Breaking the Cycle of Living Paycheck to Paycheck

Posted by Rebecca Prince on November 4, 2016

Living Paycheck to Paycheck Blog

Are you struggling to make ends meet until your next paycheck?  You’re not alone!  Living paycheck to paycheck has become a pretty common problem for many middle class American families. 

According to one statistic by military.com, one-third of American families find themselves barely scraping by until payday.  And while this is becoming more and more common, it’s definitely not healthy.

Living this kind of life style means you're one paycheck away from a car that works, a home without lights, or a home at all.  These examples are, of course, worst case scenarios – and they sound really scary!  That’s NOT what we’re here for!  We’re here to motivate you!

We want you to know that you can break the cycle of living paycheck to paycheck.  It’s going to take a little work – and a little math!  But, you can do it.  All it takes is a few simple steps.

Start Tracking Your Expenses

Transparent moment.  When I have cash in my wallet, it seems to just disappear.  Is some crafty pick pocket relieving me of my hard earned money?  No!  Spending money is not memorable!  Every time you or I roll up to the cash register, we’re not posting a selfie on Instagram.  (Or, at least I hope not!)

Start tracking your expenses, and be a stickler about it.  To get the clearest picture possible, watch where you cash goes for about a month.  You can save receipts, take notes on your phone, create an Excel spreadsheet, or download an app like Mint.  Use whatever tools work best for you!  The point is – it’s crucial to see where your money is going.

Driving though Starbucks to get a coffee every day may seem innocent at first.  But, that daily $5 coffee adds up to $150 after a month.  You may discover that you have some spending habits that need to change.

Create a Budget

I can hear the groans already!  But as the great Dave Ramsey, says: “A budget is telling your money where to go, instead of wondering where it went.”

  1. Start with your income. How much money do you have coming in?  How much are you earning on your paycheck?  Do you have any side jobs that help you bring in a little extra money?
  2. What are your fixed expenses? We all deal with things that cost the same amount each month - mortgage, rent, car payments, etc.
  3. Add in your variable or flexible expenses. These are items like gas, groceries, or utilities.  They may not cost the same amount every time, but you spend on them regularly.
  4. Don’t forget about the periodic stuff. Christmas, back to school, yearly medical exams – these things happen every year, but somehow we still seem to get surprised them.  Add them to your budget, so you can save in small chunks, and things won’t get so overwhelming.
  5. Pay Yourself First and make it automatic. Do you have any money left over?  Great!  Pick an amount, commit to it, and put into your savings account.  Start small if you need to.  Your money will grow over time.  AND, make the deposit as soon as you get paid!  The longer you wait, the more likely you are to spend.  Make things easy on yourself!  Sign up for direct deposit or auto transfer.  Then, you won’t have to do a thing!

Whatever money you have left over is yours to spend or save how you wish.  Don’t forget to keep telling that money where to go!

Attack Your Debt

According to Wise Bread.com blogger Mikey Rox, “The more debt you have, the more likely  you are to live paycheck to paycheck.”  And really, I couldn’t agree more!

There are many ways to start chipping away at your debt.  Tackle your debt with the smallest balance first, or focus on your debt with the highest interest rate.  The choice is up to you!  Just keep paying down those balances.

And don’t forget – call and negotiate your credit card rates.  The credit card company may say no, but you’ll never know if you don’t ask.  And believe me, they won’t offer you a lower rate unless you initiate the conversation.

Find a Side Hustle

Do you have a hobby or skill that can help others?  You would be surprised what people will pay for.  Our society really loves convenience!

Mow a lawn, clean someone’s house, help a student with an essay, become a “professional organizer,” watch your friend’s pets, or try out blogging for a company that’s hiring.

“Depending on your circumstances, a part-time job might fit your schedule perfectly. If you can earn as little as an extra $20 a day, you’ll have an extra $600 a month. For example, you can search online for local office-cleaning companies, and call these companies to see if they’re looking for part-time help in the evenings. I have a friend who cleans a small office every day after work. It only takes two hours and the cleaning company pays him $20 per cleaning. It’s not the most glamorous or high-paying part-time job, but it’s easy work and pays okay,” says Rox.

Learn the Art of Saying “No”

Honestly, this one might be the hardest for me.  After all, who doesn’t want do dinner, a movie, or a concert with your friends?  But if it’s not in your budget, this is the fastest way to go broke!  The people who truly care about you will understand.

Saying “no” doesn’t mean you have to become anti-social – maybe just a little more creative! Become the event planner of your group.  Find free events in your area, host movie nights, pot lucks, or days at the park.  Believe me, your life isn’t over!

Downsize if Necessary

Is your rent/mortgage, gas bill, or upkeep on your car really expensive?  Consider seeking out a cheaper alternative.  Ideally, you shouldn’t be spending more than 28 – 30% of your income on housing.  This alternative might not be glamorous, but if it lightens your financial load, it might be worth it.

How DuGood Can Help

You deserve to be able to have peace of mind and save for your future goals!  If you need a friend to help you break free from living paycheck to paycheck, we’re here to help.  Please don’t hesitate to contact us.  One of our Lending Experts can take a look at your situation and see if debt consolidation is right for you. If it isn’t, they can still help you develop a plan to get your finances on the right track.  Helping our friends and families FEEL GOOD about saving money is what we’re all about!

Topics: Budgeting & Saving, Getting Out Of Debt