How To Stop Living Paycheck to Paycheck in 8 Steps

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Stressed man worried about bills and money
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Are you stuck in the all-too-common habit of living paycheck to paycheck? You don’t need me to tell you that’s a self-defeating cycle. You simply can’t get ahead that way.

But escaping isn’t easy, especially if your paycheck is tight. Change involves not just the hard work of making a new habit but also changing your ways of thinking.

And yet people do make this leap. They pay off huge debts, reach ambitious savings goals and turn their financial lives around.

If you intend to be one of them, read on for a road map.

1. Know where your money goes

Woman at a grocery store checkout
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Some people swear by budgeting. Others are happier just tracking their expenses. Whichever you prefer, make sure you can see where your hard-earned money is going, right down to the last nickel. Keeping a careful eye on your purchases is critical to getting a grip on overspending.

But budgeting and expense tracking need not be painful. A program like Money Talks News partner YNAB (You Need A Budget) walks you through starting a budget or expense log and automates much of the process after that.

Budgeting software can pay for itself: According to YNAB, new users save $600 by their second month of using the program and $6,000 by the end of their first year, on average.

2. Make saving painless

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Whether your goal is having a comfortable retirement, launching a business, putting kids through college or buying a new home, you’ll need to translate that dream into savings goals to make it a reality.

Setting concrete goals also helps motivate you, making saving easier. So name those savings goals and set up automatic transfers from your paycheck to a high-yield savings account or retirement account. That way, you’ll never see the money or miss it. You’ll find high-yield savings accounts in the Money Talks News Solutions Center.

Keep increasing the percentage you send from your paycheck to savings. When you get a bonus or a gift of cash, divert at least a fat chunk of it into savings too.

3. Live on less than you earn

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Well, duh, you say. But it’s not as obvious as it seems. When you spend less than you earn, you can save. If you spend everything you’ve got, you can’t save. And with no savings, it is nearly impossible to get ahead.

The solution is simple, but it’s not easy: Stop spending money you don’t have.

Again, a program like YNAB makes this easier. It automatically generates a variety of reports — including an income-versus-expenses report that tells in real time if your income this month is greater or less than your monthly expenses.

4. Get comfortable saying ‘no’ to the kids

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If you are giving in to your kids’ every request and demand, you are doing worse than just emptying your bank account and making it impossible to get ahead: You are teaching them it’s OK to overspend.

Turn things around by setting a household budget that establishes realistic spending limits and then sticking to the limits you’ve set. You’ll help your savings and teach the kids a valuable lesson.

If it’s a grown child siphoning off your potential savings, check out “6 Ways to Help Adult Children Without Going Broke.”

5. Cut your housing costs

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Decisions about housing are super difficult. Traditionally, consumer experts have advised keeping the cost of housing at or below 30% of household income. Today, though, many Americans are spending more.

High housing costs are a budget-buster because housing is typically a household’s biggest expense.

You may need a radical lifestyle change to solve this problem. Take a clear-eyed look at your options, even though you may not like them: Move out of your neighborhood, out of town, out of state or in with relatives. Or share lodging with others.

6. Drive a used car

Woman holding the key to her new car
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Buying a new car is like throwing money down a rat hole. Unless you have money to burn, it is one of the worst financial moves possible. Buying a 2-year-old vehicle is a much better deal than buying a new one.

7. Learn to cook

African American couple cooking
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It’s always been cheaper and more healthful to cook at home than to eat out constantly. Unsure how to get started cooking at home? You’ll find lots of guidance and tips at Money Talks News. A few examples:

8. Forge an independent spirit

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Some people save money easily and intuitively. Others must come to it through struggle. If you’re in the latter camp, becoming independent from the habits and opinions of your friends and family is crucial.

You’ll need to stop trying — consciously or unconsciously — to keep up with the lifestyles of others, especially the spending habits, trends and consumption patterns that celebrities model.

When the pressure is on you to spend, it takes a strong individual to buck the current. You must listen only to your own drummer. Keeping up with others will sink your financial ship as reliably as if you had a gambling habit.

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