According to a recent study, 7 in 10 Americans live paycheck to paycheck.
If that is you, you are not alone. But it is also probably not a place where you want to remain.
Here are 10 steps to stop living paycheck to paycheck:
1. Believe it is possible.
One of the greatest hurdles to overcome for any change we desire in life is the obstacle of doubt.
If someone’s first response to the idea of no longer living paycheck to paycheck is, “That is impossible because of x,” they will never achieve it.
And it doesn’t even matter what x is. If you have decided already that the circumstances of your life are so stacked against you that you can never get ahead financially, then you never will.
The circumstances for you may be more difficult than others, but it is never impossible. Believe it is possible and that you have the power to make a change.
2. Don’t wait for more money.
Just like “this is impossible” thinking will keep you stuck. So is, “I need more money to get ahead.”
It is true, of course, that some people need to make more money to get ahead financially. But when we fall into the trap of thinking we can never get ahead without it, we never even give ourselves the opportunity to find out.
Let me try and prove this:
7 in 10 Americans live paycheck to paycheck. But why do 70% live with no financial margin? Is it because 70% of us don’t make enough money? Or is it because many of us are buying things we don’t need and spending money where it doesn’t need to be spent?
This is an important distinction. Because either we are held hostage by an unfair economic system that needs to be entirely blown up, or we just need to take more personal responsibility with our excess spending. It appears, in many cases, to be the latter.
Look deeper into the numbers and you’ll notice something important:
- 62% of consumers earning between $50,000 and $100,000 per year live paycheck to paycheck.
- 54% of consumers earning between $100,000 and $150,000 per year live paycheck to paycheck.
To put that into context, the median household income in the United States is $67,000. Over half of American households making twice the median income live paycheck to paycheck!
There are some extenuating circumstances of course, but not for 54% of Americans in the higher income bracket.
All that to say, there is no change possible if we constantly fall into “I just need more money” thinking.
Instead, the more money people make, the more money they end up spending. The time to get out of paycheck to paycheck living is now—not waiting for a big raise.
3. Make it the life change you want most.
There are more important things in life than getting ahead financially. But it is a change worth pursuing because it brings both calm and freedom into your life and family. It is a worthy pursuit.
If you are ready to make it happen, finally, I recommend making it the life change you want most. Changing the way you spend will require focus and intention. It will require a seriousness that forces self-reflection and energy.
Decide today, once and for all, this is the victory you are going to pursue in your life.
And make sure your immediate family is on board with it. When trying to get buy-in from your partner or kids, explain the benefits in a way that resonates with them. Approach the conversation clear on what it is going to take to achieve it. To accomplish that well, you’ll need steps 4 and 5.
4. See the benefits of owning less.
The most essential foundation for financial freedom is to spend less than you earn. If you cut back on your spending, you’ll be able to get out of debt and start saving. We’ve all heard that advice before.
But why is this step so hard to implement?
One reason I believe spending less is such a difficult step for many to take is because the solution sounds unattractive to so many. Buying less sounds a lot like taking a step backwards in life. In a world where success is often defined in material acquisition, spending less sounds boring, unfashionable, and destined for ridicule.
And that’s what I used to think too—until I actually tried it.
Fourteen years ago, I made the intentional decision to own less and buy less. It has turned out to be among the best decisions I have ever made in my life. As a result of paring down most of my possessions and determining to only buy things that are actually needed (rather than everything I ever wanted), I have found my life improving in very significant ways.
Now that I own less and spend less, I have more time, energy, and money available to me than ever before. Because I own fewer things that need to be cared for, I spend less time cleaning, organizing, and managing. I have more opportunity than ever before to pursue my greatest passions in life—however I decide to define them.
Rather than running up a credit card bill by chasing every new product or fashion line sold at the department store, I am able to invest in the things that make my life worthwhile and significant.
In this simple decision to buy and spend less, financial discontent in my life has been resolved. It also paved the way for more intentional living.
See the benefits—and be drawn to the lifestyle.
5. Sit down to do the math.
Overcoming the cycle of paycheck to paycheck living will require you to sit down with a sheet of paper and compare your income to expenses. But this does not have to require a detailed, track your spending every day, monthly budget.
Instead, I recommend crafting a Spending Plan. I have found it to be immensely useful in my life.
To get started, determine your monthly take-home pay (not your gross income before taxes, but your net income—the actual amount on your check or direct deposit).
Second, compare your fixed monthly costs to your monthly take-home pay. These are the expenses you currently have in your life that require some of your income every month—no questions asked. The actual monthly expense may vary (within reason) from month to month, but you know it is going to be there every month.
For example, your fixed monthly costs, might include: Charity, Mortgage, Groceries, Auto Fuel/Maintenance, Savings/Retirement, Utilities (Gas, Electricity, Water, Garbage), Insurance (Auto, Health), College loan repayment, Internet, Cell phone, Home Owner Fees, Kids’ School/Activities, etc.
After you have determined your monthly income and your monthly fixed costs, whatever dollars remain is your monthly discretionary income (the money that you have left over to spend as you desire).
This is your margin to begin getting ahead each month. If you spent no other dollars on golf outings, concerts, eating out, cinnamon rolls, or travel, these are the dollars you could begin saving and use to get ahead of your paycheck.
And of course, if your monthly fixed costs already exceed your monthly income, drastic changes to your baseline standard of living need to be made.
6. Admit that you probably spend more on nonessentials than you think.
According to one poll, the average adult in the USA spends $1,500 a month on nonessential items.
I have cited that statistic before and the comments are always the same:
“That’s absurd.”
“That is unrealistic.”
“Obviously that is only rich people.”
“No way! I don’t spend near that much.”
And to some extent, there is probably truth to those replies. Since that’s the average number, roughly half of us spend below that amount.
But if we are ever going to stop living paycheck to paycheck, we need to admit at some point that we probably spend more money on nonessentials than we care to admit. Once we start buying things and bringing them into our lives, it becomes very easy to no longer imagine life without them—and we start to consider them essential.
Consider this, you may not think you spend $1,500/month on nonessentials. But even if you spend half that amount ($800/month), you could save $10,000 next year by simply not buying things you don’t need.
7. Put your savings into a different account.
As you begin to see the benefits of owning less and change your spending habits accordingly, you’ll spend less.
Open a new account at your bank or use an online bank (Capital One, for example) to store those funds. Transfer money every month—automatically or manually. Pick an appropriate dollar amount and transfer it at the beginning of every month or pay period.
Only check the balance in your new account twice/year. Just let it grow slowly every month.
Taking the money out of your usual spending account will keep you from spending it.
If you need a goal to save towards, one paycheck worth in savings would technically remove you from the paycheck-to-paycheck statistic—and that’s the goal here.
Other experts recommend saving 3-6 months of living expenses. There’s nothing wrong with that goal, but it can seem very difficult to someone struggling to just get ahead of one paycheck. So I recommend choosing “one paycheck worth in savings” as your first goal to work towards.
8. Embrace a No Spend Period.
Commit to one month of buying nothing. (Except for some obvious exceptions: food, utilities, health, etc.)
No-buy experiments offer lots of benefits: They help us save money, reset consumeristic tendencies, provide time for other endeavors, and are environmentally friendly.
There are wonderful examples of people who commit to no buy experiments for an entire year—or even longer.
I have never set out for a year-long experiment, nor have I ever had the desire to do so. But I do find inspiration in their example. I see it this way, “If someone else can accomplish this experiment for an entire year, then surely I can do it for one month.”
For most people, just one month of not buying anything would result in almost $1,000 in savings. You might be closer to overcoming paycheck to paycheck living than you think.
PS: It’s important to mention here that getting ahead financially does not require lifelong changes. Adjustments in the short-term alone can help you reach the goal of putting one paycheck into savings. That’s why the predetermined no-spend period can be so helpful.
9. Don’t be afraid to consider drastic changes.
Cost of living numbers vary widely from one part of the country to another. And I can understand why making drastic changes may not be possible for some. But that should never keep us from considering them.
Maybe you are happy living paycheck to paycheck because it allows you to live in a certain part of town or the country.
Of course, if that is the case, you probably didn’t click to read this article in the first place. But if you did, and your mind constantly races to “you don’t understand how much it costs to simply live in my area,” you might be right. And you can always continue to choose that.
But any time we want something new for our lives, changes are required. Sometimes small, sometimes drastic. Don’t be afraid to consider all of them.
10. Be gentle with yourself and give yourself some time.
Overcoming the paycheck-to-paycheck lifestyle is possible. But it may not happen right away, it might take some time. Especially if we have families to get onboard with the decision.
And with any change that takes time, there are bound to be some setbacks and mistakes. Work to intentionally eliminate as many of those as possible, but be patient with yourself when they occur.
Two steps forward and one step back is still one step closer to your goal than never trying.
7 in 10 Americans live paycheck to paycheck. But you don’t need to be one of them.
Belinda says
Have a big yard sale to get rid of some of your stuff. You may even bring in enough to pay for your meds. Downsizing is a good thing. Praying for better health.
Lois S. says
I’m planning on taking some clothes to a consignment shop and donate some clothes to charity. I have a lot of clothes too big or dressy for me now
Lisa says
I guess it’s nice that we are not the only ones struggling even though we feel like we make smart money decisions. We have paired down and sold most of our belongings. We have no car payments, no credit card debt, purchase minimum food (easier now that the kids have moved out). Have a garden to help with some food. No frivolous spending. No medical debt, our only source of heat is free except for our time in cutting wood. Utilities are no more than $70 every 2 months. No cable TV, And so on…. There are no more areas left that we can cut back. Yet we are paycheck to paycheck despite all of this and both of us having full time jobs. Gone are the days of “as long as you have a job you’ll be ok”. This new era requires side hustles, resourcefulness, and more side hustles. Imagine if something happened, like a car needing repairs, or a family member gets sick? Next stop, homeless! I just pray that the Lord sees us through, because that’s truly all that’s left to do for some of us.
Lauren says
I only have one credit card, a VISA from my credit union. About two years ago the maximum amount owed on it was about $12,000. Currently it’s about $1,750. It’s been a diligent journey to get it down, and right now it’s taking a lot of willpower not to raid my savings accounts to get it down to zero. I have to continually remind myself that putting $300 month into savings (and keeping it there) is as important as paying off the credit card. If I remove that cushion and have an emergency then I’ll be back where I started.
Melissa Quinteros says
Dude pay off your credit card because if you don’t you’re paying more than you owe because of the interest then you start to Cushion in your savings account
Tim says
I agree. It doesn’t make sense to save $300.00 per month at 1 or 2 percent interest and carry a balance on a credit card that charges 17 to 30 percent.
Lauren says
I am a woman.
I already pay $400 per month every month on the credit card plus the $300 into savings. The interest rate on the card is about 10 percent, high, yes, but not in the 17% plus rate because it is a credit union card. And right now the balance is down to just under $1400.
I agree it would be better to pay off the card but I know that in February I will file my taxes and get a refund of around $4,200. That will go to pay off the balance with the rest into savings. So I am less than two months away from zero. And if an emergency like a root (tooth) amputation comes up again as it did less than a year ago I can again pull money out of the savings account to pay for it. That $1300 would have just been added to my balance on the card if I had not had the savings I did. True, it did hurt financially but I started right back saving again and never lost a month of payments on the card.
While your points are good and I certainly know the arguments, it is not always the best road to follow. I had been a member of Debtors Anonymous for a while some years ago and one of the best things I took away from it was not to throw all your extra money at paying off your debt, however tempting. Some to debt repayment, some to savings, some to personal pleasure ensues that you don’t feel deprived enough to go out and start spending again. So ultimately while it is costing me interest, it is also a lesson for me. And I have learned to learn from my lessons.
heather says
I agree to pay off the credit card. Check out Dave Ramsey’s debt snowball. We do not have a credit card. Once you pay it off and have a savings account that is above your credit card limit, I bet you will feel safer without it.
Lauren says
I’m not worried about using my credit card. I have developed in iron will about its limited use. (How do you think I got the balance down so low in a relatively short period of time? By turning as much toward it as I could while not using it.) But you are right about getting the savings above the limit; my goal is to get it above $100K. I have no doubt that with good habits that are not extreme in any direction I will get there. And I’ll be giddy as hell when that happens.
Cornelius says
I love this article. Since I started implementing these principles a few years ago, my financial life has changed drastically. There are a few of these principles that I’ve neglected, which I’ll definitely reinstate, especially the one about knowing how much you’re spending. The one that is new to me which I definitely would love to try is the ‘No spending for a month’. It could be a great challenge. Thank you for the inspirational article.
Hannah says
Great article, while I don’t expect my income to go up I will have more money in my pocket. I’ve finally paid enough on my credit card that my once minimum payment is more then the new minimum. I plan to devote even more money to paying off that card now that I finally have some leverage!
Ruth Dumont says
I have learned so much from becoming minimalist. As a senior, and ill…it’s particularly hard when 2 of my medications cost over $1300.00 per month and that is with Medicare D Drug plan. By knowing that I have to spend that each month, I’m more conscious of what I don’t need anymore to purchase. The other aspect, I lost insight, as that when you get to become “elderly”…you sit back and look at all the STUFF you worked hard for, and for what? At the end of ones journey, it doesn’t matter. You’re not going to take your STUFF with you, and trying to downsize at my age is almost impossible now, cause I still have STUFF. Did it bring me joy, at the time? Yes. But now my Stuff is a burden. One day, your readers (if not already) will be elderly, and trying to get rid of Stuff when you’re old and sick is burdensome. thank you for your tips…Also, it’s imperative to save while you’re young, as you don’t know what health issues you’ll have as you age. Medications are not cheap, and I can’t do without as the meds are for Heart failure. Blessings to all and wishing all a wonderful 2023.
Erika says
Hello Ruth. I am a senior too and agree with you completely. Retired for 3 years now I look around and just see STUFF! I have minimized as much as possible knowing we can’t take it with us. My husband refuses to cooperate and hangs on to EVERYTHING. He is an organized hoarder although the furniture is so outdated it makes me so sad. I feel alive from decluttering and thank goodness we have GoodWill and other organizations willing to accept donations.
I am always telling my kids to save, save, save as well.
I feel for you and the cost of health care. I wish you well and thank you for commenting on here with regards to the elderly and our fixed income. God Bless you and Josh for helping others. I am finally at peace becoming a Minimalist!
Eva R Steele says
My friend, I think to myself…why did it take me so long to see that stuff is not where my life should be. I recently got interested in Feng Shuai. It helped me declutter!!
Michele Rivera says
Thanks for the reminder about Feng Shui. I read “clear your clutter with feng shui” a few years ago and it was life changing!
Belinda says
Have a big yard sale to get rid of some of your stuff. You may even bring in enough to pay for your meds. Downsizing is a good thing. Praying for better health.
Cynthia Pietrucha says
As a small business owner, my “paycheck” is not consistent. When I sit down to do the math, how should I approach my varying income month-to-month? How can I determine my monthly income pay?
joshua becker says
I’d recommend taking the average of the last 12 months. Or paying yourself a set amount each month and leaving the rest in the business bank account.
Elizabeth says
Hi there. You may want to consider going with the lowest amount. This way you have a cushion if it is a bit higher
Terri Olson says
When your children get into High School there are always more expenses. Like sports, car insurance, activities, laptops, phones, pictures, and so much more. How do you manage these with the same income as before? Being a single parent there is no other income. After working full time I can’t even manage the necessities, let alone extras!
joshua becker says
Well, if there is no other income coming into the family, then the expenses can’t increase. You’ll need to either:
1. Decide which additional expenses are actually required.
2. Work hard to find other expenses that can be reduced.
3. Find additional income from you or your child in order to increase expenses.
Those are the options I see. Don’t assume every expense that everyone else is paying is actually essential, and don’t discount the responsibility and lessons your child might learn having to work for some of those things.
julie says
“Don’t assume every expense that everyone else is paying is actually essential, and don’t discount the responsibility and lessons your child might learn having to work for some of those things.” AMEN!
Donna Sims says
Add tithing. Yep, on your gross income. I, too, was a single parent with three sons. I determined to tithe the first of each paycheck. God has faithfully provided. Tithing also has enabled me to practice stewardship as a lifestyle.
Heather says
My daughter is in 11th grade, she does not require these extras you speak of. We did buy her a computer for her birthday, but she is using it to generate income. Small, but she is learning. She has been using the same phone since 6th or 7th grade, and paid half. She rides the bus. Does not do sports or activities, and she wears the same clothes until they are outgrown or destroyed (her choice). What I am saying is that most of the things we see as normal are optional.
Lory Vecchione says
Not putting her in sports is a big mistake as it plays such a huge role in social development.
heather says
And what is this huge role you speak of? Do you think sports are the only way to be socialized? My daughter has participated in sports before, according to her interests, but I do not see how forcing kids to do competetive sports every season is socially necessary. Have you considered the negative sides to competition? I am sure your comment was just to validate your own ideas, but I am just bringing up other points. If a parent cannot afford it, I do not see how it is wise.
Pat Chapman says
I made my savings. I opened a separate online account and set up a direct deposit for every paycheque. I never missed the money, as I could still pay my bills. It went so well that after a couple of months, I increased the amount. I still never missed the money. Now if something urgent ( new roof, expensive car repair etc) the money is there ready. No panicking necessary.
Mary Alice Crowther says
Are credit card payments considered fixed expenses until they are paid off or do the payments come out of discretionary?
joshua becker says
Yes, I would count any outstanding debts with recurring payments: credit card, mortgage, student loan, car, etc.
Barbara says
I have lived this and I absolutely know it to be true. I have lived on as little as $380 per month and when my income increased so did my spending. During 2020 when everything shut down we had $1500 per month left over! (I was still working, husband retired on social security) That’s what we were spending on restaurants, movies, entertainment pre pandemic. Now we have savings, eat at home and enjoy the great outdoors for entertainment. Note: Not rich, just middle income, now both retired.