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How to Stop Living Paycheck to Paycheck and Start Getting Ahead

Do you live paycheck to paycheck? Most Americans do. Money comes in on payday, and in two weeks (or sooner) it’s gone. When you don’t have emergency savings, or even a cushion in your checking account, the smallest unexpected expense can put your personal finances in a tailspin. But with a little planning and some discipline, you can stop living paycheck to paycheck and start building financial security—no matter how little you earn, or how much debt you have.

The key to getting away from living paycheck to paycheck is to reduce your spending each week so that there is a little left over. Just like you can’t get in shape without starting to exercise, you can’t get financially fit without tracking—and trimming—your spending.

Start tracking your spending

Get started by tracking what you spend. For just a few dollars a month, budgeting tools like Mint or Mvelopes can help. Budgeting isn’t the most fun thing in the world, but it’s vital if you want to get ahead. Once you have an idea of where your money is going, it’s time to start trimming the fat.

Find ways to cut back

Next it’s time to look for less obvious ways to cut back on your spending. Chances are, if you are living paycheck to paycheck, you’re going into debt. After all, if you don’t have savings, when an unexpected expense comes up, you’ll use a credit card or loan to take care of it. Then, when the credit card bill comes, you can’t pay the balance off in full because you’re limited to your paycheck, which is already earmarked for this month’s expenses. Not good.

Lower your credit card interest rates

If you have good credit history (need to check it?), take a long hard look at any credit card debt you have. Kicking this debt out of your life should be your number one priority! If you haven’t paid attention to your credit cards, you may be paying way too much in interest. These days, a credit card interest rate over 12% is too high for somebody with excellent credit.

Compare credit cards that offer generous 0 percent balance transfer offers for up to 18 months. Put your balances on that card and make more than the minimum payments every month. And don’t use that credit card—or any other card—for new purchases!

Save money on everyday purchases

Next, find bargains on things you have to buy anyway. Find coupons, shop online, or buy used from Craigslist or eBay. See if you can save money on car insurance by shopping around. All those Geico and Progressive ads are on TV for a reason. Insurance is a competitive business, and the chances are good you can cut your payments.

Avoid fees

Next, keep an eye on bank fees. Do you get dinged with overdraft fees? ATM fees? Ask your bank if you can open an overdraft line of credit that will protect your checking account if you should overdraw it. You’ll pay a small interest rate on any amount you dip below zero, but it’s far cheaper than a $30 fee every time.

Save on ATM fees by taking out all the cash you’ll need for the month at once, or shop for a checking account that refunds other bank’s ATM fees. (Many credit unions offer this).

Keep your money safe (mostly from yourself)

Once you’ve trimmed expenses, sock that money away so you aren’t tempted to spend it. I can’t recommend enough getting a high yield savings account for this purpose. FNBO Direct is my current favorite. You can open this high yield account with $1 and automatically transfer a few dollars every paycheck. While you can get at your money anytime via online transfer or ATM card—I recommend you don’t. Set it, and forget it.

That’s it!

Follow these steps and you’ll be on the road to financial security. You’ll be amazed how fast a few dollars a month can add up to $1,000 or more in savings. Not too mention how fast your credit card balances will drop if you get a 0% balance transfer, pay as much over the minimum as you can and—most importantly—do not charge any more!

What’s your favorite tip for getting out of the paycheck to paycheck rut?

Published or updated on October 6, 2008

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


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  1. Eric, that’s SO true. I’ve always been totally open about my finances in relationships, and I’m not even married yet.

    It’s a tough balance for a saving partner to make a spending partner see the need to be cautious with money–of course spenders can get annoyed by savers thinking they are cheap and no fun! Hopefully most people can reach a compromise. Good luck!

  2. I think another great tip, especially if you are married or in a relationship where finances are shared is to be level with your significant other. This is something I’m currently experiencing. My wife see’s extra money in the account after bills are paid and doesn’t consider next week or down the road and wants to go shopping for cloths or household items. We just got into a huge conversation two nights ago about the current economic cluster fu** and yesterday she tells me she wants to goto mexico for a few weeks for christmas. Seeing her family is important to her, but the fact that she doesn’t bring any money into the house and wants to spend upward to 3,000 for two weeks to mexico just irritates me. It’s really hard to get out of the pay check to pay check thing, or even save diligently when you and your spouse/significant other are not aligned.

  3. James says:

    I believe this is a fair example of paycheck to paycheck. Most working individuals certainly count on receiving their pay. However, if you need to delay certain payments such as bills and filling up the gas tank because you don’t have the supplemental funds to do so UNTIL payday, then you are most certainly living paycheck to paycheck.

    By keeping the cushion of good savings you relieve yourself of the stress and anxiety of regular payments and purchases, thus relieving the tension of ‘living paycheck to paycheck’.

  4. JvW says:

    I don’t know if what you described is not living paycheck to paycheck. Just because your paycheck is earmarked for debt reduction doesn’t mean you can go without a paycheck. I think you stop living paycheck to paycheck when you have enough money in the bank (or investments) that you don’t need to work at all anymore. These steps are a good start in the right direction, but for most of us, it’ll be a long time before we don’t care when payday is.

  5. Great point, Adam. It’s so easy to get caught up in clothes shopping once you’re out. You see something you “want” and justify it by thinking I “need clothes” anyway…but clothes add up fast.

    I know a lot of fashion-conscious folks (men and women) who find most of their wardrobe at places like Kohls, Target, and TJMax…and they’re saving a bundle.

  6. Adam says:

    Clothing can be a big money sink. Because it’s a necessity, I find people don’t think twice about dropping serious money on them. I just recently started shopping the clearance racks at Kohl’s. I’ve gone from paying $20-50 per item to paying $5-20 each.

  7. barak says:

    Great tips!

    Also, look at what is costing you the most. Consider how you can lower that cost. Get the most bang for your “buck” this way. Don’t get caught looking down for pennies while the dollars are flying away over your head.

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