Ten Steps to Stop Living Paycheck to Paycheck


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.

The choice is yours.

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.

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