How To Stop Living Paycheck to Paycheck

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Where money is involved, sometimes it can be difficult to see the forest through the trees. However, to improve your personal finances, you have to take stock of what your actual cost of living is and what changes you are comfortable making. Many Americans are living paycheck to paycheck when there might be room to save some money or free up some extra cash.

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7 Tips on How To Stop Living Paycheck to Paycheck

Spending money is too easy, especially when there is less to go around. Fear not though, as even with high inflation and interest rates, there are still ways to stretch your bank account further — and maybe even start building it. You can be your own financial health officer if you follow these seven tips:

Create a budget
Reduce nonessentials
Start an emergency fund
Try a saving challenge
Use a budgeting app
Start a side hustle
Live beneath your means

1. Create a Budget

A well-balanced budget helps you prioritize your spending so you have enough money to cover your monthly bills, let alone your weekly bills. The more you plan, the fewer surprises, which means you might even have money to spare.

Sometimes, it helps to break your budget down to even the smallest percentage point. Here are two budget percentage breakdowns to try:

70/20/10 rule: The 70/20/10 budget rule works by allotting 70% of your income for monthly bills and everyday spending such as groceries or utilities, then 20% goes to saving and investing and 10% goes to debt repayment.
50/30/20 rule: The 50/30/20 rule of budgeting is when you save 20% of your income every month. That leaves 50% for needs, including essentials like rent and food. The remaining 30% of your income is for discretionary spending.

Either of these plans can be adjusted to fit your income and needs. If you spend 60% of your monthly income on essentials, you could do 60/20/20 instead of 50/30/20, for example. Whatever budget plan you use, start with figuring out your essential spending — housing, food, etc. — and decide your percentages from there.

2. Reduce Nonessentials

Once you have created and analyzed your budget, there may be things you ll notice you can do without. For example, unused subscriptions or superfluous expenses such as streaming services are billed every month, and then you forget about them.

Look carefully to see which ones you can eliminate. And don t let the fact that they re cheap trick you, as eliminating a few subscriptions at a few dollars each per month can add up pretty quickly.

3. Start an Emergency Fund

An emergency fund is essentially a separate savings account you set money aside in for unexpected expenses, like injuries or car repairs, or in case you lose your income.

Even if you can t add to your emergency fund consistently every month, putting in little bits at a time can go a long way. There are plenty of savings accounts that won t charge you fees for having a low balance, so your money can grow on its own, too.

4. Try a Savings Challenge

A money-saving challenge can alleviate day-to-day budgeting boredom. This can be a motivating way for you or your family to rise to the occasion and save some money, which will help more cash flow roll over to the next payday.

Here are two family-friendly money-saving challenges you can try:

100 Envelope Challenge

The 100 envelope challenge can help you put away over $5,000 in 100 days. It works by getting 100 empty envelopes and writing and labeling them from one to 100. For 100 days, randomly choose an envelope, and whatever number is on the front of the envelope you chose, put that amount of money in the envelope.

You will have saved thousands in just over three months.

The Pantry Challenge

With the Pantry Challenge, you look in your pantry and get creative to make meals out of what you already have instead of grocery shopping or going out to eat. This helps you clear your pantry, stop wasting food and save money at the same time.

This is a fun cooking challenge and savings challenge that can free up room in your paycheck.

5. Use a Budgeting App

A great way to control what comes out of your paycheck and when is to track your spending on a money-tracking or budgeting app. You can keep all of your accounts linked and see what money you are spending or saving. Through tracking your credit card use and bank accounts, a budget app can help you motivate yourself to save just by seeing your financial picture in its entirety.

You can even link your partner s accounts to help keep you both on the same page with your finances. Here are some popular budget apps for you to look into:

6. Start a Side Hustle

There are many side hustles you can do online for some additional income that can go towards savings and expenses. You can do many of these without having to leave your home and on your own schedule.

Here are some gigs that can earn you some extra money on the side to free up room in your budget:

Complete online surveys
Dropshipping
Online focus groups
Open an e-commerce store
Teach online courses

7. Live Beneath Your Means

Minimize your expenses by reducing your impulse buying and avoid taking on debt, especially with credit cards. Cut out unnecessary spending, and don t open new credit card accounts or take on personal loans. Thrift clothing you need instead of buying new.

One creative way to save money and stretch your paycheck is to try a no-spend month, which is where you don t spend any money on non-essential items for a full month.

Final Take

Breaking the paycheck-to-paycheck cycle doesn t mean you have to take a fine-toothed comb to the Consumer Price Index. Assessing what you spend and reducing it in certain areas may be more doable than you think.

FAQ

Here are some quick answers to common questions about budgeting, living paycheck to paycheck and breaking the cycle.

How do I get away from living paycheck to paycheck?
- To break the cycle of living paycheck to paycheck, start with these seven steps:
  - 1. Create a budget
  - 2. Reduce nonessentials
  - 3. Start an emergency fund
  - 4. Try a spending challenge
  - 5. Use a budgeting app
  - 6. Start a side hustle
  - 7. Live beneath your means
Is it normal to be living paycheck to paycheck?
- Yes, many Americans are living paycheck to paycheck - but there are ways to get out of that cycle, starting with creating a budget and reducing your nonessential spending.
What is the 70/20/10 rule of money?
- The 70/20/10 rule is a budgeting method you can use if you're trying to pay down debt. With it, 70% of your income goes toward essential spending, 20% goes into savings and investing and the last 10% goes to paying off your debts.
- You can adjust these percentages to fit your finances, but they're a good place to start.
What is the 50/30/20 rule?
- A popular budgeting strategy, the 50/30/20 rule advises you to save 20% of your income every month, leaving you 50% for essentials like housing and food and 30% for discretionary spending.
- Of course, not everyone can afford to drop 20% of their paycheck straight into a savings account and not touch it, so you can - and should - adjust these percentages to fit your needs.