How to End Cycle of Living Paycheck-to-Paycheck

How to End Cycle of Living Paycheck-to-Paycheck
Skilledwise 02 Feb 2022

Living paycheck-to-paycheck is a familiar term for most of the Americans and others who are in a salaried job worldwide. The term simply means that you need to wait for your next paycheck to clear your dues and cover your expenses. Without the paycheck you find it impossible to pay your bills and look after your family. You must feel a part of this population based on your current financial situation. In fact, it has been found that more than half of Americans live paycheck-to-paycheck.

Ending the cycle

The consistent stress of distressing about your financial condition has a ripple impact on all other aspects of life that could become devastating. Discovering a way to keep in check, your spending habits and realizing your financial goals could mend not just your bank account but also your overall wellbeing. You could follow the below given steps to assist your paycheck-to-paycheck cycle:

Start by tracking your spending

You have come to a point where you are fed up with your spending habit and want to stop living a life like this that is, being worried about your finances and it is the first crucial step. Furthermore, you wish to be more aware about the things on which you spend your money. It is highly likely that most of your spending does not match up to your important list. You thus need to start by paying attention on the things you could cut down that is, the things that you do not need.

There are several ways to cut the spending, some of which include:

Reduce your credit card rates –

  • One of the reasons for your paycheck-to-paycheck living is the debts you are engulfed in that continues to take out your bank balance.
  • You could control this by calling your card issuer and see if your interest rates could be lowered. Doing this, you would be able to spend the least on monthly interest.
  • Do away with any unused subscriptions – look for those apps or magazines or streaming services that you hardly use or do not use at all and end those right away. Keep as little subscriptions as you can.

Prepare a spending plan

Prepare a spending plan

Make a plan on spending money deliberately on things that are of importance to you. In other words, prepare a budget. With a spending plan, you will be able to spend on things that are of significance to you and keep your unnecessary spending at bay. The budget needs to be goal-oriented that is, you need to set some goals on what you want to spend money.

  • Firstly, make payments towards bills that could not be negotiated
  • Secondly, create an emergency saving fund
  • Thirdly, pay your existing debts as soon as you could

Begin with creating an ‘opportunity gap’

In a situation where you continue to live under the stress of paycheck-to-paycheck cycle, you actually take two steps forward but move behind because of your spending habit. The key is to begin saving the money even if it is just a small amount of what you earn. For instance, saving 20 dollars or 50 dollars here and there could add up over time and you will find yourself taking two steps ahead and only half step behind. In this way, you start making progress. This is called the opportunity gap.

Make use of last month’s earnings

You need not worry about not being able to go on for a month without having to use the new paycheck and being able to continue with last month’s earning. It is not a big deal if you still could not stop living paycheck-to-paycheck because there are ways you can adopt to change this situation.

  • First is you can sell some things that are of no use or little use to you and you could even look for an additional income source and make some extra cash so that you do not have to depend on your month’s paycheck.
  • Despite the fact that you might have to get rid of some of your most prized things, the long-term economic cushion that you would feel from possessing a month’s buffer created into your financial system would really be worth it. You do not have to stand wobblingon a financial crisis edge.

Enjoying a debt-free life

Reasons for living paycheck-to-paycheck

As the above pie chart shows, being engulfed in debts is one of the primary reasons for people living paycheck-to-paycheck.As a first step towards adopting a life free from the paycheck-to-paycheck cycle, you could follow the following points to enjoy a debt-free life:

Start with writing a budget

Creating a budget means you are instructing your money to go where you want it to go. If you want to go on a vacation, add it to your budget; if you want to buy an expensive attire, add that to your budget as well. Initially, writing a budget could be tricky because you might not be aware of a budget that matches your expectations. However, you will be on track after a few months.

Know what your needs versus what your wants are

To cite an example, you might want an online streaming subscription but actually you do not have any need for it. You could although spend a certain amount to fulfill your wants but the list must be as short as possible.

Avoid comparison

We often compare our lives with those of others especially when we observe others enjoying vacations and buying cars and homes. These constant comparisons often lure people to possess what others have and this is where they commit the mistake and go into huge debts.

When you stop such comparisons and stay content with what you have, you will be spending much less and this will ultimately help you end the paycheck-to-paycheck cycle. All of a sudden, you will find that you have sufficient amount in your bank account that could help you progress towards the journey of leading a debt-free life.

Improve your habit

You should confront your money habits that are causing you to live in debts. The moment you are ready to face those habits, you will surely feel the difference. Make consistent small choices that fit your finances. For example, if you want to have a sip of coffee at Starbucks but you chose to instead have it at home.

You want to have dinner outside every night but instead you chose to prepare a meal plan at home. You want to have a subscription for an online clothing asp but you choose to buy online only when you need it. These little changes in your money habits could go a long way to help you end the paycheck-to-paycheck cycle.