5 Tips to Stop Living Paycheck to Paycheck

A Jungle Scout Consumer Trends Report released on March 16, 2021, found 56% of American consumers surveyed live paycheck to paycheck. The report also says that 48% of Americans experienced unexpected financial setbacks over the last three months. However, even before the pandemic arrived, more than a majority of Americans struggled to meet their monthly obligations. If you find yourself in this group, then you know how stressful it is. Living paycheck to paycheck leaves you with no money to save for emergencies, retirement, and life goals. How can you break out of this cycle?

5 Tips to Stop Living Paycheck to Paycheck

1. Track Your Money

The first step toward taking back control of your financial life is to figure out where your money is going.

  • Set up a method that works for you and track every expense, from loans, credit card, and monthly bills to your carry-out coffee.
  • Use an expense tracking app such as Mint.
  • Once you have an accurate picture of how you’re spending your money, you might be surprised to see how much is wasted.

2. Make a Budget and Stick to It

You could earn a good salary and still find yourself living paycheck to paycheck. According to GOBankingRates, almost 34% of Americans have no savings, and 69% say they have less than $1,000 in an emergency savings account.

Budgeting tends to be one of those avoided tasks. Financial experts suggest that you focus less on the word “budget” and more on the idea of creating a spending plan that focuses on your goals. In this way, budgeting becomes an exercise of empowerment that makes it possible to do the things you want to do in life.

3. Pay More Than the Minimum on Your Credit Cards

On the one hand, you might want to improve your monthly cash flow by keeping more money in your hands while paying the minimum due to your credit card carriers. But over the long term, you’ll pay more in interest, harm your credit score, and stay in debt longer. If you make only the minimum payment on a balance as low as $5,000, it could take you 30 years to pay it off. And this is assuming the interest rate does not increase.

4. Automate Your Savings

You’ve probably heard the phrase, “pay yourself first.” The idea is that before you spend your money on purchases, you make sure you’ve funded your savings goals. It can be tempting, though, to skip a month and use the money instead to make a purchase. However, maintaining a regular habit of prioritizing your financial health will help you get out of the cycle of paycheck to paycheck living. And the best way to do it is to automate your savings contributions. For instance, you can arrange a certain percentage of your paycheck to go directly to your emergency and retirement savings accounts.

5. Constantly Hunt for Ways to Save Money

Most of your monthly expenses are necessary. You have to pay rent, buy groceries, and pay utilities and internet providers. But there are ways to cut back on these expenses.

  • How much are you spending on groceries? Do you throw out food? Before grocery shopping, inventory what you need and make a list. Stock up on your favorite things when they’re on sale.
  • Be careful about using out-of-network ATM fees.
  • Take advantage of technologies such as smart thermostats to save on heating and cooling expenses.

Bottom Line

Getting out of the paycheck-to-paycheck lifestyle can be challenging. Many Americans find themselves with very little money left over at the end of the month. But there are strategies you can employ to break this cycle.

  • Track your expenses
  • Write a spending plan (budget)
  • Reduce debt.
  • Automate your savings
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