8 Tactics to Stop Living Paycheck to Paycheck

While escaping the cycle of living paycheck-to-paycheck isn’t easy, it’s possible to get ahead by changing your mindset, examining your lifestyle, and creating new habits. Once you free up even a small amount of discretionary income each month, it’s possible to build a better financial life with more security and less stress.

Laura Adams, MBA
7-minute read
Episode #550

3. Measure your cash flow carefully.

You can’t change what you don’t measure, so track your expenses carefully. No matter how much you earn, you must spend less. Again, when you live paycheck-to-paycheck and spend everything you make, it’s impossible to get ahead.

Find a way to keep an eye on your spending that’s easy for you. It could be jotting down every expense in a paper notebook or entering costs into a computer spreadsheet.

Try apps, such as Mint and Quicken, that sync with your financial accounts and automatically pull in your transactions. Tiller is a Google Sheets-based tool that consolidates your daily financial transactions into a dashboard that you can customize. Also check out downloadable Excel budget spreadsheets at Simple Planning.

Technology makes it easier than ever to create a spending plan and stick to it. So, if you don’t have a clue where your money goes every month, get curious. You may be shocked by what you find.

Budgets don’t have to be forever, but they’re an essential part of taking control of your cash flow and understanding how to cut back. Then you can allocate that savings to build wealth and security for the future.

4. Cut your largest expenses first.

An effective way to stop living paycheck-to-paycheck is to cut your largest expenses first, such as housing. A good rule of thumb is to never pay more than 20% to 25% of your gross income on rent or a mortgage, even if a home lender says you can afford a bigger payment.

You may need a radical lifestyle change to downsize your housing. Consider a variety of options, even if you don’t like them. Remember, financial sacrifices will help you get ahead and don’t have to be permanent.

If you buckle down for a year, you can accomplish a lot with your money. You could move to a less expensive apartment, home, neighborhood, town, or state. Consider moving in with family or getting a roommate to share expenses.

Vehicles are another budget-buster to evaluate. Driving a used car is always a better deal than buying a new one. Never let your car payment exceed 10% of your gross income. And check out other transportation options, such as public transit, carpooling, or using a ride-sharing service.

Keep looking for more big cuts. You’ve got to take control of your financial life and make serious changes to break the pay-to-pay cycle and create more financial breathing room.

Bonus Tip from The Penny Hoarder

With summer upon us, you're probably watching your thermostat as close as you're watching your budget. Here are three ways to save money on your power bills.

1. Programmable Thermostat: This can automatically adjust the temperature settings for you depending on when you're home. You don't have to blast the A/C, either. When you get home, turn on a few fans to get that cool air moving. A programmable thermostat can save you 10% on heating and cooling costs each year, according to consumer reports. 

2. Switch Out Your Light Bulbs: Compact flourescent light bulbs (CFLs) start at around $5 per bulb, which can seem expensive. But they save about $6 per year in electricity costs. The key to getting a great return on investment in new bulbs is to replace the ones you use most often, so you can get the full $6 annual savings per bulb.

3. Lights on a Timer? If you have any lights on a timer, be sure to adjust the turn-on time to account for the longer daylight hours. You don't need your porch light on at 5pm when it's lighter for hours beyond that in the summer. Those small savings add up.

For more tips, visit The Penny Hoarder.


About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.