According to a recent JungleScout study, more than half of Americans say they’re living paycheck to paycheck.
More. Than. Half.
Financial stress is prevalent in America, and as many of us know, it can be very difficult to break free from the pattern.
If you’re one of the millions of Americans struggling to make ends meet, here are 10 strategies to help you spend less, save more, and pull yourself out of the paycheck-to-paycheck cycle.
1. Start budgeting — and keep it up
When you’re managing your money without any clear guidelines or goals, it can slip through your fingers long before the next paycheck has landed in your bank. With a budget, however, your money will have a supervisor of sorts. Before you jump on a BOGO deal at your favorite retailer or splurge on a vacation away with friends, your budget will step in and say “yay” or “nay.”
This may seem like a no-brainer, but failure to build a budget isn’t always the root of one’s financial struggles; in many cases, it’s merely a lack of follow-through. Check out Money Under 30’s step-by-step guide on how to budget, and you’ll see right away that building your budget is only half of the process. After you’ve established your budget categories and amounts, make sure that you follow through when it comes to your spending.
My husband and I sit down once a month for a budget meeting. We spend a couple of hours reviewing our transactions and making sure we’ve adhered to our budget categories. If there are any consistent patterns of overspending, we adjust our spending habits or the budget category itself (or both!). It’s taken time, practice, and patience, but we have benefited tremendously from the process and have even paid off our mortgage!
2. Automate your savings
When you’re stuck living paycheck to paycheck, goals like buying a home and saving for retirement may feel out of reach. Fortunately, there are ways to increase your savings a little each month that are painless in the present but will pay off in the future.
Before you spend a cent of your paycheck, set aside a portion of your income in a savings account. In other words, pay yourself first. This is perhaps the easiest step you can take to change your financial circumstances because many banks allow you to set up a recurring automatic transfer to your savings account. You could also get an online savings account like Chime, which rounds up every purchase you make on your Chime debit card and saves the excess. You don’t even have to think about it!
Chime Disclosure – Chime is a financial technology company, not a bank. Banking services provided by, and debit card issued by, The Bancorp Bank or Stride Bank, N.A.; Members FDIC.
3. Set up an emergency fund
A few weeks ago, I went to a coffee shop downtown to write. I spent a few productive hours sipping my iced Americano and tapping away on my keyboard, but when I returned to my car there was a yellow slip of paper waiting for me under the windshield wiper. I’d completely missed the “2 Hour Parking” sign.
It may seem unnecessary to set aside money for expenses you aren’t anticipating, but unexpected bills are actually quite common. Fortunately, with an emergency fund, bills like these won’t add to your stress.
That parking ticket would have been a frustrating way to start the day, except my husband Steve and I set aside a portion of our income every month in an emergency fund. Instead of scrambling for cash to cover that surprise, I went home, paid the ticket online, and went about my day.
To get a sense of what your emergency fund should include, check out MU30’s calculator below.
4. Cut out the clutter
For some people, this tip may be the hardest to implement — myself included. But if you’re scraping by each month, it’s time to cut the spontaneous shopping trips, the dining out, the subscription services, and anything else that is eating away at your account balance.
Okay, before you slam your laptop closed in utter fury, hear me out. Yes, you will need to cut back on the buys you love if you want to rescue yourself from the cycle of living paycheck to paycheck, but you don’t have to eliminate every single luxury.
Spending, even “splurging,” isn’t inherently bad, but learn how to do so with intention. Remember to pay yourself first and use your budget to make sure you’re covering necessary bills and setting aside enough for basic essentials before you allow yourself to spend money on things that you don’t need.
5. Trim your bills
Now that you’ve skimmed your bank statement for superfluous spending, it’s time to evaluate the essentials. And one way to do that is with a company called Trim – they analyze your spending patterns to find ways that we can take action and save you money. Trim will even negotiate your cable, internet, and phone bills to get you the best rates.
There are also plenty of ways to trim your budget, even where necessities like food and housing are concerned. To help you discover new ways of trimming your budget, here are a few ideas to get you started:
- Plan your meals and stick to the grocery list. Ever gone to the grocery store hungry? It’s easy to grab a couple of bags of chips here and a box of cookies there, assuming it won’t add much to your grocery bill, but it adds up quickly. To help you save on food, plan out your meals before grocery shopping. Once you’ve arrived, stick to the list!
- Update your insurance policies. How do you know if you’re getting a good deal on your homeowners/renters insurance or if your car insurance premium is high, low, or average? Compare rates! Take advantage of services like Gabi to start shopping for lower rates today!
- Cut back on utilities. Adopting simple habits to cut back on utilities can make a substantial impact on your overall budget. In fact, there are multiple incentive programs to help you save energy and money.
- Find a cheaper mobile phone provider. If you’re looking for creative ways to cut back, compare cell phone plans and consider switching to a cheaper provider.
- Refinance your mortgage. This tip won’t apply to every homeowner, but it is possible to save money by refinancing — you’ll just need to do a little math to find out!
6. Learn how to spend less
My husband and I aren’t exactly rolling in the dough. In fact, when my younger brother graduated college, his first job paid twice what I made, and my income alone has supported me and Steve for years.
Nevertheless, we own our home, travel multiple times a month, and can afford luxuries like date nights and outdoor sports equipment. The reason? In our experience, financial freedom depends less on your income level and more on your spending habits.
Changing your habits is no easy feat, especially where spending is concerned. However, if you’re relying on each paycheck to afford routine expenses, adopting new habits is also the ticket to financial freedom. Think about your own spending habits and ask yourself, “Can I do this in a more affordable way?”
7. Eliminate debts
If debt is keeping you in a state of financial stress, focus on ways you can repay your debts to free up more of your income. Two popular debt payoff methods to consider are the snowball and avalanche methods. The snowball method has individuals focus on repaying their smallest debts first. The avalanche method, however, is based on the interest rates, eliminating debts with higher interest rates before tackling those with lower rates.
Debt repayment will require shifting your spending habits. For some, a balance transfer or debt consolidation loan may be the necessary solution. You may even need credit counseling! The key here is that you do something. Take action today to address your debts and take a giant step towards financial freedom.
8. Shop secondhand — or free
This is perhaps my favorite tip to achieving financial flexibility and freedom, not merely because I’m an avid thrift shopper (literally left the Salvation Army one hour ago), but because it works!
I’ve learned to shop almost exclusively secondhand for clothes, and sure, that has saved me hundreds of dollars over the past few years. But, while my friends are paying off their cars each month, my husband, Steve, and I spent less than $3,000 combined on matching used Priuses (don’t knock it till you try it). Every piece of furniture we own was either purchased secondhand or picked up for free. I even saved money by adopting my dog from a rescue rather than purchasing a puppy from a breeder.
In my experience, buying items secondhand versus new is a mental barrier for many. For those struggling to overcome financial barriers, this simple change of habit and change of mind can help you reach goals and reduce financial stress.
9. Save bonuses and extras
Every time Steve and I received a stimulus check or tax refund this past year, we sat down in our monthly budget meeting and asked ourselves: should we spend this money on something fun or something essential?
We faced this same question when I received a bonus at work and insurance money after my car was rear-ended. Every time it has been difficult to prioritize budget categories like “emergency fund” when alternatives like “travel” are waving in the background. However, these surprise payments have helped us tackle major financial goals like repaying my student loans and even paying off our mortgage!
Before you say “yes” to a spontaneous vacation to Maui, think about how that check could change your car payments each month or how $1,000 in your emergency fund could alleviate stress in the future. Focus on eliminating financial burdens today. Maui will still be there tomorrow.
10. Take it slow and be patient
When I met my husband, it was clear right away which of us was better at money management.
Steve owned his own home and had paid off his student loan debt. Meanwhile, I was living in a basement studio apartment and owed thousands in debt. So when we got married, I told him to take the lead in our financial decisions — and the adjustment was rough.
I had to monitor how much I was spending on clothes, coffee dates, and even groceries. We started budgeting every month, and it was always stressful and often spurred arguments between the two of us. But, we didn’t stop.
We’ve been married for six years now and still budget once a month, but the process is rarely stressful. In fact, sometimes it’s a pleasant experience! Part of the reason I feel better about budgeting today is I’ve seen what a consistent habit of budgeting can do. Steve and I own our home outright and live off of my income as a freelance writer. We enjoy occasional luxuries like date nights and travel often. In fact, I’m currently writing on the road (headed to Yosemite for some backpacking)!
All this said, when you’re feeling tired and overwhelmed, don’t give up. Be patient with yourself and remember it takes time to create new habits, but it’ll be worth it in the end!
If your paycheck seems to vanish as quickly as it appears, whittling down your shopping budget won’t solve the problem entirely.
Breaking the cycle of living paycheck to paycheck takes consistent discipline and determination. Start by building and maintaining your budget, then scan your spending in search of savings opportunities. You’ll need to adopt new spending habits, such as opting for a used car instead of a new model, but you can also free up existing income by updating your insurance policies and tackling debt.
There are a number of ways to free yourself from the pattern of living off each paycheck, but the key is consistency. Give yourself grace as you adjust your spending and celebrate the little victories.