For many people the concept of living between paychecks is real. And in turn, wondering how to stop living paycheck to paycheck is a regular occurrence, but still seems like a far off dream.
It is so difficult to imagine ourselves as someone who has thousands in savings and doesn’t have to worry about unexpected expenses at all, especially when paycheck to paycheck is all we’ve ever known!
A study on the ‘Economic Well-Being Of Households’ shows that 37% of people would not be able to afford an unexpected bill of $400.
The report does explain that some people may have enough to pay off the $400 in cash, but choose not to. But for many, it is more likely that they cannot afford the bill at all because they are living paycheck to paycheck and have very little (if anything) in their savings.
This isn’t something to be ashamed of, or embarrassed about, if you fall into that 37%. This was me when I was starting out life with a young child.
The fact is, life throws curveballs, and things don’t always go to plan.
That is why I am here, bringing you my favorite tricks and tips to help you boost your savings, so that you can pay any unexpected bills with ease.
How To Stop Living Paycheck To Paycheck: 7 Key Tips
If you are anything like me, and thousands of others, you are probably tired of living paycheck to paycheck, and I am glad to hear it!
Working on my finances, and building my savings up was a very liberating experience.
I no longer get feelings of anxiety when I receive an extra bill or unexpected expense, because I know I have the money to pay it straight away.
The list below consists of 7 proven tips which helped me stop living paycheck to paycheck, and if you implement them and put in the necessary work, they can help you too.
Now I am not going to sugarcoat this and make it seem ‘as easy as pie’, it will take time and perseverance (we’ve already spoken about how life likes to throw curve balls!).
There may be setbacks, but they do not mean you have failed! Keep at it, and you will break out of the living paycheck to paycheck cycle.
If I can do it, I know you can too!
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1. Get The Basics Covered, And Then Reduce Them
The best place to start, from my personal experience, has always been getting everything in line and go from there.
This can be done a variety of ways, but a popular method is to create a budget using a spreadsheet with different columns for different categories such as;
- Your income source (e.g. job A, job B, selling etc)
- How much each income stream is
- Then a list of each and every outgoing, from your rent or mortgage, to the $5 magazine subscription
- You’ve probably guessed this one: then you want a column with the cost of each bill
- And lastly, you want to include your savings and the total
Spreadsheets are a great way to organize all of this, largely because you can use pre-programmed formulas to add everything up for you, and it lays everything out in a simple way.
(Not to mention the many pre-made sheets you can find and download which save you the hassle of organizing them!)
Now you have everything listed, and how much each bill is costing you, you can easily see where the bulk of your money is going. And that is what leads us into the second part of this tip.
Reducing your bills
Now you know what you are spending money on, you will want to look for expenses which can be reduced.
For example; can you reduce your energy bill by turning off the heating and wrapping up warmer instead?
Or maybe you can reduce the amount of electronics being on at any one point (e.g, turn off the lights when you leave a room, unplug your laptop charger or use a power strip for ease).
Look at each bill and ask yourself; ‘how can I reduce this bill?
Can you find a cheaper provider for your car insurance?
Or forego the car all together and find cheaper methods of transport?
(Maybe there is a bus or subway which will get you where you need to go for less than what you spend on fuel each week?)
Perhaps you can take shorter showers to save your water bill?
And I am sure you have some unused subscriptions which you’ve been meaning to cancel for months now (it’s something we are all guilty of, let’s be honest!)
Take the hassle out of identifying and cancelling subscriptions by using the aptly named app Trim. Trim can negotiate your cable, internet and/or phone bill with ANY provider, lowering your bill by up to 30%.
Remember, a penny saved is a penny earned.
2. Live Below Your Means
A perfect follow on from reducing your bills. Living below your means is possibly the most efficient way to improve your savings, and in turn help you stop living paycheck to paycheck.
Living below your means is basically making sure that your outgoings are always less than your income.
But it does go a little bit further than that, it also means that you should reduce as many unnecessary expenses as possible.
Just because you have money ‘left over’ doesn’t mean you need to spend it!
Now I am not saying that you aren’t allowed to treat yourself at all, just be more mindful of where you are spending your money.
If you go to Starbucks every day on your way to work, maybe you could make your own instead. I used this drinks flask every day for 7 years, I reckon I saved over £7,000 bringing my own drink to work.
Then on Friday (or whatever your last working day may be) treat yourself to that Starbucks as a reward for making it to the weekend!
Not only would you easily save $15-$20 a week in this scenario (if not more), but it makes it seem special again.
I love reducing my spending in this way as it makes saving money feel less like a punishment, but still helps me limit my spending on unnecessary purchases.
3. Get Out Of Debt
Nearly all of us have incurred some form of debt at one point in our lives. Especially when we are living paycheck to paycheck and have very little in terms of savings.
It is often unexpected expenses (like the theoretical $400 expense the study above used) which land us in debt.
That is why building up your savings, and managing your money well is so important. Having good habits with money can save you the stress and anxiety that comes with debt.
Not to mention that the amount of interest you will be paying on your debt can be extortionate, and you will nearly always be paying back far more than you ever owed to begin with.
Just imagine how much you could have been saving if you weren’t paying all that interest!
How you work on paying off any debt will vary person to person. Some people prefer to hold off on saving and opt to throw every spare penny they have into bringing that cost down. While others may split their money between savings and their debt.
Your financial situation, and your feelings towards your debt and savings (or lack of) will really affect what you decide to prioritise in this situation.
Which is having the greatest effect on your life?
If you decide to throw everything you have into your debt, what would happen if another large expense came up?
There is a lot to consider, and if you are really struggling then speaking to your bank or a financial advisor may be really beneficial!
4. Think About Future You
Consider what you want out of your future, and think of ways you can begin building towards that now.
What I mean by this is picturing the future you; future you will need looking after, what can you do now to help yourself later?
Maybe you can prioritise saving money for your retirement?
Or perhaps you can start building an emergency fund so that you can still cover your bills and needs if you lose your job?
The future you can be at retirement age, or it can be a year from now, or even both!
The point of this exercise is to help you prioritize paying towards your future, as I find it really helps me to truly consider every purchase.
Do I need this? Or would the money serve me better in the future?
I find so many of us tend to be, almost careless, with our own money. But when we consider money to be someone else’s, we become much more mindful and deliberate with each purchase.
When you think about the ‘future’ you, it can be easy to consider it ‘their’ money and that makes us more conscientious of what we spend!
For the future you, you are thinking long term and putting money in a savings account for 10+ years is not a great way to grow your money (unfortunately).
When it comes to personal finance for women (and men), investing is one of the key habits we all need to get comfortable with.
Investing is where you can make your money grow and build into the lump sum you need and want. And I know what you are going to say, because the old me said exactly the same thing!
I don’t know anything about investing
My secret tip: Get comfortable with the idea of investing by using a really fun app called Acorns. It’s the modern equivalent of your coin jar as it rounds up every purchase to the nearest $1 and automatically invests this spare change.
Acorns is a really simple way to dip your toes into investing, and save money, without even thinking about it. I think the best part is this hands off automated service costs as little as $1 a month.
Acorns automated roundups make saving and investing unbelievably easy, you’ll be pleasantly surprised how quickly your spare change accumulates.
5. Save Your Bonuses
When we receive a bonus from work, it can be so incredibly tempting to spend it all as we ‘treat’ ourselves.
While there is nothing wrong with that, if you want to stop living paycheck to paycheck then bonuses are a great opportunity to propel your savings forward.
But naturally when you have worked hard for something, especially money, you are going to want to spend at least some of it on yourself. And that is absolutely understandable!
A good rule of thumb I like to use when I get a bonus is keeping 10% of it for myself and then saving the rest.
That way I still get to treat myself to something, whether it is a new gadget, a day out, or even some retail therapy. But I also get a nice lump sum to put into savings.
It’s a win:win situation, if you ask me!
For those of you who have some debt, getting a bonus can also be a great time to throw some money at it.
If you manage to pay off a nice chunk in one go, it can either bring down your regular payments and allow you to save a bit more each month.
Or it will shorten your repayment period, so even if you pay the same amount each month there will be fewer months left to pay. (It all depends on your debt, and who the lender is as to how the payments change!).
6. Save For Big Purchases
With the increasing popularity and convenience of credit, many of us have stopped saving for big purchases in favour of smaller monthly payments.
It is something we have all done, and it does have benefits. Smaller payments are more manageable and paying them on time can help boost your credit rating.
But ultimately, it is still a form of debt and best avoided where possible. Especially when they can do more harm than good if you begin to fall behind on payments!
This is why I would highly recommend beginning your own sinking funds. This is a separate pot of savings, where you specifically save for large expenses. This can cover anything from a new phone, to a new car or even kitchen goods!
By purchasing your items outright, you never have to worry about falling behind with payments and getting debt.
7. Look After Yourself!
I have been in so many situations where money was tight, and I’d make drastic changes to my life and spending habits which didn’t always have positive outcomes. And I am here to tell you now;
Look after yourself first!
Budgeting is all about balance. Especially when you are trying to stop living paycheck to paycheck.
If you are saving hundreds of dollars a month but living on bread and instant ramen noodles, then you haven’t got a very good balance, and this will likely lead to health issues.
Likewise, refusing every invitation to socialise and go out with friends, so you can avoid spending money, will have a negative impact on your mental health. You don’t need to become a hermit to save!
Saving $100 a month, but being able to care for your mental and physical well-being, is so much more valuable than saving $300 a month. Something I learned the hard way.
Leaving paycheck living behind
Hopefully my tips and tricks have helped you figure out how to stop living paycheck to paycheck.
As I mentioned at the beginning, it will be hard-work. But I can say from experience that it is 1000% worth it.
Having money in savings, and breaking the paycheck to paycheck cycle was a liberating experience. Knowing that I had the finances to afford unexpected bills, or necessary purchases helped ease so much of the pressure I felt under.
These 7 tips helped me immensely, and I hope they will help you too!
Start taking back control of your money by grabbing your copy of the Money Saving Starter Guide today.
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Last Updated on 7th June 2021 by Emma