How to Stop Living Paycheck-to-Paycheck
If you are among the nearly 80 percent of people in the country who live paycheck-to-paycheck, these tips can put you on a less stressful path.
According to data from CareerBuilder, as many as 8 out of 10 Americans live paycheck-to-paycheck.1 In other words, each time they receive their pay, it’s already earmarked for basic expenses like food and rent, and missing just one paycheck would cause significant problems because they don’t have a financial safety net. These stats include 10 percent of people who make more than $100,000 a year. Unfortunately, the percentage of people living paycheck-to-paycheck has been on the rise.
Living this way means living without true financial peace of mind, which can lead to a great deal of stress. If you are among the nearly 80 percent of people in the country who live this way, consider the following tips to help put yourself on a more responsible and less stressful path.
Create a budget and stick to it
Take some time to sit down and create a budget.2 Look at all your regular expenses as well as your sources of income. Figure out what you have left over and try to put that amount into your savings account while strictly abiding by the budget you have set. Be sure to include entertainment in your budget, because if you don't, you will most likely be dipping into money that is supposed to be saved.
Open a savings account
Perhaps the most obvious step to keep yourself from having to live paycheck-to-paycheck is to start saving money. The best way to do that is to set up a savings account which you can add to on a regular basis as your finances permit. If you can, try to put a certain amount or a certain percentage from every one of your paychecks into the savings account to help yourself build an emergency fund or nest egg. Consider signing up for a new program called SaverLife, which provides encouragement, advice and incentives for saving.
Keep track of every transaction
Be vigilant in keeping track of every single transaction that you make, whether it's a payment, a purchase, or a deposit. You should always know exactly how much money you have at any given time. Failing to keep a close eye on this is a recipe for overspending and makes it much harder to break out of the paycheck-to-paycheck cycle.
Find areas where you can cut back on spending
Look at your spending history as well as all of your ongoing expenses, and figure out where you can be spending less. Look for habits that can be broken or improved upon. Look for expenses that can be eliminated or reduced. If you are paying for some monthly service, is there a cheaper alternative? Do you really need that service at all? The more expenses you can cut out, the more they add up and improve your financial padding.
Downsize your home or apartment
Moving to a new home or apartment may not be on the top of your list of solutions, but you may need to consider if downsizing is a viable option. Do you have more house tor square footage than you need? Could you be saving hundreds of dollars a month by moving to a smaller home or even to a different location? If you live in an apartment, it may be worth your time to explore other options that better fit your price range.
Find new income sources
Have you considered working a second job? A part-time side job can go a long way toward helping you get out of the paycheck-to-paycheck rut. If you're managing to get by with a single full-time job now, you could potentially use the entirety of a second job's income to build your savings. A recent study found that 25 percent of Americans have some sort of side business. Most of those who own a side business have full-time jobs, and the main reason they started their business was for financial gain.3
Even if you don't want a regular second job, there are plenty of freelance opportunities out there that allow you to work remotely from the comfort of your own home across a variety of industries. The gig economy has a plethora of opportunities to offer if you know where to look.
Get your debt paid down
Pay your debt down as quickly as possible. This is easier said than done when living paycheck-to-paycheck, but ultimately, the faster you can do this, the less money you'll be paying in interest and fees.
Hold yourself accountable
Finally, hold yourself accountable. Stick to your budget and save money, but make it a point to evaluate your efforts on a regular basis, whether once a month or once a week. Analyze how you're doing and always look for ways to improve.
2. This calculator can help you set up a household budget.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of Zions Bancorporation, N.A. Member FDIC