How To Avoid Living Paycheck To Paycheck (Informational Guide)

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Living paycheck to paycheck is a situation where nobody wants to live but reality over 75% of people live paycheck to paycheck as they are stuck in a situation where they have to spend money. 

When we start earning money, we tend to spend about 20% on unnecessary things. This is our natural behavior. Once we fulfill our wants, we create the new one in no time. 

This makes people living paycheck to paycheck as we do not calculate the budget we must keep every week or month. 

The time when I got stuck with a paycheck to paycheck, I was spending more than 60% of my salary for paying bills that include energy, phone, Emi, and credit card minimum payment.

It was a wrong decision from me taking a credit card. That made me go overspend and eventually got me into a situation where I was only able to pay the minimum balance amount.

Anyways, that was a big learning for me. 

Now I set my budget every month and follow the budget plan to avoid living paycheck to paycheck. 

If I want to buy any new thing, then I add it to my budget and try to cut down other expenses.

This budget idea keeps me under control.

You must also start creating your budget to control your expenses and save money every month.

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What Does Living Paycheck To Paycheck Mean?

Living paycheck to paycheck means you are spending all your income earned with no savings in your hand.

This usually happens when you do not plan your budget including all your expenses. The most common reason is, credit card bills or loan payment. 

In this process people start spending money using credit cards, expensive car etc. and later they end up paying EMI to lenders. 

This eventually brings to the situation in your life to live paycheck to paycheck. You cannot think to invest money on business or assets. Your spendings go limited because you already living on a paycheck. 

Why Do We Live Paycheck To Paycheck?

Let’s see how we get into living paycheck to paycheck by following the most common human behavior. 

I am going to explain to you how our cash goes out by calculating the common expenses that we make without any plans.

Calculate the unplanned budget

Taking $4200 per month net income after tax. 

Now, we will calculate the expenses. 

  • Room rent: $800
  • Utilities: $300
  • Car Loan: $700
  • Day Care: $600
  • Car Insurance: $150
  • Gas: $200
  • Groceries: $700
  • Baby Stuff: $150
  • Car Maintenance: $50
  • Weekend holiday expenses:500 per month
  • Credit Card bills: $100
  • Wifi: $50

Total Income $4200 – Total Expenses 4300 = (-100)

This is what the budget we carry every month. The only reason we do not save money is by not creating a monthly budget.

If your savings is zero then you must think about what are expenses that you are doing but not mandatory. 

Are there any recurring or unnecessary expenses that eat your money every month?

List down the common expenses that you must see and find some way to reduce the expenses to save money at least $1000. 

I know it’s not easy at the moment but it’s not impossible as well. 

Try to cut down your expenses and pay all your credit card dues and stop using it further. Credit cards usually make people buy stuff that eventually gets yourself over budget. 

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Create A Well Calculated Budget

Creating a budget is very important if you seriously do not want to live paycheck to paycheck. 

The first step to create a budget is to list down all your expenses. 

Make a list of spendings/Expenses 

list down the expenses that you can avoid or at least reduced it to some level.

You can use the below spending list and get some ideas.

  • No credit cards
  • Create a budget shopping list.
  • Create a budget grocery list.
  • Stop spending on expensive cars.
  • Stop unwanted subscription with the help of Truebill app.
  • No Cellphone upgrades.
  • Take a budget mobile network
  • If using WiFi at home, then ask your wifi service provider to get you the value pack to reduce the monthly bill. Otherwise, find an alternative.
  • Do not use a bank overdraft facility.
  • Reduce energy bill (do not waste energy)
  • Do not buy electronic items or gadgets when not required.
  • Make food at home rather than buying from outside.

The most common reason why people ruin their monthly budget is because they never plan their spendings.

They prefer to use a credit card rather than a debit card. I have seen people end up paying credit card bills from monthly savings.

What I feel is, credit card is a kind of trap. It makes people use it and pay the minimum amount. This makes you pay over 30%(annually calculated) charges for not paying the remaining amount. 

Follow this budget formula

Budget = all expenses – cut down expenses

Savings = All expenses – 20% reduction in total expenses

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Living Paycheck To Paycheck Statistics

I have done research through various authority sites on people living paycheck to paycheck and found some interesting points that you can see below.

  • 78% of US workers living paycheck to paycheck 
  • 10% of Americans who are earning $100,000 or more are actually living paycheck to paycheck. Over 50% of respondents said that they save $100 or less every month.
  • More than one-fourth worker do not save money.
  • 75% of workers are in debt and paying all savings to settle EMI.
  • Maximum workers who are getting minimum pay works more than one jobs just to survive every week/month. 
  • People who are earning around $3400, more than half of them are saving less than $100.


Strategies to Stop Living Paycheck To Paycheck

You must have a strategy to stop living paycheck to paycheck. It requires effort and little time. You may strive to reach a financially balanced life if you follow the most useful strategy that I am going to share with you. 

  • Keep Emergency Fund

You are working hard to make money and it’s your responsibility to save at least 5% of your total earning and keep it for the emergency fund. 

You can open a new bank account and start saving the money in separate account. You need to follow this process strictly. 

Suppose you earn $3000 a month. 5% of 3000 is $150. 

Your savings in 12 months will be $1800. 

We never know what expense may jump on our head anytime. So we should prepare to fight. In case of no emergency, you are getting the whole money saved in your savings account. 

This doesn’t mean that you buy a new smartphone straightaway. 

You must add up more money to it. This may help you to settle your heavy debt in the future. 

  • Side Income

If you get stuck into a paycheck to paycheck then there are few ways you can use to get rid out of it.

Invest some extra hours daily for side income and support your finances.

If you know something that you to do in your life, then this is the time. You should go for it.

It’s better if you start your own business or do freelancing  or spend tine in learning some skills to earn money on the side.

If you want to make money in spare time, then you can join Swagbucks. You will receive an online survey. You will earn money on survey submission.

We must have a side income business. It supports you financially. Though it’s not easy to get it in the initial stage but, if you work for the long term then you may see the results.

If you use your side income perfectly, then you may come out of debts and eventually help you save money consistently.

  • Settle Your Credit Cards Bill

It’s not a good habit to use credit cards frequently. It makes you buy things and put you in a debt.

If you have a credit card with the dues, then I would recommend you to clear your bills first. 

Cut down your other expenses for a few months but pay off your debt as soon as possible.

Bank allows you to pay minimum amount because they get a charge you a heavy interest on the remaining due amount.

This is the reason why you should clear your credit card first. Pay the full amount if possible or else make a good amount of payment every month.

If you do this, then you will surely take a sigh of relief from credit cards.

In the end, return the credit card to the bank. Use your debit card to pay bills.

  • Avoid Buying Things On EMI

Nowadays you can easily buy things on EMI. This makes people to buy expensive items.

Many EMI gets you items with zero down payment. People get such without paying a single penny, but the catch is, after one month the continuously deduct the amount with interest from your bank account or credit card.

This is where you get stuck. Now you have to get money to pay EMI. And you get closer to living paycheck to paycheck.

It’s better if you avoid EMI schemes and buy things on cash or plan to buy in the future.

I have gone through this situation and learned a lesson from my buying behavior.

This is the reason why I am emphasizing more on avoiding EMI and Credit cards.

It becomes very easy for us to buy you should understand how hard work it takes to earn money.

  • Stop Buying Expensive Items

If you are living paycheck to paycheck and still carrying a habit of buying expensive items, then you should stop doing it and find the other option to buy items for less price or discount.

The sale is something that attracts people and at that time you must ask yourself before checking, whether I really need this item?

You must have control over buying behavior. I know people are buying expensive things but doesn’t mean that you copy them and live your entire life to show off others.

Change this mindset and live life for yourself and not to show off others.

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Important Things To Remember

Living paycheck to paycheck is a situation that many people are facing. Either they are not managing their spendings or got into EMI and credit card/loan debt.

Nowadays we have 100’s of options for overspending. It’s easy to get loans or apply for a credit card but this opens the door for you to ruin your budget.

If you don’t have control over your spendings then in the future, your debts will make you control spendings by paying EMI/interest debts.

So, I would recommend you to create your own weekly or monthly budget as per your earning. Do not forget to keep 5% to 15% monthly saving into the list.

Create a budget plan and follow it with discipline. This will eventually keep you away from living paycheck to paycheck

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