How to Stop Living Paycheck to Paycheck and Start Making Progress

By Jackie Beck   Updated 10/27/2022 at 1:10 pm

Wish you could stop living paycheck to paycheck? You’re not alone. According to the Brookings Papers on Economic Activity about 1/3 of Americans live paycheck to paycheck.

That’s about 38 million folks who would be in trouble if they had to pay an unexpected bill or would be panicked if they lost a job. If you’re one of those folks, you know it sucks. It’s scary to live on the edge, or to not understand why you just can’t seem to get ahead.

I know this because I used to be one of them. But it doesn’t have to stay that way. You can stop living paycheck to paycheck.

Here’s what it takes to change things.

Start with an objective look

First, you’ve got to step back and objectively figure out why you’re in this situation. That can be tricky, because most people assume they’re living paycheck to paycheck because they don’t make enough money.

Makes sense, right? Yet 2/3 of those 38 million people are middle class, with many making more than $41,000 a year. It’s by no means just the “poor” who are barely making ends meet.

If you’re one of those who in theory actually make decent (or even great!) money, but still can’t seem to stop living paycheck to paycheck, you might be beating yourself up about it too. Know that it’s what you do going forward that matters, not what you’ve done in the past.

No matter what your income, if you’re living hand to mouth, bringing in more money feels amazing. And making extra money certainly could help you stop living paycheck to paycheck. But it might not help as much as you think — unless you change a few other things too.

That’s why you won’t know what to do next until you figure out what happened. So start with an honest look at why you are living paycheck to paycheck.

Ask yourself these questions if you want to stop living paycheck to paycheck

Ask yourself:

  1. What bills do I have to pay every month like clockwork, and how much are they?
  2. What else do I usually spend money on? (Look at your recent spending online or at statements instead of just trying to remember this)
  3. What kinds of expenses do I usually forget about or just hope don’t end up happening?
  4. How much money do I bring home each month, and from what sources?
  5. Do I have debt?
  6. Do I have an emergency fund?

Look at your finances as if they belong to a stranger. Take a deeper look at what you found out. If you have trouble doing that, ask someone you trust to give you an opinion. Then actually give serious thought to what they say.

Before you can stop living paycheck to paycheck, you need to get clear answers to all of those questions.

The last two (about debt and an emergency fund) are extra important. Why?

Because owing money literally means you are spending an extra amount of your money every month to pay for things you’ve already bought. Things you may no longer even have. So getting out of debt will make a HUGE difference in the amount of money you have available every month.

And if you don’t have an emergency fund, that’s a big red flag. Everyone has emergencies. Everyone. It’s not unusual at all for your car to break down, to lose a job, to experience disasters, etc. So you need money waiting for those things. That means you need to do everything you can think of to get money set aside for emergencies right away. As the #1 priority. Here’s how to build an emergency fund in 90 days or less.

What’s after that?

For now, reduce expenses where possible

I’ve been in the position where I’d already cut back really far. If you’re in that same place — living at or below the poverty line — don’t beat yourself up over it, but do look deeper just to make sure.

And no matter what your situation, do what you can to reduce expenses wherever possible. (At least for now.)

What are your top expenses? Housing, taxes, food, transportation, childcare, and utilities (especially if you include cell phones, internet & cable) are usually way up there. How could you reduce each of those? What are you spending on but not really enjoying or using? What could you get for less?

Keep in mind that cutting a big expense will give you the most mileage. Could you move to a less expensive home or area? Rent out a room in your home? Do you have a car you could sell? Could you keep your existing car once you’re done paying it off instead of buying a new one? (The answer to that last one is yes, and I highly recommend it.) Or maybe you could cancel cable and make your kids pay for their own cell phones if they want to keep them. (This will not kill them.)

Having a hard time knowing where to cut back?

Try asking yourself this: If I absolutely had no other choice (say, in order to save a loved one’s life) what expenses could I cut out or reduce? Even if I really don’t want to or can’t immediately think of a way that it would be possible or convenient. Remember, you’re saving a life. What could go on the chopping block? Rank those puppies in order of easiest to hardest to do.

If you need ideas on where to cut back, here are a whole slew of money saving tips.

The changes you make now don’t have to be forever, which can make them a lot easier to swallow. The idea is to do everything you can to get yourself into a better financial position.

Think about making more money

Of course, you can also work at bringing in more money. If you’re making minimum wage or an entry level salary by all means do what you can to increase your income. Ask for a raise, look for a better job, or make money on the side.

But don’t add to your expenses in order to make more money.

If you want to go back to school, find a way to do it with cash, grants, scholarships, or employer-paid schooling. The goal is to stop barely making ends meet, not make it harder (even short-term) to do so.

Use the one-two punch to stop living paycheck to paycheck

The one-two punch of cutting expenses and increasing income will give you the boost you need to make these life-changing money moves:

  1. Start an emergency fund (Digit is a surprisingly painless way to get one started.)
  2. Get a handle on budgeting and smoothing out your irregular expenses over time
  3. Start paying off debt if you have it. (Paying off your first debt will free up more money, and you’ll really start to feel some relief.)

Once you’ve moved from the paycheck-to-paycheck life to the conscious-spending & saving life, you’ll be motivated to continue improving your money situation. (You know, planning for retirement, spending more on the things that matter to you, etc.)

Remember, changing your financial situation will take time, but most awesome things do.

How to stop living paycheck to paycheck and start making progress with money.

2 thoughts on “How to Stop Living Paycheck to Paycheck and Start Making Progress

  1. Great post, Jackie. We were them, and are them, but are working our way out of debt and paycheck-to-paycheck living, because we decided a year and a half ago that we’d had enough!! What peace there is in having/working a plan for no more paycheck-to-paycheck living.

  2. It has taken me so long to stop living paycheck to paycheck but I’m so glad that I started to take control of my finances and am not (generally) doing this anymore. Budgeting is definitely the key. I notice very quickly if I become a bit sloppy with budgeting and not checking my bank statement regularly. I’ve gotta get the debt down though!

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