
How to Stop Living Paycheck to Paycheck: 7 Ways to Break the Cycle
Living paycheck to paycheck isn’t easy. It means using up all your paycheck until the next one arrives. This leaves little to no room for surprise expenses, such as accidents, medical emergencies and other surprise fees that can put your bank account in the red. It also makes it harder to save for long-term goals, such as retirement, buying your first house or paying off your credit card or student loan debt. Use these personal finance tips to break out of the cycle so you can start saving more money each month.

LESSON CONTENTS
Set a Budget
To break out of the paycheck-to-paycheck cycle, you’ll need to create a budget. Start by tracking all the money going in and out of your bank account. Add up all your reported income as well as all your regular monthly expenses. If you don’t make the same amount of money every month, add up how much money you made last year and divide it by 12. You can use a calculator, pen and paper or have a software program calculate the total for you.
Subtract all your expenses from your total income to see how much money, if any, you have left over at the end of each billing cycle. If your expenses total more than your income, you aren’t making enough money to support your current lifestyle. Once you have these figures in front of you, it’s time to start looking for ways to reduce your expenses and/or increase your income.
Focus on the Essentials
When calculating your budget for the future, it’s best to focus on the essentials, including food, utilities, shelter and transportation. This can also include anything you need for work as well as health insurance and regular doctor’s appointments, so you can maintain your health.
Try to eliminate or reduce expenses that aren’t absolutely essential, such as entertainment, trips and meals out. You can start with small things, like pausing certain subscriptions or streaming services until you have a better handle on your budget. Look at your budget again without these unnecessary expenses to see how much you can save every month.
Prepare for the Unexpected
Unexpected emergencies and bills make it that much harder to get out of the paycheck-to-paycheck cycle. Start putting aside a little bit of money every week or month, so you have some extra cash on hand if you need to repair your car, go to the hospital or pay a surprise bill. Experts recommend having at least three months’ worth of expenses saved up in case things take a turn for the worst. Read our article, How to Save Money, for additional tips.
Review your current insurance coverages to know what could be covered in the event of an emergency, or how much you will need to cover out-of-pocket through deductibles or co-pays.
Life is anything but predictable. The more you plan for the unexpected, the better you can prepare for the future. It’s also better to pay for these surprise expenses up front instead of taking on additional debt and having to pay interest.
Use resources like United Way 2-1-1 to access services to help you through financial hardships and emergencies.
Get Out of Debt
Saving money can be next to impossible when you’re stuck in debt. That’s why it’s important to get out of debt as soon as possible. When adding up your monthly finances, try to put some extra money toward paying off your debt. This usually means paying more than necessary on your auto loan, student debt, credit card or other high-interest consumer loans. The principal loan amount should go down from month to month, so you don’t have to pay as much in interest.
Look for other ways to lower your monthly payments. Try refinancing your current debts to lock in a lower monthly payment or interest rate. You can also apply for a low-interest personal loan to consolidate your debt, which should help you pay off your bills as fast as possible.
Increase Your Income
If you’re having a hard time getting ahead of your expenses, try boosting your income, even if it means bringing in just a few more dollars a month. You can try working a part-time job or starting a side hustle.
Becoming an entrepreneur has never been easier. You can start your own online project, e-commerce shop, or marketing venture if you have a sizeable following on social media. Consider selling some of your possessions if you no longer need them to beef up your finances.
Limit Purchases
Keeping track of your money can be a challenge in the modern age. Watch out for automatic deductions that can hurt your bank account, such as magazine subscriptions, entertainment services like Netflix and even your local gym membership.
Some companies may charge you additional annual fees on top of your monthly bill. It’s a good practice to review what subscriptions you have on at least a yearly basis. Cancel the services that you haven’t used in a while or look for bundling options from services you already use. For example, your phone company may also offer Spotify or Hulu with your cellular package.
Increase Your Down Payment
If you need to take on more debt by buying a house or car, try to increase your down payment as much as possible before signing on the dotted line. A larger down payment will help to reduce your monthly payment on the loan. Try to hold off major purchases until you have more money in the bank to avoid taking on more debt than necessary and start saving early.
Living paycheck to paycheck can be stressful and exhausting. Use this information to get a leg up on your finances, so you can start saving money, growing your wealth and working towards your financial goals.
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