Living paycheck to paycheck might be a common financial lifestyle, but that doesn't mean everyone is doing it by choice.
It can be really difficult to know how to break the cycle of living paycheck to paycheck and start living with a comfortable financial surplus. But there are so many benefits to learning how to do this! It really makes all the extra work and organization worth it.
Take some time to read this article and you'll learn how to start living with financial surplus instead of constantly living paycheck to paycheck.
How Many People Live Paycheck to Paycheck?
According to a study living paycheck to paycheck is the most common financial status among Americans.
In fact, this study says that in June 2022 about 61% of Americans were living paycheck to paycheck. Although inflation could be a part of this phenomenon, there are other reasons too.
So, if you are one of the many Americans living paycheck to paycheck, you are not alone.
But just because it's common, that doesn't invalidate anyone's desire to change their financial status to one with a little more wiggle room.
Whatever your income levels might be, the following tips and tricks can help you save more, spend less, and live more comfortably financially.
What Does Living Paycheck to Paycheck Mean?
Are you wondering, what does living paycheck to paycheck mean exactly? Don't worry, we'll answer that too.
Live Paycheck to Paycheck (idiom): when all the money in a monthly budget is spent without any surplus for next month.
Some people would also say that to live paycheck to paycheck also means to spend all the money in a monthly budget without any surplus for savings, retirement funds, or emergency funds.
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10 Tips for How to Stop Living Paycheck to Paycheck
Whether you have high or low income levels, you could still be living paycheck to paycheck with no money left over at the end of the month for a savings account or emergency fund.
By living with more of a financial surplus each month you'll have more money to put toward savings, emergencies, retirement, big purchases like home renovations or a car, fun vacations, and more!
Learn more about How to Make a Budget.
Having more extra cash at the end of each month might even be just what you need to get your own small business started.
Check out these tips and tricks for how to stop living paycheck to paycheck so you can stop living in the red and start living in the green.
1. Budget by paycheck with a Paycheck Breakdown Budget
Our top tip to stop living paycheck to paycheck is to budget by paycheck instead of by month.
Monthly budgets are some of the most common budgets. But unless you get paid once a month, this strategy might be a little confusing to actually implement.
Everyone has a different paycheck to paycheck cycle.
Some people get paid once a month while others get paid twice a month while others might get paid sporadically with no set schedule.
Learn more about how to use the Cash Envelope System.
These differences in payment cycles are why you should actually budget according to a paycheck to paycheck cycle.
This will help you organize and manage each paycheck you get rather than having to organize and calculate expenses for 1 to 2.5 paychecks per month (depending on the month). You may be interested in selling gold or metallic jewelry that has been broken.
Download a Paycheck Breakdown Budget.
2. Use percentages
Seeing your spending in percentages can help you see a more tangible overview of where your money is going paycheck to paycheck. This can also help you determine whether you are an average spender or if you are overspending on a category.
How much of your paycheck should go to rent? You should spend on average, 25% to 35% of your monthly budget on housing.
How much of your paycheck should go to utilities? You should spend on average, 5% to 10% of your monthly budget on utilities.
How much of your paycheck should go to insurance? You should spend on average, 10% to 20% of your monthly budget on insurance.
How much of your paycheck should go to food? You should spend on average, 10% to 15% of your monthly budget on food.
How much of your paycheck should go to savings? You should spend on average, 10% to 15% of your monthly budget on savings.
3. Pay yourself first
One of the great reasons to use the paycheck cycle budgeting method is because when payday hits, you can take immediate, planned, and calculated financial action.
The first action you can take on payday is to pay yourself first. What does this means?
This means put money in your savings account first. This could be $5 to $100 or more, just make sure you are "paying yourself first" by putting some extra money aside in a safe place outside of your checking account. Getting a reloadable prepaid card can help you not overspend.
4. Start a savings account
Part of learning to pay yourself first is starting a savings account to save money (if you don't already have a savings account set up).
This savings account can double as your emergency fund, retirement planning, vacation fund, and more!
Make some fun savings goals to help you feel motivated to save money and put extra money aside when you can.
5. Get rid of and avoid high interest rates
Nobody really likes debt but sometimes it's necessary for things like higher education, buying a home, or buying a car.
But whenever you can, avoid debt with high interest rates.
When you can't avoid a higher interest rate, make those debts a priority to pay off first since they'll accumulate the most interest.
6. Get rid of and avoid credit card debt
Pay off your debts as soon as you can. Paying off your debts can take some time, but that's ok, that's what financial planning is for!
Make a breakdown of your credit card debt, student loans debt, and any other debts you might have. Then list these debts in order so you know which ones are your priority to pay off soon.
7. Use automatic payments to avoid late fees
We all have bills to pay each month, but people who pay their bills with autopay can avoid annoying late fees and more things to do each month. Make life a little easier by setting up automatic payments for all your bills.
Today you can set up autopay for a lot of things, like rent, utilities, insurance, car payments, credit card payments, and more.
Take some tasks off your to-do list when you set up autopay. This will also keep you from missing payments or being late with payments.
These late fees can really add up! And nobody wants to waste any extra money on fees that could have been avoided.
8. Make extra cash with a side hustle
Monetize your hobbies and talents to make extra cash. This can help you go above and beyond in learning new skills for one of your niche talents or interests, and it can also provide extra cash to save and spend as you please.
9. Meal plan instead of eating out
Avoid overspending on food by not eating out too much. Eating out can get expensive fast.
Thankfully there are tons of cheap and easy recipes you can make at home instead!
Save more money by making an inexpensive meal plan each week that won't take up too much of your paycheck budget.
10. Make more financial goals
Instead of letting finances control you, gain control over your own finances.
Whatever your financial situation might be, you can make financial goals that motivate and inspire you to break the paycheck to paycheck cycle.
Take some time to sit down and write down some of your financial goals. It might even help to post your financial goals somewhere where you can be reminded of your purpose for implementing these tips and tricks.
See How Check City Can Help.
You may find it helpful to learn how, where, and why you should cash a check!
More Resources
"The Number of Consumers Living Paycheck to Paycheck Has Increased Year-Over-Year Across All Income Levels," PR Newswire. August 1, 2022.
