How to Stop Living Paycheck to Paycheck

Living paycheck to paycheck describes earning just enough to cover your monthly living expenses without the means to pay for living expenses if you miss a paycheck or lose your job. And it’s not just people with low-income jobs that live paycheck to paycheck. This can happen at any income level, including those making over $100,00 a year. 

It can be frustrating to end each month with an empty bank account and no progress on your financial goals. Worse, you may feel hopelessly stuck in your current financial rut because you don’t see a way out. 

The good news is that you can get out of this rut — starting today. There are changes you can make to break away from the paycheck-to-paycheck cycle and help you feel financially empowered. 

How many Americans are living paycheck to paycheck? 

According to a MarketWatch survey, nearly two-thirds of Americans (66.2%) say they’re living paycheck to paycheck, and just under half of Americans (48.6%) report feeling like they’re “broke.” Those statistics suggest that most people feel financially insecure in today’s economy. 

No age range or household size is immune from these statistics, either. Every working generation from Boomers to Gen Z experiences living paycheck to paycheck. Barely making ends meet has become a financial epidemic in the U.S. So, no, it’s not just you. 

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Why your financial health matters 

How we feel about our finances can affect our mental health and general well-being. When we’re stressed or unhappy about our money situation, we also tend to feel worse about other parts of our lives. 

Financial insecurity can make us feel like we’re always in reactive mode rather than proactive mode, meaning that we’re only able to respond to financial issues as they arise rather than having the ability to plan and save for emergencies. 

Financial insecurity can make finances appear unmanageable (even if they’re not), resulting in pessimistic feelings about the future. Stress about finances may even cause anxiety, depression, and insomnia, all of which have negative effects on our physical health. 

Figuring out how to stop living paycheck to paycheck isn’t just necessary for better financial health — it’s also critical for overall wellness. 

Why Americans are living paycheck to paycheck 

There are a number of factors that contribute to the paycheck-to-paycheck cycle many of us feel trapped in. Knowing which ones apply to your situation is the first step in taking control of your finances. 

Stagnant wages and inconsistent income 

Wages haven’t increased at the same rate as monthly expenses, which means it takes a larger percentage of our earnings to cover basic needs. 

Loss of steady paychecks and a reliance on the gig economy means monthly income can be inconsistent. Having a savings plan is difficult when you don’t know how much money you’ll have from month to month. 

Job insecurity and underemployment 

For many, living paycheck to paycheck began with job losses caused by COVID-19, which resulted in lockdown and unemployment that lasted longer than expected. 

Since the pandemic, the job market has become less stable, and unemployment is a looming concern for many workers. Job seekers may take low-paying jobs underutilizing their skills simply to have money to pay the bills. 

High cost of living, healthcare, and other costs 

Housing, utilities, food, healthcare, and education keep going up. Healthcare premiums and bills for medical services are a significant financial hardship for those without employer-provided coverage. 

While budgeting and cutting back on extras can help, the reality is the necessities of life cost more each year. 

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Debt 

Gaps in employment and the rising cost of living have forced many consumers to go into debt on top of debt they may already have had. This means a large portion of monthly income goes toward student loans, personal loans, credit card debt, auto loans, and mortgage payments. 

Lack of savings 

Experts advise having an emergency savings fund of at least three months of expenses, yet a recent Bankrate poll shows that only 44% of Americans have that saved. Even more troubling is that 27% of adults have no emergency savings. 

Without the financial cushion of an emergency savings account, just one financial emergency can devastate a household’s finances. 

Inflation 

As the price of goods and services increases, our purchasing power is reduced, which makes it harder to stretch paychecks to cover expenses. Even cost-of-living raises are often too modest to counter inflation. 

Lifestyle inflation and lack of budgeting 

When we earn more, we might increase spending on non-essential items, leaving little for savings. Without a household budget, we can’t track expenses and know where our money goes each month. 

Stop living paycheck to paycheck 

Now it’s time to share tips and tricks for a better financial life. Here are simple steps you can start doing today to take control of your money, eliminate debt, and build up savings. 

1. Create a budget 

Regardless of how much you earn, everyone needs a budget. Track your income and expenses each month to see where your money goes. Account for every dollar and prepare to be surprised at what you learn about your spending habits. 

Once you’ve created a budget, commit to it. At the end of the month, review your spending records to see how well you stayed within budget. A budgeting tool or app can help you manage your finances and ensure you’re not overspending. 

2. Prioritize essential expenses and cut unnecessary ones 

Make sure all your basic needs, such as housing, utilities, groceries, and transportation, are covered before spending on non-essential items. You don’t want to worry about being sheltered, fed, or getting to your job. 

Review all non-essential items you’re spending on and identify what you can cut back on, such as dining out, subscriptions, or impulse purchases. You’ll feel some pain on this one but remember that short-term sacrifices create long-term gains. 

You may even consider taking some big steps to cut your largest expenses by doing things like: 

• Moving to a more affordable city or state. 
• Renting a smaller, cheaper apartment or getting a roommate to share rent. 
• Taking public transportation instead of driving your personal vehicle. 
• Cooking meals from scratch with budget-friendly, nutritious ingredients. 
• Adjusting your utility usage for lower bills. 

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3. Pay down debt 

Eliminating debt frees up money for other things (like savings). Focus on paying down high-interest debt, such as credit card balances. Use the debt snowball or avalanche methods to boost your debt payoff efforts. You’ll be able to reallocate the money you were previously paying toward debt, and you’ll save the interest you would have paid over a longer period. 

4. Build emergency funds 

Start saving a small amount each month to create a financial cushion for unexpected expenses. Begin by building a smaller emergency fund of $1,000 to cover things like car repairs, emergency medical bills, or higher-than-usual bills. Once it’s in place, build a second emergency fund to cover three to six months of living expenses. 

To help you consistently save money before you spend it, set up automatic transfers to your savings account when you get paid. Save first, not last! 

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5. Increase your income 

Look for ways to boost how much you earn. Consider taking on a side gig, asking for a raise, or pursuing education or training for higher-paying jobs. 

If you can switch to working remotely or get a work-from-home job, you won’t have commuting expenses every week. 

6. Live below your means 

The best way to stop living from paycheck to paycheck is to have a cost of living below what you earn. Increasing your income doesn’t help if you add more expenses to your lifestyle. 

Frugal living trends are popular on social media. You can find inspiration for upcycling, making homemade/DIY things, thrifting, couponing, and budgeting. Embrace a simpler lifestyle to help you put away money for your goals! 

7. Set financial goals 

Set clear, achievable financial goals, like saving for a vacation, buying a home, or building your retirement fund. Setting specific goals can motivate you to save and manage your money better. 

Having a visual reminder of your goals is helpful. It can be as simple as a magazine photo taped to your fridge or a digital vision board you create in Canva. It just needs to motivate you to stick with the sacrifice and effort required to pay off debt or build savings. 

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8. Monitor your progress 

Regularly review your financial situation and adjust your budget and spending habits as needed. Celebrate the small victories on your journey to financial stability. Every debt payoff and savings milestone you hit are worthy of patting yourself on the back! 

Cancel living paycheck to paycheck 

If you’re living paycheck to paycheck, you’re not alone. Many of us are in the same situation because — let’s be real — the cost of living is high right now. By following our simple steps, you can break out of the paycheck-to-paycheck cycle, build savings, and create financial security for your future.