What To Do If I Need To Stop Living Paycheck to Paycheck

Do you need to stop living paycheck to paycheck?

According to a survey carried by CareerBuilder a leading job site related to American workers

They collected statistics related to debts, budgeting and living paycheck to paycheck

78% of Americans are living paycheck to paycheck

The survey above is long and detailed but what really grabbed my attention

28% of workers earning between 50 K and 99 K and need to stop living paycheck to paycheck

3 out of 4 surveyed say they are in debt

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living paycheck to paycheck
Broke business man with empty pockets isolated on white

While in Canada, according to survey conducted by Angus Reid on a sample of 2,047 Canadians

It showed that 53% of Canadians need to stop living paycheck to paycheck

That's really a devastating news

This brings me to talk about this phenomena and to start with

What is meant by living paycheck to paycheck

Simply this term means you cover all of your expenses with your income

You desperately waiting for the next paycheck usually biweekly to continue to cover your expenditures

You are in a continuous cycle of no money left over and no savings to make

What are the causes of living paycheck to paycheck

Don't every think that those workers who are broke waiting for next paycheck are those who are on low income jobs

Check above 28% of people earning 50K to 99K are still struggling to make ends meet

Here are all the reasons that cause this phenomena

They don't include the low income jobs as a cause

Is this a surprise to you? read the first cause about cost of living

Your cost of living is beyond your income

I will always mention this fact over and over from my personal life experience

Me and my wife were living with enough buffer to save and more room to enjoy our lives with a combined income of 52% less than what we currently earn

I know what went wrong, we moved to a bigger place with extra mortgage to pay

Bottom line, check your bills including your mortgage/rent and make your math

I want you to calculate the percentage of your mortgage/rent to your income

I bet you that a few people know their percentages

Banks still lend you for a mortgage that can eat up to 42% of your income

They don't care if you understand the consequence of your action

What is important now for banks maintaining a safe threshold for borrowers to keep paying their mortgages

Keeping up with the Joneses

Keeping up with the Joneses is Dave Ramsey‘s expression from his book Total Money Makeover

What he means is that not all relatives and friends have equal incomes

This is part of life to have filthy rich, rich, middle class and poor people

What is inappropriate is not saying I cannot afford it to friends and families when they ask you to hang out for dinners or pubs so many times more than you can handle it

Or paying for expensive gifts in return of what they bought on your birthdays and anniversaries and you try to complement them the same way

We bought the lie, we lived our lives according to the standards set to “Keep up with the Joneses” and it turned out that they broke and living in debt too

I love this quote from Dave Ramsey's total money makeover

Saving is not a priority

In other words, you are not paying yourself first

Paying yourself first is the automation of the saving process by deducting a percentage or amount from every paycheck to transfer to another saving account

You don't do it but ask you bank to set it up for you

All banks can do this automation if you ask them to do so

You are not tracking your spending

Without tracking your spending, it is almost impossible of detecting where your money is spent

You can track your spending by following these 2 steps

Step 1 – if you are initially tracking your expenses for the first time

You need to get all of your credit cards statements for the past 3 – 6 months and investigate where you spend your income

Almost all credit cards companies allow you to save your statements in CSV format

You can open it in spreadsheet application like Microsoft Excel, Libre Office, Google Sheet and Open office

Step 2 – If you already analysed your spending and want to stay up on track

In this case you can use a weekly spending sheet to keep track of your spending

download weekly spending sheet to keep track of your spending
Weekly spending plan

I have made it easy for you as you can download it below for free

Click to download for free from my products page

Not having an emergency fund

Building an emergency fund is very essential, you cannot predict when it will rain

In Dave Ramsey's Total Money Makeover book

He uses the expression rainy day from his grandma where she used to tell him this quote

You need a coat for those rainy day and it is going to rain for sure


Although having an emergency where you need to pay for your car repair or for urgent medical or dental bill not covered by your insurance can cause unexpected disruption in your monthly bills

In a typical year expect to have one or more of these urgent unplanned emergencies to pay for

They can put you in debt if you are not ready with an emergency fund

Relying on credit cards for your lifestyle

I am not against using credit cards to pay for your daily expenses

What I do I stick to creating my family budget where I can control myself to use my credit cards to pay for what I planned in my monthly budget

There are people who use their credit cards to pay haphazardly for anything and everything

Not setting any financial goals or plans

The only thing that motivates you to save and help you to achieve your financial goals is setting a clear financial plans

If you have a clear plan, saving money will be priority for you and definitely you will find a lot of room to cut in your flexible and discretionary expenses

How to stop the cycle of living paycheck to paycheck

living paycheck to paycheck
paycheck to paycheck

Create your family budget

Don't be afraid from the term budget, just think about it as a spending plan

If you like the spending plan term, they are the same

I made it super easy to build spending plan for your household income

Just get a cup of coffee, tea or whatever drink you like, follow the link above and give it only half an hour

Finally you will be set to overcome the fear of creating a family budget

Build an emergency fund

I discussed in a previous post how to build an emergency fund as fast as possible

If you have debt to fight, you need at least the baby step for saving $1,000 for an emergency fund before you move to your next debt step

Sell belongings you don't need

You want to complete the emergency fund step as soon as possible

If it requires to sell few of your belongings like a precious watch or rug in your house using Facebook Marketplace, Craigslist or even eBay

If you scan you house, definitely you will find so many stuff to sell for quick cash

Get rid of your debt

If you still have not built your emergency fund yet

I ask you to do so before you start fighting your debt

If you are paying few loans and credit card debts monthly, I want you to think for a moment how to stay motivated and encouraged to continue paying your debt

The best way to achieve successful result is to sort all of your debts from smallest to largest regardless of their interest rates

It is called the snowball effect, start by paying small debt first when you finish it, move the energy towards the larger debt in line

What is more important in the snowball process is to get rid of anything causing some of your debts to stay like selling your luxurious car instead of paying its loan

Increase your income with side hustle

You may be on low income and that's why it is tight with you

But are you going to stay like that for a long time?

I always believe to some extent that earning more money is based on what you know and not based on your college degree

For example, I knew lot of people who used to work with minimum salary and they insisted to study for few months to change their future

It is out of topic to discuss that but there are so many certificates that can definitely move your career to the next level like project management or CMA

Please read my post how to make 200 dollars a day to get more ideas of income you were not aware of

Live below your means

Sometimes the problem lies in the way you live and spend your money

I discussed earlier some people are paying more than 42% of their incomes for mortgage/rent

There is nothing wrong if you are very tight and single to live with your parents and pay for your room

Or if you don't accept it, downsize your rent or find a roommate

Cut from your expenses

Expenses are categorized into fixed like mortgage/rent and insurance, flexible like groceries and discretionary like your morning take away coffee

You have to sort out all of your flexible and discretionary and sacrifice some of your expenses to save money for the future

Start saving for your retirement

Time flies and you have to plan for saving up to 15% of your income for retirement

If your company matches up to 6% of your contribution then saving 6% you get 12% saved in your retirement saving account, you have no excuse to save the 15% now

If not, do your best for reaching the 10% saving into a retirement saving account invested in long term mutual funds

How to save money and stop living paycheck to paycheck

If you expect to read something super duper natural on saving money with low income

Unfortunately you will read a regular grandma's advice like

The reverse budget method – Pay yourself first

The reverse budget method is also called pay yourself first because your prioritize your saving plans over other items on your spending plan

Sometimes it is called spending plan after saving

I will add here my little twist regarding how to pay yourself first

On your paycheck day, money goes into your checking account

If you arrange with your bank to auto transfer any amount to a saving account

You would be tempted to take the money back from your saving account to avoid that you have to set an auto transfer to mutual fund saving account

Instantly your new allocated amount will be used in buying mutual funds shares where you need to keep the money for long term

Apply the half payment method

This half payment method is very easy to apply and it helps to save money too

Take all your fixed bills like mortgage/rent, car and home insurances, car loan, electricity and heating gas – based on the last 3 – 6 months average and divide all of them by 2

For example if mortgage/rent is $800, car insurance is $150, electricity is $60, heating gas is $100 divide them by 2

If your biweekly income is $1,800 then deduct $400 for mortgage/rent+ $75 for electricity + $30 for electricity + $50 for heating gas = $1,245 leftover

The half payment method helps you to manage your income properly as all bills are deducted monthly and you get paid biweekly

You will be able to save money because if you have your bills distributed throughout the month

You may have one paycheck goes to bills and next paycheck your priorities will be messed up

But if you plan to equalize your paychecks by deducting the portions that go to bills

You will have paychecks with equal amount to manage

The cash envelope budget method

The cash envelope budget method requires you to stop using your credit cards and replace them with cash for all money you assigned in your budget for flexible expenses like groceries

Once you finish the cash in any envelope you stop buying it, you have to be very diligent and manage to count what is left in your envelopes to make sure you have enough cash to cover your expenses

It is between you and me

I attempted working with the cash envelope budget method before but I couldn't adapted it in my lifestyle

I monitor my credit cards cautiously to avoid any deviation to my budget plan

Conclusion on how to stop living paycheck to paycheck

It is never too late

Everyday of your life you have a chance to save money for the future especially for your retirement

Don't count on your government for the pension amount you will get

Start today by learning how to create your household budget and building an emergency fund

Michael launched Wealth of Geeks to make personal finance fun. He has worked in personal finance for over 20 years, helping families reduce taxes, increase their income, and save for retirement. Michael is passionate about personal finance, side hustles, and all things geeky.