Wellness Tips

Tips to Avoid Living Paycheck to Paycheck | Family Finance

Trying to cover bills when the cash runs out at the end of the month is a hardship Americans across the country face. According to a February 2023 LendingClub and PYMNTS survey, “As of January 2023, 60% of United States adults, including more than four in 10 high-income consumers, live paycheck to paycheck.”

If you are among them, you know the stress this situation causes.

It’s time to create a plan in which your expenses fit comfortably within your income – and also save for the future. Here are 10 tips to help get you on the right path.

1. Focus Funds on Fundamentals  

Are you spending on too many things that aren’t really necessary? Find out now. By reducing or eliminating them you will free up your income for important costs.

“Create a simple budget, in Excel, in an app like Mint, or even with pen and paper,” says Allison Sanka, an accredited financial counselor for Journey Financial Wellness. It will be your guide to living within your means.

  • Rent or mortgage.
  • Utilities, internet service, cellphone.
  • Transportation.
  • Groceries and toiletries.
  • Basic clothing and self-care. 
  • Debt payments.
  • Insurance premiums.
  • Child care.
  • Health care.

  • Vacations.
  • Excess clothes and accessories.
  • Expensive self-care purchases like massages and manicures. 
  • Dining and drinking out.
  • Entertainment. 
  • Gifts.
  • Gym memberships.
  • Streaming services. 
  • Delivery costs.

When you break your spending down this way, you can quickly trim them to make ends meet instead of constantly struggling to cover them all.

“This knowledge is key to being able to see where you can make specific, impactful changes to your finances right away,” says Sanka.

2. Get Better Deals 

“To stop living paycheck to paycheck and have breathing room in your budget, find more money in your current budget,” says Lakisha L. Simmons, a Nashville, Tennessee-based financial coach. “List out expenses and start looking for lower cost substitutions for each item.”

For example, if you’re like most people you have a cellphone. According to a 2023 WhistleOut survey, the average U.S. phone bill is $114 per month. However, some low-cost cellphone plans can be as low as $10.

There’s no reason to pay more if the service is comparable. With just a phone call you could switch your plan and add that money into your budget.

“I’ve been a paying customer at Mint Mobile for over three years now and pay only $240 a year for mobile phone service,” says Simmons, who also suggests shopping around for lower home and car insurance rates every year.

3. Refinance or Repackage Debt 

If you currently owe money, one of the most powerful ways you can close the spending-to-income gap is to refinance or rework your debt.

  • Mortgage. If you can get a lower interest rate by refinancing your mortgage, your monthly payments might be significantly lower and you’ll pay less in financing. 
  • Student loans. If you’re on the standard 10-year plan, the payments may be pushing your budget over the edge. Consider a student loan repayment plan that offers lower payments. You can always pay more when you’re in a better position. 
  • Credit card balances. If you can’t seem to get ahead because your credit cards’ APRs are high, transferring the balances to a 0% APR card can help. You won’t be charged any finance fees during the promotional period, so your entire payment will be driving down the principal. Once you’ve repaid that debt, you’ll have that much more in your budget to spend. 

4. Downsize Big Expenses 

U.S. Bureau of Labor Statistics data found the two largest consumer expenses are housing and transportation. If you want to make significant changes, turn your attention to those categories.

“Don’t be afraid to downsize,” says Simmons. “There is nothing to be ashamed of. You can always rent out a house you can no longer afford or move to a more affordable apartment. Do what makes the most financial sense for you to have more breathing room in your budget and reduce your stress levels.”

Apply this to a car as well. If the payment is too much to handle, consider selling your car and buying a less expensive one. Or, think about leasing, since Car and Driver found that the payments are typically lower than they are for loan payments.

5. Boost Your Income

It can be depressing to concentrate only on lowering costs by removing the fun from life. If your goal is to stop living paycheck to paycheck without getting ahead or falling behind, consider pursuing money-making opportunities and strategies

  • Request a raise. If you believe you’re worth more than what you’re currently making, ask for a meeting with your boss and make your case. 
  • Look for a more lucrative position. No opportunity for financial growth with your current company? Start looking for a better paying job elsewhere. 
  • Have family members pitch in. If older teenagers or adult children are living with you, ask them to contribute to the household. 
  • Get a side gig or second job. Augmenting your income can come in a couple of different forms. You may want to do something casual, like caring for pets when neighbors are out of town, or secure a part-time job working at a cafe after your full-time job ends. 

6. Pay Yourself From Your Paycheck  

“Creating an emergency fund of $500 to $1,000 is one of the most effective ways to break the cycle of living paycheck to paycheck,” says Sanka. “This amount is a great start and can cover almost any typical unforeseen expense that may come up, like a parking ticket, pet vet bill, car repair or medical care not covered by insurance.”

Not only does an emergency fund alleviate anxiety when those events do arise, it can prevent you from having to borrow for them. If you charge those things but can’t repay the bill in full, the payments will erode the cash you have for your regular costs and the interest you accumulate will drag you down even further.

“Set a line item in your budget and set up automatic deposits every payday, going into a separate high-yield savings account so you are earning interest and so the funds aren’t visible in your primary checking,” says Sanka.

“Even $25 per paycheck is a great start and will grow over time. I help clients at all income levels, and no one has ever told me they regret saving for an emergency fund or even that they noticed the money missing from their primary checking. Set a challenge for yourself to increase the amount you save each month, even if it’s just by a few dollars,” she adds.

7. Manage Impulse Spending 

Even the most precisely developed budgets can be wrecked by unintended purchases.

If you are an impulse shopper who goes into Target for two things and ends up filling the cart and spending $100 unintentionally, remove yourself from the retail temptation situation,” says Sanka. “Try ordering only what you need online and picking up curbside (if available).”

On the other hand, if you browse e-commerce websites for fun and often find yourself filling the virtual cart with things you didn’t plan on buying, stop now. Remove your payment information from the site and purge the app from your phone.

Everyone buys unplanned items occasionally, so add a line item into your budget for extras. For example, you may decide to withdraw $50 from your checking account every week for free spend. It will help you feel empowered rather than restricted.

8. Delay High-Ticket Purchases

How can you integrate major expenses that you really do need into a carefully honed budget?

Slowly, says Edmund H. Moore, author of “Financial Freedom: Doing Nothing Is An Option.” If you don’t have the money upfront (you can use your credit cards but should pay the debt off within a few months to avoid excess interest), wait it out.

“Let’s say you want to furnish your house,” says Moore. “Great. Do it one room at a time. You almost never need to to get everything right away, but people often think they do. No. Practice delayed gratification. Put funds away for this thing you want and wait it out.”

To make this kind of goal-oriented saving easy, use a budget app. For example, the app Goodbudget enables you to deposit money into digital envelopes, allowing you to systematically save for high-cost items while ensuring you can pay your essential bills.

9. Get Professional Advice and Personal Support

When you’re struggling to close the gap between the amount of money that’s going out and coming in, you might want to contact a professional for guidance.

For example, the National Foundation for Credit Counseling is staffed with trained and accredited counselors. At no charge to you, they will review your budget and pinpoint problems that have been holding you back, then develop an individualized action plan.

As for personal support, it can be hard to make changes on your own. If you have a partner or family members who live with you, explain what you’re trying to do and ask for their ideas and assistance.

10. Commit to a Healthier Financial Life

Living paycheck to paycheck is not just frustrating today, it impacts your future. Before you get started, know where you want to be in the future.

“Set aside time each day to visualize yourself in your ideal financial situation,” says Sanka. “Close your eyes and imagine the details of your life with improved finances. Visualize paying off debts, seeing your savings grow, or achieving financial freedom. What does this look like for you?”

Whatever it is, that’s your goal.

Avoid dwelling on current financial challenges or limitations, too. With even a few sensible adjustments you can make a significant difference.

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