The First Steps Away from Paycheck-to-Paycheck Living

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stressed pleather by Duchamp on Flickr!Out of all of the blessings that have come into my life over the last two and a half years or so (a new home, my daughter, financial recovery, a new career, a lot of wonderful readers), the one that has truly helped me to sleep better at night is the move away from living paycheck to paycheck.

Paycheck-to-paycheck living happens when you are regularly waiting for your next paycheck before you make basic financial moves, like paying bills or buying food or doing something fun. It’s incredibly dangerous for a number of reasons:

If you lose your job, your life requires you to find a replacement job immediately. Thus, you’re completely dependent on your current job. You can’t sustain even a few days without that regular paycheck coming in. Quite often, your boss knows this and takes advantage of it, because they know you can’t function without that job – this, in the end, makes your job completely miserable and makes it dominate your life.

You can’t plan ahead for disasters. Whenever something bad happens, like a car breaking down or a child needing emergency dental work, your only choice is to bust out the plastic and then sweat it over the next several months as you fight to pay down the balance. If you’re relying on each subsequent check to even manage your day-to-day life, you can’t plan ahead for these unfortunate situations. Instead, the best you can hope for is some good “luck” in that they won’t occur too often.

You can’t plan ahead for bigger things, either. Dreaming of a big family vacation? How about a new car, or a new house? If you’re living paycheck to paycheck, these dreams are simply unreachable in the foreseeable future. You might really want these things for your family, but they’re unattainable with your current financial structure.

So what’s the solution? The solution is obviously to back slowly away from living paycheck to paycheck, but it’s not always easy.

Ten Tactics for Backing Away From Paycheck-to-Paycheck Living

1. Recognize that there’s a problem – and that you’re not alone in dealing with it.
I was in these very shoes once upon a time, waiting for that next paycheck to come in so I could cover the required bills and then spend some more. I racked up five figures in credit card debt and it got so bad I spent a very long night holding my infant son and wondering how I would ever fix things.

Living paycheck to paycheck is a problem of your own creation. But you’re not alone in creating that problem, and if you put your nose to the grindstone, you can get out of it and start moving towards financial prosperity. Use the internet – or your own social network – to find out about the experiences of others who turned their ship around and share your thoughts and difficulties anonymously. You’ll find it much easier to work through this tough process.

2. Look for regular expenses you can trim away.
The first big step is to trim your monthly expenses. Reduce that cable bill and that cell phone bill. Get rid of unused memberships, like gym memberships or country club memberships. Look for ways to tone down your home energy use. Start a carpool or start using public transportation. Start cooking at home more and eating out less. All of these things will ease the monthly pressure on your wallet, allowing you to stop feeling like you’re falling behind and instead start getting ahead a little.

3. Don’t shop for entertainment’s sake.
When you’re hanging out with friends, it can be tempting to go shopping for clothes or hit the electronics store. Don’t. Find anything else to do. Shopping for fun in a social environment is costly even if you don’t buy anything, because you’re surrounded by temptation and the mental imprintings of stuff that you want but don’t really need. It’s an excuse to talk to your friends about stuff you want and potentially talk yourself into purchases, either now or later. Just stay away.

4. Cap your non-essential spending each month.
We all spend some money on things we don’t really need. Instead of just spending as opportunities arise, put a cap on that spending each month. Allow you and your spouse a cash allowance each month and agree that your discretionary spending comes from this cash and this cash alone. Make the amount lower than what you normally spend, but not enough lower that you’re tempted to cheat. Then, when you’re used to the amount, consider lowering it a bit more until you find a sweet spot of savings and fun.

5. Don’t use your ATM receipt or check ledger as “permission” to spend.
If you’ve ever looked at an ATM receipt or at your checkbook ledger to find out if you can afford something, the answer is that you can’t. Don’t even bother to look. You can’t afford it. Looking at that receipt and then going ahead with the purchase is nothing more than an agreement that you want to continue living paycheck to paycheck. If you’re tempted to peek or to use your balance as justification that an unnecessary purchase is okay, you’re perpetuating living paycheck to paycheck. You’re choosing to be chained to your desk, at the mercy of your boss.

6. As you gain some breathing room, move towards paying bills right when they come in.
One thing that many people living paycheck to paycheck waste money on is late fees. You’re a couple days late on a bill because you were waiting around for your paycheck, so you’re dinged for an extra five bucks. It used to happen to me all the time – and it was a serious money leak. The best solution for handling this as you move towards financial stability is to start paying your bills as soon as they come in – that way, you avoid the late fees by a mile. Later on, as you get more comfortable, you can develop your own bill-paying routine – I pay mine monthly – but the best way to handle things just as you’re getting some cash built up in your account is to pay bills ASAP.

7. Don’t carry more than one credit card with you.
Leave the rest at home. The only reason you should be carrying a credit card in your pocket is to cover emergencies or for specific purchases. Thus, carrying more than one credit card in your wallet is not only an identity theft concern, it’s also temptation to spend more than you should.

I personally have three credit cards. Two of them are for specific purchases only, so I leave them at home. The other is my general use card, and it’s the only one that resides actively in my wallet. Because I recognize that I need to keep a healthy free balance on it for emergencies, it makes the temptation of the plastic much lower.

8. Work together with your spouse and/or with your family.
Walking a new financial path isn’t easy. It’s like a diet – it’s a new set of routines and it can be difficult to get used to a new walk. The best way to make it easier is to ask for help, and the best place to ask is your spouse. Work cooperatively with your spouse to cut spending and get in a better financial routine.

If you’re single, try to find a “money buddy,” as suggested by the excellent book Money Drunk, Money Sober. Basically, this is a person that you can work in tandem with to overcome your financial challenges and spending issues. By opening up to this person (and allowing this person to open up to you), not only will you find an outlet to talk things over, you’ll also cement an already-strong friendship.

9. Downgrade.
One major step you can take in getting away from paycheck-to-paycheck living is to downgrade. Do you really need that gas-guzzling car when an efficient one would do? Do you really need that big of a house? Consider moving to a smaller or more efficient version of these things. It’ll lower your monthly bills, eliminate some debt, and quite likely directly put some cash in your pocket.

This is a major step for many people and it’s often one that gets inside the comfort zone. “I’ll NEVER do that,” you’ll think to yourself. Instead of just automatically rejecting the idea, think about it more seriously for a little bit. Think of how much easier life would be without a car payment or with a smaller house payment. You might find you don’t need the things you think you need.

10. Learn some basic skills so that you can deal with some emergencies yourself.
Get a book or two like the Reader’s Digest Complete Do-It-Yourself Manual, Fix-It-Yourself Manual, or the Popular Mechanics Complete Car Care Manual and learn how to do basic maintenance and repair yourself so you’re not turning to an expensive repairman every time something little goes wrong. Not only that, you can often do basic maintenance like oil changes and air sealing your home yourself without nearly as much effort as you might think. This cuts way down on expenses and doesn’t leave you at the mercy of “emergencies” quite as much as before.

Good luck. Breaking free from the paycheck to paycheck cycle is one of the most mentally relieving things I’ve ever done. I hope you’ll do it, too.

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51 thoughts on “The First Steps Away from Paycheck-to-Paycheck Living

  1. Thanks for this list, Trent. I’m just getting started with my financial revolution. I’m not a big shopper, but most of these tips apply to me. I find the biggest obstacle is getting the cooperation from my partner and friends. It’s not that they’re unsupportive, it’s just difficult to say no to social activities that require money.

  2. I am about to lose my job and blogging will NOT pay my bills yet. I will unfortunately have to go find more work to hold me over and this site gives tremendous advice for those who are working for paycheck or not….

  3. I’ve heard paycheck-to-paycheck living decried many, many times. But I’m not sure I know what the opposite of that is. Is there a word or phrase that means “non paycheck-to-paycheck”?

    You have a great sentence defining paycheck-to-paycheck living:
    “Paycheck-to-paycheck living happens when you are regularly waiting for your next paycheck before you make basic financial moves, like paying bills or buying food or doing something fun.”
    Could you write a similar sentence that defines the opposite of paycheck-to-paycheck living?

  4. When I was living paycheck to paycheck I would never know how much money I had until I looked at the ATM receipt.

    And even then I wasn’t really sure because I didn’t know what checks had cleared and what checks hadn’t.

    I was too lazy to even keep up with my check book register. And even when I did attempt reconcile my finances, I would always be missing a few transactions.

    This in turn led to a lot of rediculous $40 overdraft fees! I remember being so made at the bank for charging these fees, but looking back on it I was the one to blame for being so LAZY!

  5. Non-paycheck-to-paycheck living occurs when you can manage your day to day lifestyle without any concern for when your next paycheck arrives.

    Obviously, income does matter, but everything doesn’t fall apart if you go without pay for a month or two.

  6. Although I can (and usually do) easily (I think) live on 60% of take-home pay, I sometimes use “wait until the next paycheck” as a way to curb impulse/frivolity – once some time has passed, etc.

  7. I hate living paycheck to paycheck. And I DO dream of a new car that I haven’t saved enough to buy yet :(

  8. A note on paying bills as they come in… It’s a great idea, because late fees can really set you back.

    I’ve found that scheduling the payment online works for us. I usually schedule payment for 2-3 days before the bill is due, letting that money earn us a bit of interest in the meantime. I had been paying the mortgage up to 15 days early, just to get it over with, until I realized we could be earning a few more dollars in interest each month. (We have a high interest checking account, a perk from being regular customers.)

    It’s not much, but every dollar counts. And always SUBTRACT the payment when you schedule it. The money may be earning interest, but as far as I’m concerned it’s already spent.

  9. Changing your views on “leftover” ATM money is a big part of it. Before I got used to the idea of investing, any money put into stocks or funds seemed wasted–like it was gone forever. It felt like I’d have been smarter to have spent it on material goods, because then at least I’d have something tangible to show for my efforts.

    Flipping that switch (actually it was a slow process, not an instant flip) made a ton of difference. Now, those dollars left in the checking account represent a future, and those “wasted” dollars that were invested make me more excited and secure than tangible goods.

  10. I can relate to your financial discipline. Trim the “fat”, that’s what I say.

    Maybe in a future article you can share some tip on convincing the spouse on this mentality.

    That’s my challenge. It’s twice the work when your partner’s not on board.

  11. Regarding #7. Don’t carry more than one credit card with you:

    On rare occasion I will try to purchase something with my primary credit card and the transaction will be denied. Most recently this was because the CC company (incorrectly) suspected fraudulent activity. Other times perhaps there were some computer glitches. In any event, when these cases arise, it is incredibly convenient and will likely prevent significant embarrassment if you have a second credit card with you to fall back on. That is why I always carry two credit cards.

  12. Man, #5 (not checking your balance for permission to spend) is my current bugbear. I do this all the time, and it really pisses me off that it’s so hard to fight.

    I’ve taken to simply spending down any excess on bills, savings or debt as soon as possible, because if it’s in the checking account, it’s going to get spent (usually on eating out or going on dates with hubby, my only real splurges anymore).

    Luckily, I’ve recently taken on a position that doubles my income, so hopefully with this habit licked and more money coming in, I’ll be in not-paycheck-to-paycheck land soon.

  13. In the last six months or so I managed to save enough money to support myself for 6 months if I lost my job. I felt great. Until I found out that I may have a pretty serious illness. Seeing all that money drain away and knowing that I won’t be well enough to make it back anytime soon makes me feel sad and insecure. On the other hand, at least I HAVE that money. God knows what I would do if I didn’t – I don’t have even one credit card.

  14. Good article. My credit card debts is currently a four figure sum. My other debt is the car loan as I have yet to buy a house. My short term goal is to eliminate the credit card debts. My credit rating is good. Should I get a personal loan just to pay up the credit card debts in total simply because the interest rate is around 11.5%, much lower than the credit card at 18%? Or should I just debt snowball the credit card debts?

    Thank you ahead.

  15. <>

    I have to disagree with this statement. I have never not lived this way…it’s the way I was raised and I married a man who has no understanding (and doesn’t care to learn) of the position that living paycheck-to-paycheck puts us in. We are in a perpetual cycle of never getting ahead. I have implemented many of the ideas you suggest but I cannot single handedly fix our problem.

    I would love to hear your thoughts on how to get away from this lifestyle when one of the spouses is on board and the other is not. Divorce is not an option.

  16. the statement I disagree with is:

    Living paycheck to paycheck is a problem of your own creation

  17. First I must say this is very useful site, keep up the good work!:-)

    Then I have a question, that I think this is related to the first replay in this topic.

    I think it is easy to save money as long as the savings only affect yourself. But
    for example to have a lunch with your co-workers costs a lot (compare to what it is worth).
    Lets say you pay 5€ for a lunch at work. For this money one can cook 4 meals at home that
    are more aligned to your budget and work out program, it taste better etc.
    But to stop eating out could propable be bad for social life. How do you handle this?

    Relatives can also have very different views on how one should spend money.
    “But Of course you have to buy a new [X], bla bla” X = Insert any new home equipment
    /machine/thing you don’t need.
    How do you handle this?

  18. Nice article, but I feel that It really doesn’t help my situation. I make less than 30k a year and support myself and my husband (He currently can’t work)

  19. I also have the hardest time with #5. In fact I have taken to transferring any “leftover” money out of the checking account immediately because it will surely be slowly leaked out if it’s there.

  20. Good article. Once I’m out of full-time studies (career change in mid 30′s) I am looking forwarded to a fresh start. I plan on making living pay cheque to pay cheque a distant bad memory. Thank You Trent!

  21. My goal is to not have to use my overdraft protection. That means that I am living within my means. Also, you have a baby – which has it’s own costs – but I find that you don’t discuss having older children – and all the expenses they incur – from $300 – $500 year to play in PUBLIC high school sports – to the $ for equipment, gear, etc. This factors in to the “week to week” thing too. My husband and I contribute to our 401Ks, we have an add’l life insurance savings – we still need to have some fun $ – which for us is usually a pizza on Friday nights AND buying any food item at the grocery store that we want.

  22. I wouldn’t include waiting to buy food in paycheck-to-paycheck living. We buy food twice a month when we get paid because that’s what works for our family. I certainly would not say we are living paycheck to paycheck, we just choose to buy food when the money is plentiful.

  23. I’ve actually found that a different kind of paycheck to paycheck living is working for me. My income fluctuates depending on bonuses. As I put aside money for paying off debts, savings, etc, the amount I have left for entertainment/luxuries varies. If there is something I want that can’t fit into this pay period, I tell myself I’ll have to wait until the next paycheck.

    Howeverm I am saving, so hopefully larger emergencies and necessities won’t throw me for a loop. Basically, savings, bills, etc are definite, but luxuries depend on what’s leftover.

  24. when do you ever stop living paycheck to paycheck? we live paycheck to paycheck and don’t have any debt. i guess you stop living paycheck to paycheck when you no longer need a paycheck.

  25. I’ve found myself recently living paycheck to paycheck more than say, the last year because I am trying to pay down debt, as well as keep up with any surprise expenses – car repairs, medical costs. I try to pay as much as possible on the two credit cards as soon as the paycheck arrives (also pay the mortage, utilties, etc. first), then find I have *x* amount of money leftover till next payday. This would be for groceries, gas, any type of entertainment. Payday is Wednesday, so I am trying to play a game with myself to not spend any money on the weekend if possible. I am going to try and include my spouse if he will agree. He gets frustrated with the money situation, but I think he is finally getting the picture, but I have to keep working on him.

  26. I think it’s important to get to a place where both feast and famine can be borne with no change in living standard. For some people that means being able to weather a month with a short paycheck, but for us that means being able to handle summer electricity costs, winter property tax assessment, spring home insurance renewals, and every other seasonal or irregular expense without having a “lean month.”

  27. I’m living paycheck-to-paycheck right now (going by your definition of it)…but it’s largely by choice rather than strictly from necessity. Because my bank does not require a minimum balance–all they require is that I not go one cent into the red–I’ve been putting away every last euro towards paying off student loans, savings, and paying back my boyfriend for covering my health insurance (the company charged me for a whole year’s worth rather than the monthly installments, grrr).

  28. I feel like freedom from paycheck-to-paycheck living is defined by those moments when I go to the ATM on the 18th or 19th of the month and see that my balance has increased from direct deposit, and only then do I remember that payday was on the 15th. I know I have enough of a cushion to cover the trip to the grocery store, my automatically paid bills, etc, without having to check. I count on the money coming in over the long haul, but I wouldn’t have a problem switching to being paid monthly, or, with a bit of planning, quarterly.

    Of course, I might be better off paying a little more attention to my balances and keeping less in checking and more in high-yield savings, but that’s a whole different issue.

  29. Don’t carry more than one credit card with you.
    Leave the rest at home

    Nah, Don’t carry any. Futhermore, only have one. Cut up the rest

  30. This is good advice, but what do you do when you’ve done all this and you’re still living paycheck to paycheck? I don’t have a car, I only spend money on rent, food, bills, things I absolutely need, and I can’t save more then 50 dollars a month. Right now this lifestyle is OK with me, but I know that within the next year I’ll want to be more stable, have some emergency money, and not have to worry about groceries.

  31. Aimee -

    I hear you; my wife and I are in the same boat.

    When you are careful with your money (meaning that budget every month and spend every dollar according to plan), don’t spend on unnecessary items or luxuries like eating out, and still can’t get by, it means you need more income.

    You might need a short-term solution like getting a second job, or a more permanent solution like getting a better paying first job. But that is where we’re left.

    Like our former president used to say, “I feel your pain” (’cause I’m there now.) Good luck.

  32. I think you nailed my frustrations in the head. I made a blog of my journey of not living paycheck to paycheck anymore.I’m finding my downfalls of where I spend money. I know I have to look at other ways of generating money other than my current job which I love, but it’s not paying ALL the bills and there’s where the problem lies. Do I leave the job that I adore but pays less or do I find a job that is willing to give me more but I truly hate?

  33. I really enjoy your blog. One other plan is to first save money automatically out of your paycheck. This could be to a savings account, 401K, or something else. When I got a raise or bonus I didn’t spend it, I saved it. My last car was bought with cash. My husband is retired and I will retire in two years. Our house is modest but it is paid for. For the person who couldn’t get her husband on board, try writing down everything both of you spend money on. It’s pretty hard for him to deny there is a problem once he sees the input vs output of money. Good Luck everyone.
    My mother-in-law lived during the depression on a farm. Her story was whatever she could sell her eggs for, that was the money she could use to buy groceries. We haven’t resorted to that yet.

  34. I have lived payday to payday and I’m tired of it! Great job, Trent–love the article.

    Another frugal living website I visit calls this “living on the edge”, where one emergency can have you in a financial disaster because you haven’t planned ahead.

    Emergency fund equals peace of mind!

  35. Wonderful article and I will share this with my friends as an article that inspired me this week. I really enjoyed #6 as my family really benefited from paying bills as they came in. It may be tough to pay before the due date, but it can really make you feel great. Also, trimming expenses worked for us. We saved a ton of money.

  36. “be bad for social life.”

    Well, you could always downgrade on the social life. Clearly having any sort of human contact is a pocket-burner.

  37. I am slowly moving away from pay-check to pay-check living.

    What made it possible was on-line bill pay.

    It’s not that I didn’t have the money to pay X bill 2 weeks ago, it’s that I was too lazy to focus – sit down, find the bill, find the checkbook, write the check, find an envelope, find a stamp – THEN go to a mailbox?? Haha, no.

    Now, I have all my bills (gas, water, electric, cell phone, internet/cable, credit cardx2, rent, car payment, insurance, personal loan, DMV [don't ask], savings account) payed directly from my account 2 days after my monthly direct deposit. 13 freaking bills – all paid automatically. It’s f&&^king beautiful.

    Sure, it leaves me with less than 300$, but with 500$ from my wife every other week (for her share of the bills above), I never have to worry about ‘is this the real balance, or the fake balance.’

  38. It’s hard to save when you really need that money to pay bills…I have so much debt, I don’t know where to begin.

  39. This is a great post as far as it goes. A second job or part time small business was not mentioned. People who spend a lot of time recreational shopping, or dining out with friends, ARE WASTING PRODUCTIVE HOURS WHEN THEY COULD BE EARNING EXTRA MONEY. A part time job or business also TAKES UP YOUR EXTRA TIME SO THERE ISN’T TIME TO GO RECREATIONAL SHOPPING. With Trent’s excellent comments and adding a part time income stream to your full time income, you attack the problem from both demand side economics and supply side economics!

  40. What worked for me was having multiple bank accounts. I have one checking and three savings accounts. I have an ATM card (not with visa or mastercard) and a credit card with a decent grace period. I keep a register for the Credit card and pay bi-weekly. I keep about one weeks salary in the checking account (just over actually) The other two savings accounts have six months and any “leftover” money respectively. The leftover is what I use for larger than normal purchases that are not completely necessary (last purchase was a new computer).

    I handled the problem with having a spouse who was not on board by not telling her how much I make. Two jobs ago, I got a raise and did not tell my wife about it. I got a considerable raise with the next job, and did not tell her about that either. I give myself a 3% raise a year as far as spending money.

    My wife seems happy with this and I am not one paycheck away from homelessness. The checking account a joint account.

  41. “Sure, it leaves me with less than 300$, but with 500$ from my wife every other week (for her share of the bills above), I never have to worry about ‘is this the real balance, or the fake balance.’”

    I’ve seen this arrangement more and more recently – is it becoming more common to have separate funds/bills between spouses? I don’t see the advantage of this arrangement… what prompts a couple to take this step?

  42. “Living paycheck to paycheck is a problem of your own creation.”

    That’s only true if people are being irresponsible. If they’ve already done all the suggested steps, that’s different. Many people work a job (or jobs) that simply don’t make enough for them to live on, no matter how frugal they are, and no better work is available. Or worse, they can’t get a job at all, even though they are willing and able to work. That is a large and growing problem in America today, and blaming the victims does NOT help.

  43. Great post here. This is some useful info–all very straightforward and quite obvious, but I find that I tend to ignore every piece of sound financial advice I get. I think most of us do. It’s so important to save. So important.

  44. I found that even with three children and just my income, that budgeting each month on four paychecks really helped. When there were five weeks in a month, I put that check right into my savings account. That added up quickly and I bought many big items when I was ready to purchase them. I did carry a credit card, but hardly used it. When I did, I paid it off right away. I also used the 401K at work with 3 percent of my pay going to it. Our company matched part of that amount. We never went without, and I managed to pay a sitter as well. I am now retired and have my own home and new vehicle and can relax.

  45. While I generally agree with the “downgrade” advice. I would like to point out that replacing a “gas gulping” SUV with a new Prius may be good for the environment, but not necessarily for your wallet. Consider the math. You can buy a lot of fuel for the $10k to $12k extra you will pay for that Prius. In addition, older vehicles are less expensive to insure and incur lower taxes.

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  47. Well, we are currently living paycheck to paycheck, and the stress is unbelievable! My husband was fired last Thanksgiving and because of that he was unable to collect unemployment. Shortly after that, he had a medical emergency (thank goodness I put him on my insurance!). My husband had planned on going back to school to finish his degree (bad timing, I know) and he started spring semester.

    Meanwhile, we had to rely on my paycheck for the three of us (we have a 6 year old son). We had already been living frugally before this happened, so there was not a lot to cut out of the budget. We chose to get rid of daycare and downgraded our cable to basic, but still kept our internet service. We have go phones,no cell phone contract. I drive an older car with no payments, but my husband replaced his car about two years ago, so we have a small car payment to deal with every month. We don’t eat out or go out for entertainment, but we do have credit card debt from previous necessary repairs.

    My husband did find part time work a few weeks ago, after being out of work for about five months. It helps with some of the bills, but we are still digging out of the mess of debt that we have accrued over the past five months. We went through half of our savings just to cover major bills like heating bills, insurance, and property tax (we live in an older mobile home so this is not that expensive).

    I would like to get back to saving some money again and being able to pay our bills on time. I have always been a saver and this is stressing me out, always worrying about how we are going to pay for something. I try to stay positive. I don’t know how people do it that have one income and support multiple children in their family…

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