards.
A lot of people have gone to accumulate thousands of credit card debts. They use credit cards like they’re free money. The results, however, isn’t for the faint of heart.
To stay away from living paycheck to paycheck means to become responsible with using credit cards. Use only the amount you can pay in full when the due date comes.
I use my Discover Card and Capital One Quicksilver for cashback. Between the two, I have accumulated over $4,000 in cashback over the years. I pay them in full when they are due. Plus, I don’t get charged late fees or interest.
I use my Discover Card for rotating 5% cash back while I use my Capital One for 1.5% cash back on any purchase.
If you have credit cards with perks, take advantage of those. If you don’t, stick with cash or if you want to get credit cards, here are some cards with great perks you want to check out:
- American Blue Cash Everyday Card – 3% cash back (supermarkets), 2% (gas stations and select US department stores), and 1% (on other purchases). Click here to apply.
- Citi Double Cash Card – 1% (on purchases) and 1% (as you pay for those purchases). Click here to apply.
4. Pay off credit cards with high-interest rates.
The words ‘credit card due or payments’ always get people worried especially when money is tight.
What makes sense? Paying off credit cards with 14.99% annual percentage rates (APRs) or paying off personal loans with 4.99% APRs? I bet your answer would be paying off those personal online loans.
If you are trying to pay off your credit cards but feel as though a significant portion of your paycheck goes to those and on interest, not principal, then, personal loans are your best option.
Personal loans like Upstart typically offer lower interest rates than those of the credit cards.
My wife and I had to get a personal loan with 4.99% APR and consolidated all our credit card bills, which had an average rate of 14.99%. We paid off our debts right away and paid off our loan in just 2.5 years. We’ve been debt-free since then.
With this loan, you can pay off the loan with a fixed monthly payment at an agreed amount and loan length that work for you.
Click here to get started with Upstart and learn how much you can save with simple debt payment tricks like this.
5. Know where you stand.
Do you know the exact reasons why you live paycheck to paycheck? Do you know your debts, how much you owe, what you can afford with what you and don’t have, etc?
You need to look at your credit report. Understanding and keeping your credit in a good state can and will help you improve your budget. How?
Good credit rating can help you reduce your payments on loans, and other debts over time since a better credit can give you access to lower interest rates.
When we started getting out of this paycheck cycle, our first stop was to look at our credit. We used Credit Sesame to look at our financial health for FREE.
It showed us different offers to help us slash our debt even further that we, otherwise, wouldn’t have access to without using it.
A free simple tool like Credit Sesame tremendously helped us. Click here to get a FREE account and see what it can do for you.
6. Live well below your means.
With monthly bills, it is so easy to get into a mode of acceptance even when these bills cost a lot. I feel your pain and struggles.
Cut expenses one at a time so you can see how each expense will affect you. When you cut a lot at a time, and your life becomes ‘less great,’ you won’t exactly know which one is causing it.
While you analyze the expenses you need to cut, you can also use a free bill app called Trim. It examines your accounts and searches for ways to save you money on daily expenses like internet and the dreaded cell phone bills.
If you experience outages or even the slightest service disruption, Trim believes you deserve credit, and it will work with the providers to get you just that.
Trim cut my family’s on-contract Verizon phone bill by $201/yr. That’s even when we were on-contract still.
Last month alone, Trim users saved over $1,000,000 automatically. Click here to see what Trim can negotiate for you — it’s FREE to sign up.
7. Go back to the basics.
So, what the heck does this mean?
It simply means that you go back to satisfying your basic needs and letting go of your wants.
If you are trying to stop living paycheck to paycheck and trying to be debt free, one of the best things you can do is to limit your spending to what you only need. It may be hard to do it, but it will help you out in the long run.
When my wife and I were paying off our debt especially our credit cards, we ultimately stayed away from buying what we wanted and focused heavily on what we needed.
We even got a personal loan to consolidate all our debts and got the lowest interest rate, which saved us a ton in interest in just a few years.
Where did such change of lifestyle take us? It took us to a debt-free life in just 2.5 years even when I was the only one working in the family and didn’t make a ton of money, to begin with.
8. Create a buffer in your checking account.
Another way to stop living paycheck to paycheck is to create a buffer in your checking account.
This will ensure that even if you don’t receive one of your paychecks, you are still able to pay your bills. It is a good idea to keep at least one rent or mortgage payment worth of money in your checking account as a buffer.
This way, if there is an error in payroll at work or something happens to make me miss a paycheck, I am still able to keep a roof over my head.
Here are some quick tips to save money and create that buffer:
- Stop ordering convenience food. Instead of buying takeout, delivery, or going to restaurants, cook meals at home with cheap groceries.
- Cut the cable cord. You can watch your favorite television shows via Hulu, Netflix, or Amazon Prime. These are all a fraction of the cost of cable.
- Sell your unwanted items. Do an audit of your home and collect all of your unused and unwanted items that have value. Sell them at a garage sale, on Craigslist, or on eBay
- Make price comparisons. Before you purchase something, check the price on Amazon and other online retailers. You can often find things cheaper if you search for them. This can save you a few dollars here and there.
- Use coupons and refund tracker. When shopping online, use Honey, a desktop add-on that automatically scans for the best coupons without you having to find them elsewhere. Also, use Paribus.co, which files a price adjustment on your behalf when the products you bought become cheaper.
In addition to the tips above, here are some more tips to help you save money and create that buffer:
- Socialize for free. Going to happy hours and other social events that require you to spend money can burn your budget pretty quickly. Opt to spend time with people in free settings such as volunteering.
- Buy generic items. Certain medicines and foods can be bought in the generic brand than the name brand without a loss in quality. Generic brands are usually cheaper than name brands.
- Eat leftovers. Try making your meals in larger batches so that you have leftovers for the next day. This will save you money and time. You can also use $5 Meal Plan or PlateJoy to save you money with meal planning.
- Bring your lunch to work. Avoid buying lunch food when you are at work. That $5 to $10 per day adds up quickly. Instead, use your leftovers for lunches at work.
- Move to a lower cost of living area. If you are having trouble finding ways to save, it could be because most of your money is tied up in your rent or mortgage. Consider moving somewhere that will be easier on your pocket.
9. Find and work on a side hustle
Here’s a continuation of what I said about using your free time for better purposes.
Once you have found ways to save money and create a buffer in your checking account, it is time make sure you are maximizing your income. The more money you make, the less likely you are to live paycheck to paycheck.
I particularly like taking surveys (click here to see the 25+ Best Survey Sites). When you hear the word “survey,” probably the first thing that comes to your mind is a scam. Not true at all.
When my wife was a stay-home mom, we collectively made around $600 per month doing surveys (which also include testing products for FREE and testing websites).
She works full time now, but we still manage to make $200 – $300 per month from taking surveys.
Here are some side hustle ideas to get you started:
- Teach English from home. Teach kids English online from the comfort of your home. With VIPKID, you can make as much as $2,000/mo working 4-5 hours a day. That’s it. As VIPKID teacher, you get all the training and materials for teaching for FREE. Who doesn’t like that kind of side hustle? Click here to become a VipKid teacher.
- Uber/ Lyft Driving. If you own a decent car and have a clear driving history, you can drive for a service like Uber or Lyft. These are today’s modern taxi services that connect you with riders via a mobile app. How much you make will depend on how often you drive and if you drive at peak times like Friday and Saturday nights. Click here to start driving for Lyft.
- Rent A Room In Your Home. If you own your house or condo and have a spare bedroom, you can rent it out to people needing a place to stay. This can bring in a significant amount of money each month depending on the area in which you live. Use a service like Airbnb or Craigslist to post your room for rent. Then, screen candidates. Come up with a lease agreement and then start collecting rent! Click here to start renting your room.
- Freelance Writing. If you are good with words and have expertise in any area, you can be a freelance writer. There are plenty of companies and websites looking for people to write content for their pages and blogs. Sign up with job boards like Upwork and Freelancer to start looking for jobs. You will probably start at a low hourly/per-word rate. As you gain experience, you can charge more.
This post is jam-packed with ideas to get you started on the path to stop living paycheck to paycheck. Consider using some of my money saving techniques or trying out one of the side hustles I mentioned.
Once you take action, you are bound to see results. Any extra money you save or make will make a difference in your finances.
When you break the cycle of living paycheck to paycheck, you will be freer and in control of your finances.
What are you doing to stop living paycheck to paycheck? Are you ready to stop living such paycheck to paycheck lifestyle?
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Allan Liwanag is a personal finance blogger who paid off at least $40K debt in 3 years by adopting simple and extreme saving techniques while ensuring his family’s needs were taken care of. An analyst by day and dedicated blogger by night, he loves to share his thoughts – based on his research, personal knowledge, and experience – on topics related to family, life, and money. Allan lives with his family in Maryland, USA.