Why You’re Living Paycheck to Paycheck and What You Can Do About It

If you live paycheck to paycheck, you are not alone. People of various economic levels can fall into this pattern. CNBC claims that 63% of Americans are living paycheck to paycheck.

Spending your full wage each month puts you at risk of significant financial difficulty if an emergency occurs. Fortunately, you may attain financial security and generate some breathing room by improving your financial management.

Let’s look at some of the most typical money blunders that put individuals on the verge of financial ruin, as well as actions you may take to break free from living paycheck to paycheck.

Only Paying the Minimum on Debts

Moving on, paying the minimum on your bills when you have no money and strategic planning to get rid of them can be a great way of freeing up some cash. However, resist the desire. It applies for any credit-line, whether it is a credit card or an educational loan, paying only the minimum amount results in paying high amount of the interests in long run.

Paying, for instance, the least 2% of a $5,000 credit card account with an 18% APR, may cost you hundreds of dollars in interest and take more than three decades to pay off, GOBankingRates revealed. This technique entraps you into debt.

Too Many Subscriptions And Memberships

Have you lately added up on how much you are spending on those subscriptions? A CNBC study shows that there is an illusion of the monthly subscription price where customers are off by an average of $133. You can easily justify some additional $10 or $15 for membership, but the sum climbs very quickly.

As reported by CNET, half of the consumers continue their subscriptions to at least four SVODs, and a quarter of them – to nine and more. If you do not utilize it to the last penny, then it is a sheer waste of money. Perhaps it is time to measure a dollar and unsubscribe from unwanted newsletters and magazines that we pay for.

People’s fitness related memberships are another thing to ponder. USA Today as quoted by fitness facilities reveal that People pay more than $60 each month for gym and fitness center membership, notwithstanding the fact that 10 out of 15 memberships are hardly utilized. Another way of saving is through relinquishing what one does not need- this could be subscriptions to certain magazines or newspapers for instance.

A “Keeping Up With The Joneses” Mentality

It might feel like everyone around you is living extravagantly. Friends who regularly dine out, neighbors with new automobiles, and siblings who are improving their houses can all put pressure on you to splurge.

If your living expenditures are prohibitively expensive, breaking the paycheck-to-paycheck cycle is unlikely. It is critical to break out from the “keeping up with the Joneses” attitude. Examine your expenses and identify places where you may save money. While difficult, it may make a big impact.

No Emergency Fund

According to GOBankingRates, 34% of Americans have no savings, and 69% have less than $1,000 set up for emergencies. People living paycheck to paycheck frequently fall into these categories.

Without sufficient funds, an emergency might result in credit card debt or payday loans, repeating the paycheck-to-paycheck cycle. Creating an emergency fund is critical to avoiding this.

Failing to Pay Bills on Time

Late bills might sometimes force you to live paycheck to paycheck. Late fees accumulate, and a low credit score caused by missing payments can lead to increased future interest rates on loans, making them more expensive.

Keep track of your invoices and, if necessary, set up autopay to ensure on-time payments.

Break the Cycle of Living Paycheck to Paycheck

Finding a way to get out from the paycheck to paycheck trap may seem challenging, but it is not impossible. Learning how to regain control of your financial life is not an easy thing to do. It is recommended to start implementing this strategy with a few tangible actions.
Making of a Budget and Saving More of Your Money

First, draw a practical budget with all the necessary expenses and even better – with a safety cushion. Divide your budget into headings that are food and grocery, beauty and grooming, leisure and fun, and so on. When you have used the amount you decided for that category, do not use that category for the rest of the month. Draw a personal goal that will force you to cut your expenditure close to the next level for you to save more.

Get Out of Debt and Stop Taking On More

Credit card debts run at a very high risk of getting into a spiral where one finds it extremely hard to get back on track. Cease employing credit cards as soon as you are in debt and adopt the practice of using cash anywhere that is possible. This may help to shorten costs. ValuePenguin found that consumers are willing to pay as much as 83% more when paying with credit cards as compared to when they use cash. Do not apply for other loans, for instance car loans, other than the outstanding ones.

Create an Automatic Savings Account

If you’re new to saving, set up automatic payments from your salary to a savings account. According to Investopedia, automated savings programs can help with budgeting and expenditure control. Starting small is good; seek to build your savings over time.

The Bottom Line

Living paycheck to paycheck is tolerable, but it will catch up with you. Unexpected expenses, such as a medical emergency or home maintenance, can be financially catastrophic if you do not have savings.

Breaking the paycheck-to-paycheck cycle is difficult but doable with patience and specific efforts. Improving your financial status is a long-term process that requires patience and persistence.

Sebastian Lee

Associate Writer • Social Media and Cultural Trends Writer

Sebastian creates compelling posts, topics, and reviews of social media and cultural trends to help readers on what’s in and what’s out.