How To Stop Living Paycheck-to-Paycheck (2024)

Wondering how to stop living paycheck-to-paycheck? Our checklist will have you well on your way to additional savings, and less stress!

Are you wondering how to stop living paycheck-to-paycheck? Overall, 61% of Americans now say they are living paycheck to paycheck, according to new data from LendingClub. Additionally, those of us who are high earners — earning $100,000 or more per year — aren’t immune to monthly budgetary struggles. In fact, this demographic is struggling even more today: 49% of those earning six figures or more reported living paycheck to paycheck.

So, what gives? Inflation is certainly a factor. Rising prices for everything from food to fuel, among other factors, have squeezed the budgets of Americans at most income levels. “The cost of everything has gone up so (people) are having to make some pretty difficult tradeoffs,” says Anuj Nayar, LendingClub’s Financial Health Officer.

SUBSCRIBE: For more amazing (and free!) tips on managing your money every week, subscribe to HerMoney today!

Those living paycheck-to-paycheck often have little to no savings, and could face a financial crisis if they lost their jobs, which are typically their only source of income. That’s why spending everything you earn every month is so problematic: it doesn’t leave anything left to cover life’s little (or big) emergencies that can pop up. No one should put themselves in a position where unexpected dental work or a car wreck can lead to financial ruin.

Here’s a look at how to stop living paycheck-to-paycheck, and finally break the cycle.

SAVE AS MUCH AS YOU CAN, WHEREVER YOU CAN

How can you stop living paycheck-to-paycheck? The best way to do this, finance experts say, is to track where you are spending and then start to save something, starting now. “We encourage everyone to take a very hard look at their expenses and start putting something toward a savings account – even if it’s only $10 a week,” Nayar says.

“Start where there’s wiggle room,” says certified financial planner Nycole Freer, the founder of Eden Financial. “You can start small so you’re not overcommitting. Start with $50 a month and start building that (savings) muscle.” One of Freer’s current clients is living paycheck-to-paycheck and wants to stash cash away to help pay for college for her children. For now, she’s begun reducing the number of times a week the family goes out to eat or orders take out.

BUILD A BUDGET

One of the quickest ways to get control of your finances is to create a monthly spending plan, or go back to one that worked for you in the past. “I feel like you kind of have to learn these things and not everyone teaches you,” says Freer. “Most people weren’t taught how to make a budget. I didn’t learn until after college.”

Freer, who has been budgeting for about a decade now, uses an app to track her spending. “It’s linked up to my credit cards and every transaction comes through and goes into a category so I can keep an eye on it.” She reviews the app weekly and uses it to tidy up her expenses at the end of each month.

For a new budget to be effective, Freer suggests looking back through three months of financial statements (bank and credit union accounts, credit cards, Venmo, etc.) and seeing where the money is going. She suggests putting it down on paper to make it more real. For more on how to create a budget, check out these ideas. If you’re looking for a little more hands-on help with your money — with a dedicated money coach and a class full of accountability partners— then we’d love for you to join our 8-week FinanceFixx course, which can help set you on a better financial path.

CONSIDER AN AUSTERITY BUDGET IF YOU NEED TO CUT BACK EVEN MORE

The budget that you have today is based on a certain level of earned income — but if your level of income changes during a recession-induced job loss, then it’s time to create a new budget that meets you where you are. An austerity budget — a budget that’s pared down to cover only your barest of necessities, with no frills — is where you’ll need to start.

The goal is that an austerity budget helps you control your expenses and maintain financial stability during challenging economic times. To create one of your own, start by reassessing all your monthly expenses and prioritizing your essentials, such as housing, utilities, groceries, healthcare, and transportation. These line items will be your budget’s only priorities until you’re able to secure additional income. The goal is that by paring down to the necessities, you’ll be able to cut out discretionary spending for things like dining out, entertainment, subscription services, or other non-essentials like those checkout line impulse buys.

Austerity budgets aren’t just for people who have faced a job loss. Many people who simply want to save as much as they can, or who may be worried about a future reduction in income will often look to craft a strict budget to ensure their financial futures are stress-free. And at the same time you make budget cuts, you’ll also want to keep an eye out for cost savings with your essentials. For example, you gotta have groceries, but you can shop first at the discount grocer or dollar store, use coupons, shop sales, and make swaps for cheaper alternatives (like generic vs. name brand).

START AN EMERGENCY FUND

One of the worst things that can happen during a recession is you lose a job and you don’t have enough cash on hand to make it through the downturn without selling your stocks at a loss. In other words, you don’t want to have to dip into your retirement funds in order to make it through a lean period. The best way to make sure you’re ready to handle a possible downturn is to build an emergency fund, explains Jason Preti, certified financial planner at Unleashed Financial LLC.

Most people should look to set aside 4-6 months worth of living expenses in a dedicated fund for emergencies, Preti explains. When you think about what falls under the category of “living expenses,” consider all the basics that you need to run your life comfortably. This includes money for rent or mortgage, food, healthcare, and things like utilities, gas, and a cell phone bill. Essentially, you want to be able to keep a roof over your head and the lights on no matter what the economy throws at you.

Look to save something every single month if you can, ideally automatically. Saving every month works so well is because the money is there when you need it. Sometimes, you may not need it for a year or more. Then, the wheels fall off.

“While the nature of an unexpected expense could change,” Nayar notes, “you will have something happen that will completely derail your budget a couple of times a year. It’s a fact of life. The more you can shy away from putting expenses on a credit card – rates are now at record highs and balances are now at record highs – the better.”

YOU HAVE OPTIONS

People always have options to tackle their debt so they can beef up their savings, Nayar reminds. “You can also take all those high-interest credit cards and put them into an installment loan – that way you know how much you will be paying each month. Getting yourself debt free is one of the hardest, but one of the most important things we can do.”

If high-interest debt is an issue, one option could be seeking help close to home. The National Foundation for Credit Counseling at NFCC.org is a good resource for finding a counselor in your area.

MORE FROM HERMONEY:

  • What You Need To Know About How To Ask For A Raise As A Woman
  • Inflation and the New Way to Buy Groceries to Save Money
  • 6 Successful Women Who Got Fired and Went on to Greater Achievements
  • Women in Their 50s on What They Wish They Knew About Money + Career in Their 20s

SUBSCRIBE: For more amazing (and free!) tips on managing your money every week, subscribe to HerMoney today!

Editor’s note: We maintain a strict editorial policy and a judgment-free zone for our community, and we also strive to remain transparent in everything we do. Posts may contain references and links to products from our partners. Learn more about how we make money.

How To Stop Living Paycheck-to-Paycheck (2024)

FAQs

How To Stop Living Paycheck-to-Paycheck? ›

By prioritizing, creating and maintaining a one-month buffer of expenses in your checking account, you can break free from the cycle of living paycheck to paycheck and enjoy greater flexibility, security, and peace of mind in your day-to-day finances.

How do people stop living paycheck to paycheck? ›

By prioritizing, creating and maintaining a one-month buffer of expenses in your checking account, you can break free from the cycle of living paycheck to paycheck and enjoy greater flexibility, security, and peace of mind in your day-to-day finances.

What is the 70 20 10 Rule money? ›

The 70-20-10 budget formula divides your after-tax income into three buckets: 70% for living expenses, 20% for savings and debt, and 10% for additional savings and donations. By allocating your available income into these three distinct categories, you can better manage your money on a daily basis.

How can I save money if I live paycheck to paycheck? ›

With the right strategies, you can successfully save more money even when you leave from one paycheck to the next.
  1. Know Your Expenses. The first step to saving money is understanding your expenses. ...
  2. Build a Budget. ...
  3. Look for Ways to Increase Your Income. ...
  4. Automate Your Savings. ...
  5. Cut Back on Non-Essential Expenses.
Sep 29, 2023

How do I pay off debt if I live paycheck to paycheck? ›

Tips for Getting Out of Debt When You're Living Paycheck to Paycheck
  1. Tip #1: Don't wait. ...
  2. Tip #2: Pay close attention to your budget. ...
  3. Tip #3: Increase your income. ...
  4. Tip #4: Start an emergency fund – even if it's just pennies. ...
  5. Tip #5: Be patient.

Is living paycheck to paycheck poor? ›

People living paycheck to paycheck are sometimes referred to as the working poor. Living paycheck to paycheck can occur at all different income levels. The working poor are often low-wage earners with limited skills but can include those with advanced degrees and skills.

What percent of people who make $100,000 live paycheck to paycheck? ›

Living paycheck to paycheck by income

According to a recent PYMNTS report, as of November 2022, 76 percent of U.S. adults who make less than $50,000 are living paycheck to paycheck, compared to 65.9 percent of those making $50,000 to $100,000 and 47.1 percent making more than $100,000.

How much should you have leftover after bills? ›

As a result, it's recommended to have at least 20 percent of your income left after paying bills, which will allow you to save for a comfortable retirement. If your employer offers matching 401(k) contributions, take advantage so you can maximize your investment dollars.

What's the 30 day rule with money? ›

With the 30 day savings rule, you defer all non-essential purchases and impulse buys for 30 days. Instead of spending your money on something you might not need, you're going to take 30 days to think about it. At the end of this 30 day period, if you still want to make that purchase, feel free to go for it.

What is the 60 40 30 rule? ›

60/40. Allocate 60% of your income for fixed expenses like your rent or mortgage and 40% for variable expenses like groceries, entertainment and travel. 30/30/40.

What percent of Americans live paycheck to paycheck? ›

A majority, 65%, say they live paycheck to paycheck, according to CNBC and SurveyMonkey's recent Your Money International Financial Security Survey, which polled 498 U.S. adults. That's a slight increase from last year's results, which found that 58% of Americans considered themselves to be living paycheck to paycheck.

Do some millionaires live paycheck to paycheck? ›

There are several reasons why millionaires may live paycheck to paycheck. Some may have high-cost lifestyles, such as expensive homes, cars, and vacations. Others may have large amounts of debt, such as student loans or credit card debt. Still, others may simply be poor at managing their money.

Is it normal to live paycheck to paycheck in your 20s? ›

Nearly 70% of millennials and over 65% of Gen Z are living paycheck to paycheck, according to the February 2022 LendingClub Paycheck-to-Paycheck Report. Looking to escape the paycheck-to-paycheck trap? Experts say one of the most important keys is living below your means.

How can I pay off $10000 fast? ›

Read on for five ways to pay off $10,000 in credit card debt and work toward a fresh financial start.
  1. Debt consolidation loan. ...
  2. 0% balance transfer credit card. ...
  3. Make a budget. ...
  4. Use a debt repayment method. ...
  5. Negotiate credit card debt.

What is the 50 30 20 rule? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

How to pay off $6,000 in debt fast? ›

Pay off your debt and save on interest by paying more than the minimum every month. The key is to make extra payments consistently so you can pay off your loan more quickly. Some lenders allow you to make an extra payment each month specifying that each extra payment goes toward the principal.

What causes people to live paycheck to paycheck? ›

A common challenge many households face is making ends meet. From the higher cost of living to financial emergencies or carrying too much debt, many Americans are struggling to cover their basic necessities. In other words, many are living paycheck to paycheck.

Do most people live paycheck to paycheck? ›

A majority, 65%, say they live paycheck to paycheck, according to CNBC and SurveyMonkey's recent Your Money International Financial Security Survey, which polled 498 U.S. adults. That's a slight increase from last year's results, which found that 58% of Americans considered themselves to be living paycheck to paycheck.

Top Articles
Latest Posts
Article information

Author: Twana Towne Ret

Last Updated:

Views: 6326

Rating: 4.3 / 5 (44 voted)

Reviews: 91% of readers found this page helpful

Author information

Name: Twana Towne Ret

Birthday: 1994-03-19

Address: Apt. 990 97439 Corwin Motorway, Port Eliseoburgh, NM 99144-2618

Phone: +5958753152963

Job: National Specialist

Hobby: Kayaking, Photography, Skydiving, Embroidery, Leather crafting, Orienteering, Cooking

Introduction: My name is Twana Towne Ret, I am a famous, talented, joyous, perfect, powerful, inquisitive, lovely person who loves writing and wants to share my knowledge and understanding with you.