15 Steps to Stop Living Paycheck to Paycheck

Money SmartsFebruary 27, 2025

Before you’ve even deposited your paycheck, do you already know that there will be very little left over after you’ve paid for necessities like rent, utilities, groceries, or gas? If so, you’re not alone: with the rate of inflation outpacing the growth in wages over the last three years, many Americans are finding themselves living paycheck to paycheck. 

In October, a Bank of America Institute survey revealed that about 25% of households fall into the “living paycheck to paycheck” camp, with the criteria being that they spend at least 90% of their income on necessities. This means that if any emergency expenses pop up, there’s no safety net to cover them without going into some form of debt.

In this blog, we’ll walk you through 15 steps to stop living paycheck to paycheck so you can break away from this debilitating cycle and find the financial freedom you deserve.

1. Identify Barriers to Getting Started

You know that you’re living paycheck to paycheck, but have you spent any time trying to figure out why? This is an important first step in breaking the cycle. For many people, it’s a cash flow problem—they just don’t make enough money to cover the basic cost of living.

There are others, however, who overspend and dip into funds that should have been reserved for essentials or emergencies.

Keep in mind that living paycheck to paycheck can bring about many different negative emotions: stress, anxiety, and fear. Sometimes, these emotions paralyze you from taking action with your finances. Try these approaches to help neutralize your emotions: 

  • First, identify the emotion you feel. 
  • Then, remember that it’s only a fleeting emotion and doesn’t mean you’ll be stuck forever. Don't let negative emotions hold you back from making changes or learning new financial strategies.
  • Take a few minutes to analyze your income and expenses. The key is to clearly identify why you’re living paycheck to paycheck so you know what to tackle specifically to change it.
  • Accept that you can't just buy everything you want! Pause for a minute and assess the want versus need ratio of your purchases. Taking a more analytical approach could help you get out of the cycle.

2. Find Your Why and Remember It

It’s important you believe that making some small changes now can make a big difference down the road. You need to have a strong reason to change your habits and believe that you can actually change them for the better.

To do that, think about the big future goals you’re working toward, like:

  • A down payment on a second car that will make your everyday family life easier
  • A down payment on a house so you can stop renting
  • Starting a college tuition account
  • Retiring comfortably

If those goals seem too unattainable right now and you just want to envision a life where you don’t have to worry about overdraft fees or hearing your card has been declined, then focus on that. 

Always try to remember your why when:

  • You’re working a second job or side hustle
  • You hold back from hitting “add to cart” even though you really want (but don’t need) those gorgeous shoes
  • You brew your own coffee at home instead of paying the barista to make it for you

3. Set Financial Goals

Translate your future goals into financial goals. These goals are important because they’ll keep you focused and will serve as your “why” when it gets difficult to stay within your budget. Write them down and put them somewhere you can see them frequently, like the bathroom mirror or fridge door. 

Then as you make progress on your debt, savings, and budget—you can revise the goals accordingly.

4. Budget, Budget, Budget 

Budgeting is the foundation for successful money management, and it’s the first step toward ending the paycheck-to-paycheck lifestyle. When you budget, you know where your money is going instead of scratching your head and wondering why it’s all gone.

But how do you start? To set up a budget, write down your income and then start subtracting your expenses. These four essentials should be your top priority, so make sure your budget is ready to pay for them before anything else:

  • Food
  • Shelter
  • Utilities
  • Transportation

After these top four, make a list of everything else you need to pay (perhaps insurance, tuition, or childcare) and prioritize those in order of importance. 

Next, audit your past spending to “stop the bleeding” by figuring out where your money is really going. Look at your want-to-haves list and identify places to cut this type of spending. Once you’ve done all of the above, use your new, bare-bones budget for 6-8 weeks to reset your spending habits. 

Before spending any money at all, refer to your budget to keep yourself on track. This will be particularly helpful in areas like grocery shopping which can add up fast if you’re not paying attention. 

5. Build an Emergency Fund

The best way to save for an emergency fund is to put that money aside first, ahead of the rest of your spending. Set up an automatic transfer on paydays from your checking account to an emergency savings account. The more you can put on autopilot, the better.

6. Make a Plan to Manage Your Debt

First, establish exactly how much debt you’re carrying—across the board. Add up your debt total (with interest rate included) and determine what your monthly minimum payments are per debt that you owe. Then look at your budget to see if it's possible for you to pay more than the minimum, to refinance any loans, or to transfer your balance to a lower interest rate loan.

7. Sell Stuff

Now it’s time to bring in more money! One of the easiest ways to get your hands on some extra cash is by selling whatever you can. With technology at your fingertips, you don’t have to organize a garage sale—you can sell many things through online marketplaces.

Open your closets, cabinets, and drawers to locate items that you no longer use or wear—but might be attractive to someone else, like:

  • Jewelry, shoes, or clothes
  • Small appliances like waffle, pasta, or coffee makers
  • Baby gear 
  • An extra car or motorbike (and save yourself the loan money too!)

If you can part with something and get cash for it—what’s stopping you?

8. Take on a Side Hustle 

Sometimes you just need to take on a part-time job for a while to supplement your income. Here are a few great options for making extra money outside of your regular day job: 

  • Waiting tables
  • Babysitting or petsitting
  • Housesitting
  • Working for a call center
  • Delivering takeout food 

Use the extra money you earn to start an emergency fund or pay off more credit card debt. Once you have stashed some money in savings and started getting your debt under control, you’re on the right path.

9. Live Below Your Means

Many people think that increasing their income will fix their financial situation, but this might not always be the case. What can happen is that your standard of living increases WITH the increase in income—and the paycheck-to-paycheck cycle continues. 

This phenomenon is called lifestyle creep or lifestyle inflation. Suddenly, you can afford things you couldn’t before—but instead of saving the extra money, you fall back into the habit of being pretty loose with the purse strings.

If you sense this could be happening, refer back to Step #2! Remember why you took on that extra job in the first place, stay true to your budget, and continue to find ways to cut back for a few months by: 

  • Eliminating all but one streaming service
  • Downgrading your internet or phone service 
  • Going to the library or visiting public parks instead of spending lots of money on entertainment
  • Stop eating out as much.Dataindicates that the average household dishes out nearly $3,500 a year dining out. Just imagine the immediate savings if you scaled back!

10. Save Up for Necessary Repairs or Purchases 

If you own a car or a house, there will inevitably be a repair expenditure in your future. The tires will start wearing thin or the washing machine will wear down. These aren’t considered emergency repairs because you know in advance that they will eventually happen. The best way to combat this is to set up a separate account for these kinds of expenses. 

  • Make savings automatic by arranging a regular transfer on paydays from your checking account to a savings account of your choice. The more you can put on autopilot, the better.
  • Consider opening a money market or share certificate account that earns a higher interest rate but is less easily accessible—so that you’re not tempted to use the money for other purposes. 

11. Make Lifestyle Changes If Possible

Sometimes you need to change more than just your spending habits to find financial freedom and stop living paycheck to paycheck. You could consider relocating to a less expensive area or downsizing your home or apartment to save money. 

Alternatively, you could go back to school or switch careers if you think your current professional situation is not providing you with an optimal income or a long-term trajectory to success. 

12. Choose Someone to Help You Stay on Track

Work with an advisor, relative, or trusted friend to help keep you on track. Set up regular check-ins to assess your progress as well as celebrate your successes. 

13. Be Patient With Yourself

This might not be the quickest process, so be patient and give yourself grace. Moving to a savings frame of mind when you haven’t been a saver can be difficult. Breaking old habits is always a challenge, but it is completely doable if you lock in and stay focused.

14. Make Time to Learn About Finances Every Week

Knowledge is power. Every week, set aside 15 to 20 minutes to expand your financial knowledge—for free—by:

  • Checking a financial news site in the morning 
  • Listening to a podcast when you're stuck in traffic 
  • Following reputable finance experts on social media
  • Reading a chapter of a money management book 

You’ll be surprised how much you can learn in a short period. And the more you absorb about finance, the easier it will become to make good choices.

15. Remember: This Is About Your Financial Freedom

It can be daunting to think about how to stop living paycheck to paycheck. If you’re reading this blog, give yourself credit for taking the first step towards changing your financial circumstances for the better – you’re already on the path to financial empowerment. 

The information in this post is for educational and informational purposes only and does not constitute investment or financial advice. You should consult a licensed financial advisor before investing in any financial product or service.

 

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