Home > Personal Finance > How to Break the Paycheck-to-Paycheck Cycle

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Living paycheck to paycheck can be a risky move for your finances. Trying to make ends meet every month is not only exhausting but can create unwanted stress. Who wants that?

Here are some tips to help you break free from the never-ending cycle.

1. Recognize the Issue

The first step to ending the cycle is identifying the problem. Know that you are not alone and there are ways to change this unhealthy lifestyle. Ask yourself, what is causing the issue? Are you putting too much toward your savings? Spending too much on nonessentials, like eating out every week? See what you can do to change this type of behavior, and take your first step in the process.

2. Eliminate Nonessential Expenses

If you are living paycheck to paycheck, you may be spending more than you earn. Look at your budget from the past three months to see how much you’ve spent on discretionary items. This could be dinner, movies, luxury items, lunch, etc. Do your best to cut back on things you don’t really need, which will help boost your cash flow and provide more to live on.

3. Increase Your Income

An effective way to end the paycheck-to-paycheck lifestyle is to try to earn more than you can, when you can. This can mean applying for a part-time job, finding a side hustle or doing freelance work when there’s time. This will not only increase your income but reduce your financial stress. You will no longer have to worry about how much money is in your account if you have a back-up plan.

4. Start Saving

You may be thinking the last thing you can do right now is save. But it can be done! Having a small security blanket will help you in the long run. It also will prevent you from returning to the paycheck-to-paycheck lifestyle. You may lose your job or have a medical emergency, but having an emergency fund or savings account will help you prepare for the unexpected. You can even use this money to pay off high-interest credit card debt. A little can go a long way.

5. Create a New Path

As you slowly leave the paycheck-to-paycheck cycle, you will begin to see the money pile up in your checking account. Try not to spend it at once. Consider putting this extra money toward bills or debt. Set a reminder so you know when bills are due, as you don’t want to get hit with a late charge. As you continue to keep a healthy routine, you will not only see your credit score increase, but you will also have a healthier financial future. (Not sure where your credit score stands? You can view two of your scores, updated each month, for free on Credit.com.)

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  • heavyw8t

    For some people, based on income and necessities, this may not be an option. In my case, it IS an option, but I live paycheck to paycheck by design! While that may sound like I am living on the edge, there is method to what you might call madness.

    I am 65 (today!) and I have no real need to have a bank account stuffed full of money to leave behind when I die in 15 years or so. I have good credit, so when I want something I can buy it and then pay it off as quickly or slowly as I choose. (Interest means nothing to me.) Struggling to find corners to cut and fat to trim in order to keep a lot of money in savings would deny me having the things I worked my whole life for. To me that is less than optimal quality of life. I keep my credit spending below 10%, and while I do carry small balances (that has ebb and flow to it in the best of all worlds) I try to keep as many credit accounts at $0 as possible.

    Example. Recently I decided that as my dog is getting older and now cannot see, I wanted my back yard fenced in. I sat down and did some credit planning, and got that done by spreading the 4 phases of the job out onto 3 credit cards. None of them stressed my utilization out all that much, and I have the product I wanted. Now I will take the next 3-4 moths to zero those cards out, while not using them again until I do. Then it will be on to the next thing i want, in this case a trip to the mountains in late fall.

    In my situation, there is nobody to name as a benefactor, so my succession planning is simple. My now grown children were estranged from me at a very young age, and I am not in contact with them. They are each specifically named in my will to receive $1 when I die, a formality so as not to exclude them and invite legal action. Everything I own at the time of my passing will be sold in an estate sale, the proceeds of which will go to the animal shelter where I got my last 3 dogs. I consider it payback for them allowing me to have those three great companions. I choose to not have a large sum of money sitting in the bank for the state to grab when I die. I spend now to be happy now. I never run out of money, never want for anything, and I live a very simple, relaxed life as a retiree.

    The mountain of cash for a rainy day, while idyllic to some, is not the best option for me, and I just wanted to present that alternative scenario to you.

  • Alex

    Well, if you ask me, the most critical part of structuring your finances and optimizing savings is just having a plan. Whether you use a spreadsheet or a tool like Geltbox money or some other website — you have to get everything out if front of you so you can make smarter decisions. Once you do that, then implementing your disciplined savings strategy becomes critical

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