It isn’t a unique problem, but that doesn’t make it any less stressful. The silver lining is that things can change for the better—and it starts with awareness. We’ve put together four key action steps that might a to help you stop living paycheck to paycheck.
In this article
1. Reset your budget.
The first order of business is figuring out why money feels tight in the first place. This requires taking a close look at your income and expenses, then updating your budget. Look back on your debit and credit card statements from the past couple of months, what. What recurring expenses do you see? You’ll notice essential bills—like rent, utilities, food and debt payments—along with fun stuff like eating out and shopping. When taken all together, roughly how much leftover income do you have each month?
Reducing or eliminating unnecessary expenses can go a long way toward in freeing up extra room in your monthly budget. This might translate to little compromises, like cutting cable, cooking at home, or doing away with splurgy subscription services. In some cases, you might choose to make a bigger lifestyle change, such as taking in a roommate to reduce your housing payment. It’s about doing what works for you so that you’re still able to enjoy your life without overextending your paychecks.
2. Prioritize saving.
Once you’ve got some clarity around your expenses and your budget is looking good, it’s time to think about your savings account. It goes hand in hand with financial security because it essentially serves as a safety net.
A recent survey conducted by the American Psychological Association found that 61% of Americans identify money as a leading source of stress. Having a pool of cash on hand in an emergency fund can help dial down that anxiety. Experts recommend saving up three to six months’ worth of expenses, but even having a small cushion of $500 could come to the rescue when you need it most.
To build up your emergency fund, check in with your budget to determine how much you can comfortably set aside each paycheck. Set up automatic transfers and watch your savings grow. (Your future self will thank you.)
3. Make a plan for paying down debt.
Your budget is going strong and your savings account is gradually growing—these are huge steps to breaking the paycheck-to-paycheck cycle. Now is also the time to think about paying down debt, especially accounts that have high interest rates (like most credit cards). Making minimum payments each month usually isn’t enough to move the needle in a big way. Instead, the idea is to keep up with all those payments while paying more toward one account. Once that balance gets to zero, you move onto the next one.
So which balance should you prioritize? There are multiple debt repayment strategies out there. You might choose to focus on the account with the highest interest rate because it’s costing you the most money. Some people zero in on the lowest balance first and work their way out from there. What matters most is making progress toward eliminating your balances.
If you need more wiggle room in your budget and have federal student loans, you can also consider going on an income-driven repayment plan to reduce your monthly payment. Refinancing your student loans is another way to potentially bring down your payment while securing a lower interest rate. You can also see if you qualify for a student loan forgiveness program.
4. Increase your income.
This may sound easier said than done, but boosting your income is another way to create more financial stability. If you have a proven track record of positive work performance, consider approaching your supervisor and negotiating a pay raise, bonus or promotion. The current labor shortage could give you significant leverage here.
You can also think about picking up a side gig to increase your income. Play to your strengths and focus on things you can do that won’t lead to burnout. For some, that may mean serving as a freelancer or consultant within their current industry. Others may prefer to moonlight at a restaurant, drive for a ride-sharing app, or turn a passion project into a side business. The goal is to generate more monthly income in a way that won’t have you burning the candle at both ends.
At DailyPay, we understand that the struggle of living paycheck to paycheck is a very real one. We’re all about financial empowerment, which is why we make it easy to access your earned pay whenever you need it.