How to Break the Cycle of Living Paycheck to Paycheck

Pretend You Earn Less Than You Do

Give yourself a cut in pay. The goal is to put 10% in savings from each paycheck into your savings account. The easiest way is to do an automatic direct transfer from your checking account to your savings.

Create a Budget

In order to stop living paycheck to paycheck, you need to know where that paycheck is going. Creating a budget is simple with Google docs, or look into other online tools and sites to get started.

Build an Emergency Fund

Once you have your budget in place, review it and break it down into non-discretionary expenses (rent, groceries, utilities, etc.) and discretionary expenses (eating out, entertainment, clothes, etc.). See where you could cut down on eating out and put that money towards your fund. Even starting with just a little amount is great and helps you build the habit.

Consider Downsizing

It may be time to consider a lifestyle change. Consider moving to a smaller place. Replace going to that expensive gym with a trip to the local park. Think about if you really need that brand new car or if a used one would work just as well.

Pay Down Debt

If you have a lot of credit card or unsecured debt, try paying the minimum on all but one of them and aggressively pay down that one card. Once it's paid off, attack the next one. If you're so deep in debt that you can't fight your way out, consider consulting with a company who specializes in debt consolidation. They will help you negotiate your debt into smaller amounts that you can begin to pay off.

Don’t Forget Your Future

Putting at least 3% of your paycheck into a retirement fund is a great idea, or maybe when you get your first raise instead of thinking of it as free money, simply put it into a fund and forget about it. You'll be glad it's there when you need it in the future.