Did you know that 76% of Americans have less than six months of expenses saved in case of an emergency?* Half of those people have even less than three months worth of expenses saved up, and 27% having nothing saved at all. These are shocking figures. Do you fall into this statistic? Do you live paycheck to paycheck?
While a large percentage of people do, that doesn’t mean you can’t stop living paycheck to paycheck. It is possible. I’m here to show you how to break the paycheck to paycheck cycle, start saving money, finally get ahead on your bills, pay off your debt, and achieve whatever your personal financial goals are.
What is considered living paycheck to paycheck?
Put simply, living paycheck to paycheck means if there were an unexpected financial emergency such as an accident, illness, medical expense, or job loss.. you’re toast. Living paycheck to paycheck means the majority (or all) of your money from each paycheck is spent.
How do you save money when living paycheck to paycheck?
Simple! If you’re spending every dollar you bring in, and want to start saving money, you have three options:
• Cut your expenses
• Make more money
Simple, right? I didn’t say this was easy. But I will say that it’s worth it.
Goal #1 is to build a small savings of $1000 in case of an emergency. Let’s talk about how you’ll do that.
How to cut expenses to save money
There is an endless amount of options here. I have a list of the top 8 things you’re probably wasting money on here.
First and foremost, I recommend you start meal planning.
I have a guide here with free printable templates to get you on the right track. Your food expenses are the easiest thing to cut.
If you’re serious about saving money on food, this means no takeout, and no expensive lunches out. A pb&j, banana, and carrots with dip for lunch is good enough.
You don’t need to spend $15 on lunch out at work every day. If you’re currently spending about that much on lunch three days a week, there’s $45 back in your pocket. If you order in pizza every Friday night, make pizza at home. Assuming it costs at least $25 with delivery and a tip, there’s $20 saved if you buy ingredients to make it yourself.
See what I mean?
Shop your insurance rates.
My husband and I had been paying so much more than necessary on our car insurance policy because we weren’t shopping rates to get the best deal. Check Progressive, get free quotes. Find the best deal, and check quarterly to be sure that you’re still getting the best deal.
Consider downsizing or relocating.
I know this isn’t the easiest thing to do, but hear me out. Moving to a new area could save you tons of money on your rent.
We live in metro Detroit. According to Apartment Guide, a 2 bedroom apartment in Troy, MI costs around $1,100 a month. Madison Heights, MI is minutes away, and you can get a 2 bedroom apartment in the mid-$700 range.
That’s a no-brainer to me!
Moving sucks (I know, I moved with a 2 week old baby!) But you could save literally hundreds of dollars every month.
How to make more money
Nowadays, you’re always hearing people talking about getting a side hustle. Whether you drive for Uber or Lyft, deliver groceries for Shipt or Instacart, deliver food with UberEats or Grubhub, or pick up a part time job. Money is money! Adding in an extra revenue stream can make a huge difference. Especially if you’re doing it during free time that you’d otherwise spend scrolling through Facebook and Instagram.
If you have free time, monetize it.
Walk dogs, baby sit, mow lawns, shovel snow, whatever you’re good at – sell your services! There’s always going to be someone too busy/lazy to do their own yardwork. Give them a better deal than the huge companies can afford to, and (literally) rake in the cash.
Have you considered asking for a raise?
Talk to your boss. It doesn’t hurt to ask. The worst thing that’s going to happen is they say no. But what if they say yes?!
Cut costs, make more cash (even if its just a little).
How can I get out of debt if I live paycheck to paycheck?
Your biggest focus when wanting to stop living paycheck to paycheck should be to pay off your debt. You need to work your way out of debt to free up some of your income. Think of your debt as an expense that can be cut once it’s paid off. You’ll always need to eat, you’ll always have an electricity bill. Those things never go away, but debt does!!
Well, it does if you focus on paying it off instead of living with it forever. You can make minimum payments on high interest credit cards and be a slave to your debt forever, OR you can pay off your debt ASAP and take back that monthly minimum payment.
If you need to get out of debt, you need to read my post about becoming debt free here.
How to pay off debt while still living paycheck to paycheck
Take your extra income & saved money from what we talked about above, and apply it toward extra debt payments. Start with the smallest balance, and using the debt snowball method, pay it off. Take that freed-up monthly payment and add it to your next smallest debt until it’s paid off too.
Lather, rinse, repeat until debt free.
As you pay off your debt and free up the cash from those minimum payments you’ve been a slave to, you’ll start to feel the crushing weight of living paycheck to paycheck lift off of you.
With some/all of your debt paid off, you have more room in your budget to start saving. I have a post going over my family’s actual budget, where I show you the real numbers we spend every month. I walk you through starting your own budget that focuses on saving FIRST here. We use multiple savings accounts to organize the money we save for different savings goals.
My advice is to build a savings account of 1 months expenses. This puts you one month ahead on your bills, which makes budgeting so much easier. Once you’ve reached that gigantic milestone, don’t stop! You may have broken the paycheck to paycheck cycle, but you aren’t set for a serious crisis yet. If you lost your job, it may take 6 months to find a comparable salary position. Keep pushing until you have 3-6 months of expenses saved to break out of that statistic.
A step by step guide to stop living paycheck to paycheck:
1. Asses your situation by tracking your expenses, and making a budget. Do you make enough money? What spending do you need to cut?
2. Make lifestyle changes to save money and make more money.
3. Build a savings of $1,000 for emergencies.
4. Put your freed-up cash plus extra income toward paying off your debt. See the Debt Snowball Method here.
5. Re-assess your budget, and prioritize SAVING with your newfound wiggle room.
6. Build a savings of at least one month’s expenses. You are officially one month ahead on bills. Congratulations!
7. Keep saving. Set savings goals using my guide here, and push yourself to actually reach them. Build 3-6 months of expenses in your savings account in case of an Emergency.
You reached step 7. You’re no longer a part of the statistic we started this conversation with. Congratulations! You are in the minority. You no longer live paycheck to paycheck.
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