How To Stop Living Paycheck To Paycheck & Skyrocket Your Savings (13 Easy Steps)

Last Updated July 4, 2024 by Davina Kelly

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You’re probably here because you want to learn how to stop living paycheck to paycheck. It can feel like a never-ending cycle that leaves you stressed and unable to achieve your financial goals.  

I understand how you feel because I have been there myself which I will get more into later. But I was able to break free from the cycle and you can too. It will take some determination and consistency but it is possible. 

In this post, you are going to learn how to stop living paycheck to paycheck as well as how to divide your paycheck and save money.

After reading this post, you will be able to finally stop living paycheck to paycheck and start building a secure financial future. 

This post is all about how to stop living paycheck to paycheck.

Living Paycheck To Paycheck Meaning

Before we get into the steps you need to take to stop living paycheck to paycheck let’s first define what living paycheck to paycheck actually means. 

I know you may be thinking the definition is obvious, but I want to break it down and get to the root cause. Because once you understand why you are in this cycle it will be easier to break it. 

Living paycheck to paycheck is when you solely rely on your paycheck to cover your essential expenses and have no money left over. Here is how it might look. You get paid, you pay your bills and you think you might be able to get by. Then you are hit with an unexpected car repair or your boiler breaks down and you don’t have enough money to cover it. 

This cycle means you are in a constant struggle to make ends meet and it can be stressful. I know first-hand because I used to be in this cycle. I lived paycheck to paycheck for years and I hated it! I was always worried about money and thought I could never break the cycle. 

What Caused Me To Live Paycheck To Paycheck

The reason I was living paycheck to paycheck was because I had bad spending habits. I was living above my means! This caused me to get into payday loan debt and stay trapped in that cycle for years. It was a rough time. 

But I was determined to change my circumstances and eventually, I did. I had to change my mindset and put in a lot of effort, but it was worth it. I was able to break free from the cycle, pay off my debt, save $50,000 and build an investment portfolio. I am not special so if I can do it you can do it too.

 Now that we are clear on the definition, let’s get into the steps you can take to stop living paycheck to paycheck and build healthy money habits. 

How To Stop Living Paycheck To Paycheck:

1. Monitor Your Spending

The first step to taking control of your finances is understanding where your money is going. 

Tracking your spending allows you to identify areas where you can cut back and make informed decisions about your finances. You need to understand what your biggest costs and spending habits are before you can make changes.  

There are many ways you can do this. You can use an app, review your bank statements each month or you can use a spending tracker like the one I have included with my free budget printable in this post.

Once you have chosen your tool look through your expenses and pay attention to your spending habits. Aside from your basic expenses what are you spending money on? Is it shopping? Eating out? Takeaways? 

The purpose of this exercise is not to make yourself feel bad. It is to gain insights into your spending habits so that you can make adjustments as needed. 

When I did this exercise I realised I was spending a lot of money on eating out. With that information, I was able to make adjustments to my lifestyle so that I could cut back on spending in that area. I will share more tips on this in the next step.

2. Save Money On The Essentials

Finding ways to save money on essential expenses such as housing, utilities, groceries and transportation can free up funds. You can use these funds to start saving, pay off debt or invest and grow your money. 

Think about ways you can reduce these expenses. For example, can you find cheaper deals on your utilities? Sometimes we tend to stay with the same service providers because it is easier, but that could come at a cost.

I use this website to check if I am getting the best deal in my area. Check it out and if you find a better deal switch providers and save yourself some money. 

Reducing your grocery costs is an effective way to save money. You can do this by meal prepping and cutting back on takeaways, these two actions alone have saved me a lot of money.

But If you don’t have time to meal plan, but still want to save money on groceries I highly recommend this $5 meal plan.

For just $5 a month, you will receive delicious weekly meal plans and grocery lists straight to your inbox that cost less than $3 per meal. As I mentioned earlier eating out was an area I was overspending in so I had to find ways to cut back. I was able to do this by meal prepping and shopping at cheaper grocery stores.

You can do the same with the meal plan service. You can try it out risk-free with their 14-day FREE trial by signing up here. If you don’t think it’s right for you, you can cancel at any time with no problems.

3. Build an Emergency Fund

Living paycheck to paycheck is one step away from being broke. You might not be absolutely broke I mean you can still pay your bills and get by for the month. But if an unexpected expense comes up you will be screwed. 

Having an emergency fund is like having a safety net. It can help you cover any unplanned expenses without undoing your progress. It will also give you peace of mind because you will know that you have ‘just in case’ money to rely on.

With this safety net in place, you can avoid going into debt and digging yourself into a deeper hole. This is one of the most important things you need to have in place to help you break the paycheck cycle. 

You don’t have to be extreme and save half of your paycheck straight away. Start by setting aside a small amount each month. It doesn’t have to be a specific amount just save whatever is realistic for you. Think of it like paying yourself first, even if it is small amounts over time it will add up. 

It will take time so be patient, as long as you are putting money aside consistently eventually you will have enough money to cover you if any emergencies do pop up.  

4. Pay Down Debt

Being in debt sucks and it is a cycle that is hard to get out of. Just the thought of it can make you feel stressed, I know that is how I felt when I was in payday loan debt. But if you change your spending habits and are disciplined you can get out of debt

The first step is to get a clear picture of the amount of debt you owe. I know it can be daunting, but you have to identify the problem to get through it. Get a notepad and make a list of all the money you owe. Include everything such as credit cards, loans, overdrafts and any money you have loaned from friends or family members.

Once you have listed all of your debt you need to make a plan to pay them off. I know there are many popular strategies you can follow, but you need to do what is right for you. 

Paying off the debt with the highest interest rate first will save you money. Whereas if you focus on tackling the smaller debts first it will give you momentum to keep going. Both strategies are effective so you need to decide what will work best for you.

Making more than the minimum payment is better, but If you can only afford to repay small amounts that is fine. Repaying small amounts is better than nothing. 

As you pay down your debt you will start to see progress. Your debt will get smaller and it will give you the confidence to know that you can change your circumstances. 

5. Implement Money Management Techniques

Managing your money is essential in how to stop living paycheck to paycheck. It will give you financial stability, help you live within your means and save money. 

One of the best tools to help you manage your money is a budget. Having a budget is like having a plan for your money. It will give every dollar a job so when you get paid you will know exactly where your money needs to go. 

You don’t need to create a fancy budget for it to be effective. As long as it reflects your income, expenses and financial goals it will work. 

Once you have created the right budget for you, you will be able to start seeing changes. You will be able to cover your basics, save money and start planning for your future. 

You can put your budget together using the free printable I have included below. If you need some guidance you can read here to learn how to create a budget. 

6. Find Ways To Make Extra Money

Sticking to a budget and developing good money habits are essential. But finding ways to increase your income is a powerful way to stop living paycheck to paycheck.

Having one stream of income isn’t enough anymore. If something unexpected happens, for example, if you lose your job how will you survive? On top of that, everything is more expensive now due to inflation. 

I am not saying this to scare you. I am just trying to emphasise how important it is to look for ways to supplement your income. You can start a side hustle, ask for a raise or take on freelance or gig work alongside your full-time job.  

If you are a beginner one of the easiest ways to make extra money is by offering your services as a freelancer. This is what I did. I work in accounting so I used my skills to offer bookkeeping services to small businesses. 

Think of the skills you have to offer and find ways to monetise them. It could be writing, tutoring or graphic design trust me there is someone out there who will need your services. Read here to get some ideas on ways to make extra money.

These ideas won’t make you rich, but they will give you extra room in your budget to save, pay down debt faster and improve your overall financial stability. 

7. Make Saving a Habit

Saving money is like a muscle that needs training so to make saving a habit you need to do it consistently. 

It should be a priority and a non-negotiable part of your budget. Just like you pay your bills every month you should put some money in your savings. 

You don’t have to save excess amount just save what you can afford. Once you are used to saving small amounts you can increase it and maybe even save $10,000 in a year. 

The easiest way to save consistently is to automate it. Analyse your budget to see how much you can afford to save each month. Once you have decided on an amount that you can stick to set up your transfer. 

By automating your savings you will ensure that a portion of your paycheck goes towards saving before you can spend it. And by default, it will become a habit. 

8. Start Investing Your Money

Once you have built an emergency fund and made saving a habit you should start investing your money. Having savings will give you financial stability and some freedom. But investing your money will make it grow and that is essential for building wealth and financial security.

There are many different investment options, my personal favourite is index funds. Index funds are diversified low-risk investments and they have low fees. By investing your money in the stock market you can benefit from growth, compound interest and dividends. Your money is essentially working for you and making passive income. 

This is how I first started investing my money and it is one of the best decisions I have made. If you are new to investing I know it can seem confusing. This held me back in the beginning too. But don’t worry I’ve got you covered. I have included some posts below that will walk you through each step and help you get started investing your money. 

Related: 

How To Invest Money for Beginners The Ultimate Guide

How To Invest In Index Funds: A Complete Beginners Guide

9. Find Money Hacks

Discovering money-saving hacks can help you stretch your money and accelerate your journey towards breaking the cycle of living paycheck to paycheck. 

Look for creative ways to save money such as using cashback sites, shopping during sales and buying in bulk. Also, use money round-ups to save money every time you spend.

Explore the benefits of frugal living for inspiration and ideas to simplify your life and do more with less. Implementing these hacks will save you from having to cut back on the things you enjoy and feeling miserable. 

10. Set Money Goals

Setting clear financial goals will give you a sense of purpose and direction. It will also motivate you to make positive changes in your financial habits. 

Think about what goals you may want to set for your money. It could be to pay off your credit card, save for a holiday or buy a new car. One of my goals was to save up for a property down payment. Having this goal really motivated me and pushed me to keep going when things got tough. 

Once you have defined your goals make them specific and measurable. For example, say your goal is to save $25,000 for a property down payment. The end goal is clear but it isn’t specific or measurable. A better goal would be to save $25,000 in two years by saving $1,042 a month. This goal is now specific and measurable.

You should review your progress regularly and adjust as needed to help you stay on track. 

11. Spend Mindfully

Adopting mindful spending habits can help you become more conscious of the way you spend money and your values. It can also help you avoid impulse buying and spending money unnecessarily. 

One of the best ways to do this is by determining your values. Once you are clear on your values you can prioritise spending money on things that align with those values. For example, if you love working on your personal growth you can prioritise spending money on that area and spend less on non-essential things. 

If you are shopping before making a purchase, ask yourself if it aligns with your priorities and brings you fulfilment. If the answer is no then you don’t need to buy it. 

By spending more intentionally you can avoid unnecessary expenses and spend money on the things that truly matter to you. 

12. Learn How Money Works

Financial literacy isn’t the most fun subject to learn about, but it is key to mastering your finances. This is something that I wish they taught us in school. It would have saved a lot of people from making costly mistakes. 

Thankfully there are many resources that can teach you the basics of how money works. You can read books and blogs, listen to podcasts, and watch YouTube videos. I will list some of my favourite resources below.

Books:

Rich Dad Poor Dad

The Psychology Of Money

Podcasts:

Earn Your Leisure

YouTube:

Jennifer Kempson

Nischa

Knowledge is powerful especially when it is applied. If you take the time to learn how money works you will empower yourself. You will also be better equipped to navigate any challenges and build wealth for your future. 

13. Stay In Your Financial Lane

Trying to keep up with the Joneses is harder to resist now with the rise of social media and influencers. When you see people living a fabulous aesthetically pleasing life you can’t help but want it too. 

The thing is that may not be their real life and if it is you don’t know how they are maintaining it. A lot of it is for show and many of them are racking up a lot of debt to fund that lifestyle. 

I am not saying there is anything wrong with living a fancy lifestyle. But I am saying that portraying the image of a luxurious life shouldn’t take priority over your finances. 

Everyone’s financial situation is unique, what works for someone else may not work for you and that is ok. Just because your friend bought the latest Balenciaga boots doesn’t mean you have to as well. Define your own definition of financial success based on your values and priorities and stay focused on your goals. 

Avoid lifestyle creep and unnecessary spending. I promise you there is no better feeling than having your finances on track and aligned with your long-term objectives. 

Frequently Asked Questions About How To Stop Living Paycheck To Paycheck

Below are answers to some common questions about how to stop living paycheck to paycheck. 

How Do I Overcome Living Paycheck To Paycheck?

The best way to overcome living paycheck to paycheck is to first identify the cause. Are you living paycheck because you are living above your means? Or is it because you have bad spending habits? Once you have identified the cause you can make informed decisions and adjust your spending as necessary. 

Next, you need to create a budget, build an emergency fund and make saving a habit. I have gone into all of these steps in detail plus more in this post

What Is The 70 20 10 Rule Money?

The 70 20 10 rule money is a budget split that divides your net income into three categories based on percentages. 70% is for living expenses, 20% is for savings and debt and 10% is for additional savings and donations. 

If you are new to budgeting and have high living expenses this budget rule is ideal for you. But if you have different priorities you may want to try a different budget like the 60 30 10 rule budget. 

Final Thoughts

Breaking free from living paycheck to paycheck requires commitment, discipline and a willingness to make positive changes to your financial habits. By monitoring your spending, building an emergency fund, paying down debt and saving consistently you can take control of your finances.  

Remember that financial freedom is attainable but it won’t happen overnight. You need to persevere and be consistent. But every step you take towards improving your financial health will bring you closer to your goal. 

I hope you have found this post helpful and now know how to stop living paycheck to paycheck. Which one of these steps do you struggle with the most? Let me know in the comments below. 

This post was all about how to stop living paycheck to paycheck

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