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Are you trapped in the cycle of living paycheck to paycheck? If you are, don’t be embarrassed because you’re not alone. In fact, you may be surprised to hear that even high-earners can get stuck in this cycle. But just because you are in this cycle doesn’t mean you shouldn’t be working hard to get out of it. Your stress level, and bank account, will thank you!
According to a 2015 Nielsen study, 22% of the people in the US do not have any extra money. That is a pretty high percentage, considering the average US salary is about $60,000! And the figures are pretty surprising:
- 25% of Americans who earn over $150,000 live paycheck to paycheck
- 33%, give or take, of Americans who earn $50k-$100,000 are living paycheck to paycheck
- 50% of the US population earning less than $50,000 a year are living paycheck to paycheck
No wonder people look so stressed and defeated! They are working hard and still not getting ahead. Even if you feel like you cannot possibly save any money, or give up one more thing, I am willing to bet that the majority of Americans can actually put away at least a little money and give up “one more thing” for the betterment of their financial future. Your mental health will thank you!
5 Ways to Stop Living Paycheck to Paycheck
Revisit Your Budget
This is going to take a couple hours, but it’s totally worth it. If you use a debit or credit card for your purchases and bill paying you will have a pretty easy time figuring out what you spent in each area of your budget. Go through the last 2-3 months of expenses and figure out how much your expenses have been. (Download our easy 1-page budget worksheet here.) Once you have figured out what you’ve spent, add up what income has come into your household. Subtract your expenses from your total and see what the difference is. Are you money ahead…or money behind?
If you are ahead, that’s great! Now look through your budget and see what expenses you can cut to give you more money to shift into savings or towards a bill that needs to be paid off. Daily coffee can switch to twice a week coffee. Dinner out 4 times a month can be reduced to twice a month. Can you decrease your cable package? Switch cell phone carriers? Is your car insurance too high? Do you use your gym membership?
If you are behind, then you really don’t have time to waste on revising your priorities. What expenses can you cut right now to get your budget out of the red and into the black? Can you cut the cable cord? Switch cell phone carriers? You can definitely stop going out to dinner and picking up takeout and fast food. Can you cancel your gym membership and workout at home for free? Is your car insurance carrier charging you too much? What else is there that can help solve your immediate problem? If things are really out of control should you consider downsizing your home? A market evaluation from a local realtor is free and can quickly tell you what the market will bear for your house.
Increase Your Income at Your Current Job
Whether you are ahead or behind, when is the last time you had an employee review session with your superior? If it’s been over a year, or if you haven’t received a raise on over a year, ask for a review. If you work hard and bring value to your workplace your employer should at least entertain the idea of giving you a raise.
If your employer is not willing to give you a raise, it may be time to start looking at your options- especially if you are truly underpaid for what you do. Indeed.com is a great place to start looking for jobs and also seeing what other people in your field are earning.
Pay Yourself First
Investing in yourself first. Before paying any bills or blowing money on Paycheck Friday, deposit money into your savings account. Once it is in there you will be less likely to spend it. Don’t think it’s silly to start small, either. $25 dollars each paycheck is $650 a year if you are paid every other week. If you are living paycheck to paycheck that $650 will come in handy if you have an unexpected car expense, a medical bill or any other unplanned expense. It’s the beginning of a great safety net that will either continue to grow or get you out of a bind you are otherwise unprepared for. Pay yourself as much as you can- no one ever says, “Gee, I wish I had less money in my savings account.”
Watch Your Daily Spending
Little things you purchase contribute to the “paycheck to paycheck” cycle. A $2.00 candy bar here, an $8.00 lunch there, a $5 coffee while you wait for the next train, letting your kids get the $3 EOS lip balm in line at Target…before you know it, you’ve piddled away early $20 without even realizing it! If you have kids, tell those little money-suckers your family is buckling down and cutting out all frivolous expenses for the time being. This isn’t meant to cause them stress, but this is real life and at one point or another they will need to revisit their budget and evaluate unnecessary purchases, too. It’s normal- everyone has financial issues at some point in their lives. Remember college and ramen? Exactly.
Avoid the “Lifestyle Creep”
When your income increases, and odds are that it will in time, try to avoid the “lifestyle creep.” What is the lifestyle creep? Well, to put it simply, it means redirecting your salary increase into bigger and better things. If you receive a pay increase, do you NEED a larger home? A better car? More clothing? Probably not. This is not to say you shouldn’t enjoy the rewards of your hard work, but resist going overboard. Bigger houses have bigger issues. Nicer cars have higher repair costs. Think ahead and plan to use your salary increase wisely in ways that benefit your future, not your immediate present.
Have you overcome the “Paycheck to Paycheck” cycle? If so, I’d love to hear about the changes you made and how your life has improved after getting out of this money-sucking cycle!
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Ready for more tips and tricks to improve your financial health? Then you won’t want to miss these posts:
10 Sneaky Ways to Save Money Each Month (This post shows you how to use the money saving app Acorns to save your spare change electronically! It has an awesome savings calculator to show you just how much you can save from spare change over the years.)
How to Cut Your Grocery Bill In Half – and Eat Healthier Doing So!
5 Totally Awesome (and Totally FREE) Money Management Tools
10 Genius Ways to Earn an Extra $500 This Month (<— no Uber or survey sites, either!)
Money Matters: 7 Things Millenials Can Learn From Talking to Their Grandparents
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