8 Steps to Quit Living Paycheck to Paycheck

Does it feel like your paycheck is gone the moment you get it? Here's how to break that vicious cycle and make your financial goals a reality.

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Are you stuck in the all-too-common habit of living paycheck to paycheck? You don’t need me to tell you that it’s a self-defeating cycle. You simply can’t get ahead this way.

But escaping isn’t easy, especially if your paycheck is tight. Change involves not just the hard work of making new habits but, at a more-basic level, changing your ways of thinking.

And yet people do make this leap. They pay off huge debts, reach ambitious savings goals and turn their financial lives around.

If you intend to be one of them, read on for an eight-point road map.

1. Know where your money goes

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Some people swear by budgeting. Others are happier just tracking their expenses. Whichever you prefer, make sure you can see where your hard-earned money is going, right down to the last nickel. Keeping a careful eye on your spending is critical to getting a grip on overspending.

Don’t worry: Budgeting and expense tracking need not be painful. A program like YNAB (short for “You Need a Budget”) will walk you through starting a budget or an expense log and automate much of the process after that.

It can also pay for itself: According to YNAB, new users save $600 by their second month of using the program and $6,000 by the end of their first year, on average. To learn more, check out “How to Automatically Track Your Spending and Goals.”

2. Make saving painless

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What are your dreams? Whether they include a comfortable retirement, launching a business, putting kids through college, buying a new couch or buying a new home, you’ll need to translate those dreams into savings goals to make them a reality.

Setting concrete goals also helps motivate you, making saving easier. After naming your savings goals, set up automatic withdrawals from your paycheck to a high-yield savings account or retirement account so you’ll never see the money or miss it.

Keep increasing the percentage of your paycheck that you save.

If the withdrawal goes to a retirement account set up through your job, start by saving at least enough to earn your employer’s maximum matching contribution. Then, make small but consistent increases to save 15 to 20 percent or more of your earnings. For example, if you’re saving 6 percent of your paycheck now, bump it to 7 percent, and then raise it again later in the year.

When you get a bonus or a gift of cash, divert at least a fat chunk of that into savings, too.

3. Live on less than you earn

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Well, duh, you say. But it’s not as obvious as it seems. When you spend less than you earn, you can save. If you spend everything you’ve got, you can’t save, and with no savings, it is nearly impossible to get ahead.

The solution is simple, but it’s not easy. Stop spending money you don’t have.

Again, a program like YNAB makes this easier. It can automatically generate a variety of reports, including an income-versus-expenses report, which can tell you in real time whether your income for the month is currently greater or less than the expenses you’ve racked up in the same month.

4. Get comfortable saying “no” to the kids

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If you are giving in to your kids’ every request and demand, you are doing worse than just emptying your bank account and making it impossible to get ahead: You are teaching them it’s OK to overspend. And that’s true of adult children as well as young ones.

Turn things around by setting a household budget that sets realistic limits for spending and then sticking to the limits you’ve set. You’ll help your savings and teach them a valuable lesson.

5. Cut your housing costs

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Decisions about housing are super difficult. Traditionally — before the housing crisis — consumer experts advised keeping your cost of housing at or below 30 percent of household income. Housing was called “unaffordable” over that limit.

Today, though, many Americans are spending more, and housing costs keep growing.

High housing costs are a budget-buster because housing is typically a household’s biggest expense. The lower your income, the worse the problem is, since housing consumes such a big chunk of your income.

You may need a radical lifestyle change to solve this problem. Take a clear-eyed look at your options, even though you may not like them: Move out of your neighborhood, out of town, out of state or in with relatives, or share lodging with others.

If you continue spending so much of your income on housing that you can’t save, you are probably limiting your opportunities going forward.

6. Drive a used car

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Buying a new car is like throwing money into a rat hole. Unless you have money to burn, it is one of the worst financial moves possible. The average midsize sedan loses $7,419 in value in its first year alone, according to Edmunds.

Since most of the depreciation happens in the car’s first two years, buying a two-year-old vehicle is a much better deal than buying new.

7. Learn to cook

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It’s always been cheaper and healthier to cook at home than to eat out constantly, and the benefit is growing.

According to the federal government’s latest monthly Consumer Price Index (CPI) data — which is a measure of inflation — the CPI for restaurant purchases rose 2.5 percent between April 2017 and April 2018. That’s five times as fast as the rate at which the CPI for grocery purchases rose during the same period: 0.5 percent.

Unsure how get started cooking at home? You’ll find lots of guidance and tips at Localpizzadeliverywalledlakemi.info. A few examples:

8. Forge an independent spirit

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Some people save money easily and intuitively. Others must come to it through struggle. If you’re in the latter situation, becoming independent from the habits and opinions of your friends and family is crucial.

You’ll need to stop trying — consciously or unconsciously — to keep up with the lifestyles of others, especially the spending habits, trends and consumption among celebrities and in the media.

When the pressure is on to spend, it takes a strong individual to buck the current. You must listen only to your own drummer. Keeping up with the homes, cars, fashion, vacations, sports equipment or even makeup choices of others will sink your financial ship as reliably as if you had a gambling habit.

Finally, take heart in knowing that one of the greatest rewards of breaking the paycheck-to-paycheck habit is that you’ll feel much less stressed-out.

Life settles down when you’ve made those spending decisions in advance, based on values and realistic limits. Having decided what’s important frees you from agonizing over each spending choice.

For more help straightening out your finances, visit the Localpizzadeliverywalledlakemi.info Solutions Center.

What strategies have you used to keep your finances afloat? Share with us in comments below or on our .

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Marilyn Lewis
Marilyn Lewis
After a career in daily newspapers I moved to the world of online news in 2001. I specialize in writing about personal finance, real estate and retirement. I love how the Internet ... More

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