Living paycheck to paycheck sucks.
How many times have you said (or heard someone else say) – that you couldn’t buy the whatever-you-want until Friday, because Friday is payday? If you’ve said this, it means you’re living paycheck to paycheck– you use up all the money from one check, and then have nothing left. No wiggle room. That’s scary!
(I heard it twice this week, and I don’t talk to a lot of people. And it really made me think. And it made me want to write this post.)
There is an epidemic of people living paycheck to paycheck. Well, I’m using the term “living” sort of loosely here. (I mean, you’re probably reading about how stop living paycheck to paycheck, because it’s not living – it’s more like surviving, right?)
The good news is that if you ARE one of these people, you can stop living paycheck to paycheck. It just takes a little effort, and a whole lotta honestly about where your money is going and if you’re making enough money.
A friend of mine told me once that the best money advice she ever got was that when you’re struggling financially, you either gotta make more or spend less.
Sounds simple, but how to decide which one you need to do? And how to then DO it? Just like everything else in life, breaking what you need to do down into smaller steps can help.
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how to stop living paycheck to paycheck
Now, I have to add this disclaimer to start – this is not meant to be EASY. The fact of the matter is that it will not be EASY to stop living paycheck to paycheck. You are probably stuck in a bad cycle (with bad money habits) AND you may not be making enough money either.
Both of those things will have to be addressed.
1) Add up all of your debt. (ALL of it.)
Let’s get this out of the way right now.
If any amount of your income is going towards debt repayment (other than a mortgage), that should become priority number one. Use your debt as a motivator if possible.
2) Identify where your money is going.
Specifically, identify where “essentials” money is going and where your “extras” money is going.
To know where your “essentials” money is going, add up all of your “essential” bills (rent or mortgage, power/heat/water, food, transportation, medical insurance, debt repayment etc.) To know where your “extras” money is going, spend as normal for the month, and either put all of your purchases on your debit card, or if you use cash, write down every purchase.
At the end of one month, assess where your money went for that month.
(If you always use a debit card / credit card you might be able to do this NOW, and just use last month as an example, since all of your purchases should be on your bank statement / credit card statement.)
This step is tedious but important, because you need to know if you are even making enough money to cover your necessities. You might not be!
3) Determine if you are actually making enough money.
Debt aside, are you covering your “essential” bills or is just living putting you further into debt?
Unfortunately, we live in a time of low wages and high cost of living. (And we’re stuck in a vortex where when wages go up, so does the cost of living… so it’s sort of a vicious cycle.)
BUT fortunately, we also live in a time where we are absolutely not limited to making just the money we can make at work.
There’s a good chance that you ARE making enough money, and you’re just spending very poorly… if, for example, you fall into the category of people who think $16 for a box of chicken fingers is OK, then you might be making enough money. (Tough love here.)
BUT if you have debt that needs to be paid down, or if you are barley covering your “essential” bills, you need to find a way to make extra money.
Find a side hustle, sell stuff, get a second job. There are lots of ways to make extra money.
Related: How to Start a Blog for Profit and Work From Home
Related: 5 Side Hustles That Will Make You Money Immediately
Related: Real Work From Home Options (For People Serious About Escaping 9-5)
4) Identify your bad money attitudes / habits.
Do you often have plans to purchase something as soon as you get your paycheck? If someone gave you 50 bucks, would you spend it? If you had $1000 in your bank account, would you not think twice about buying the cute purse? Do you think of credit as “money” that is available to you?
You might not even realize that you have bad money habits until you take the time to think about them. I find that this is one area where most “get out of debt” posts are lacking. Addressing the bad habits is essential.
Related: Bad Money Habits You Need to Ditch NOW
I’m far from perfect but we all have our strengths, and I have a pretty good grip on my money habits. In October I made $5035.17 with my blog. (I was still at my day job, so this was “extra” money.) I do not have a plan to spend that money! I have no intention whatsoever of spending any of it on anything (well, except taxes and tithing). At the end of the year it will go into savings, or if we find we need to dip into it once I’m not working in December, we’ll have that option.
Not thinking of money as “to spend” is a GOOD money habit.
Understanding that available credit is not money that is available to you, is a GOOD money habit. (Credit is a TOOL available to you – nothing more.)
Cultivate GOOD money habits. (If you have no idea where to start with this, I recommend learning. Spending a little money to learn to deal with money will be worth it. Dave Ramsey’s Complete Guide to Money: The Handbook of Financial Peace University has helped heaps of people, OR Jessi Fearon’s Real Life Money Planmight be a better option if you need more direct instruction on how to budget, how to save, how to cultivate GOOD money habits. Jessi’s course walks you strp by step through all the things you need to do to get on top of your finances. Check it out here – it might be the best 50$ you ever spent!)
Related: 6 Habits of People Who Are Debt Free
5) Be brutally honest about where you can cut back and stick. to. your. budget.
It’ll help if you recognize that this isn’t forever. Once you no longer live paycheck to paycheck there will be room in your budget for frivolous things. But for now, be harsh. Use a budgeting app like YNAB (you need a budget) to make it easy to stay on top your spending. Try YNAB FREE for 34 days here!
(I won’t go into all the creative ways you can save in this post, but you can check out money saving ideas here – 10 things I quit buying to save money, or 15 super simple ways to spend less money.)
6) Pay down your debt.
This will probably feel like it’s taking forever, and it’ll probably be the hardest thing you do. The more extra money you can make, the better this step will go for you. You can eliminate some debt instantly by selling vehicles with big payments.
7) Build up a buffer in your bank account.
Another aspect of financially free living that I find is often “forgotten” in “how to stop living paycheck to paycheck” articles. Some people might call this step “get a month ahead” but I would say if you want to stop living paycheck to paycheck, this has to be a significant chunk of change. MORE than just a month ahead on your bills. (You might be realizing by now that the “make extra money” step is going to be a way of life for you – and that’s ok. It’s a way of life for me too!)
Step 7 is probably interchangeable with step 8. They are of equal importance, but we did step 7 first. We find that It’s less painful to watch big chunks of our paychecks leave the bank and go into savings when there’s still padding left behind in the account. Helps reduce the panic.
8) Build up an emergency savings.
Once your debt is gone you will be astounded at how easy this is. You can either use all the money that you were putting towards debt and funnel it into savings, or you can choose to save just a little less – maybe 75% – of what you were using to pay down debt and give yourself some breathing room! There’s nothing wrong with doing something fun or buying yourself something nice once in a while. So long as spending doesn’t become a bad money habit.
I’ve seen over and over that a $1000 “emergency fund” is highly recommended… but go bigger. It just takes one really unfortunate dental bill or car disaster to take you right back to square one. Aim for $5000. It might take a few years, but once it’s there, it’s there. And you will absolutely have to dip into it from time to time.
9) Invest wisely.
You’re not going to be truly financially free until you are planning for retirement. Investing is way over my head, so we let a financial adviser do that for us.
10) Teach your children how to handle money (and stop the debt cycle).
Not only will this be one of the greatest gifts you can give them, but it will keep you accountable. You will be far less likely to slide back into bad habits if you are aware that your kids are watching, and you are actively trying to teach them good habits.
Just get started
I won’t insult your intelligence by saying that it’s “easy” to stop living paycheck to paycheck, or that it won’t take you long, or that you won’t struggle with the adjustments. But gaining financial freedom IS possible, and you don’t have to have a 6 figure salary to do it. (I can say this, because we live “financially free”, and last year we didn’t make $50,000. We can’t buy whatever we want when ever we want, but we never have to “wait for payday” to make a purchase.)
Getting started is the hardest part. As your good habits gain momentum and you start to SEE results, you’ll be more motivated than ever… and it will get easier.
Are you ready to stop living paycheck to paycheck?
I’d love to hear your plans and encourage you if I can!
17 thoughts on “How to STOP living paycheck to paycheck: 10 Steps to Financial Freedom”
Such great advice. Even working on one of these items at a time. Setting a goal to work on one each month and then move on to the next is a great way to make it more attainable.
Thanks Bryan – Great point… one thing at a time is VERY wise.
Getting those finances in place is so important not only for your peace of mind but for your financial future. When you are ready to buy a home, you want to be able to qualify for the best rates possible.
Absolutely Lee – I don’t want to have to struggle through life financially at 75… I’d like to be able to relax a little 🙂
Great tips, I am a blogger myself and I give tips and advice about budgeting and saving money. But fail to take my own advice. I allow unexpected obstacle discourage me. Which only keeps me in the same situation. I will be taking you advice and implementing it today. A change must come.
We all fail to take our own advice sometimes… yikes!
This is a fabulous article. I just read a post that stated 78% of US Work Force live paycheck to paycheck. I’m a self help junkie and have always read that we should have multiple streams of income. I longed to find something I could do that would allow me to be a good Mom and yet thrive in a career I love. I have found that real estate has provided 4 income streams for me yet so many realtors only focus on 1 stream. I would love to connect with you and get your opinion on the concept if you’re game?
78%!!! That is a staggering number…I’d have to agree that having multiple streams of income is super beneficial!
How do you earn $5,000 a month from your blog?
Through advertisements, affiliate marketing, product sales, etc. I have an entire course on how to do it if you’re interested 🙂 https://mommyonpurpose.com/how-to-start-a-blog-and-make-money/
Awesome article. Especially, it hit me when you talked about Emergency funding. I should start working on it ASAP so I won’t plunge into debt if an unexpected event strikes me. I myself own a blog and play a vital in a corporate company. I would love to interview you if you are interested as well.
I grew up in a family living paycheck to paycheck, so I never knew there were other ways, or how to get there. Honestly, saving up an emergency fund was the best decision. Life still happens, I still have debt I’m working on paying off. But having an emergency fund of only $600 has helped keep me from having to go into additional debt. I cut up my credit cards and I’m never looking back!
Nice content and guide that everyone can follow through on managing their finances.