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How to stop living paycheck to paycheck

Find yourself running out of money before payday? Here's how to spend less and save more without sacrifice.

By Stacy Johnson Oct 9, 2012 11:13AM

This post comes from Angela Colley at partner site Money Talks News.


Money Talks News logoIn a recent study conducted by the American Payroll Association, 68% of the 30,600 people surveyed said they would have difficulty if their paycheck was a week late. In other words, more than two-thirds of Americans are living paycheck to paycheck.


Image: Man holding out empty pockets. (© Dougal Waters/Photodisc/Getty Images)It's a situation I know all too well. I lived paycheck to paycheck for years, sometimes running out of cash days before my next payday. I spent too much and racked up debt. My entire financial safety net was the $50 minimum required to keep my savings account open.


My game-changing moment came when my paycheck bounced and the financial tightrope I was walking on snapped. I had to borrow money from family to keep from being evicted. I knew I was going to have to change something to keep that from happening again.


For the next few months, I worked on my finances. Now I have a pretty decent emergency fund, some money saved for retirement, and even a few investments. Here is how I did it.


Adjust your attitude

For some, living paycheck to paycheck can be a lifestyle choice. In my case, I chose to ignore my financial reality and live beyond my means, so I never got ahead. To help myself change my attitude toward money, I made a list of goals and rewards:

  • Pay off debts to improve my credit score so I could one day own a home.
  • Build an emergency fund so I could start saving for fun things like a vacation.
  • Stop wasting money on little things I didn't need so I could buy bigger things I did need later on.

Creating a vision of what I could have in the future made it easier to make better financial choices.


Create a savings-friendly budget

Surprisingly, I had a budget, but it was a horrible one that only accounted for my living expenses. It looked something like this:

  • Monthly income -- $1,800.
  • Rent -- $750.
  • Utilities -- $85.
  • Cellphone -- $85.
  • Internet -- $45.
  • Remainder -- spend on whatever!

I didn't budget for any of life's other necessities like toilet paper and food, and I didn't plan for the future. As a result, I paid my bills, paid the minimum amount due on my credit card, and wasted the rest of my income.


To meet my goals (and realize my vision), I needed a better budgeting system. So I created one that included every purchase I made in the month -- like groceries, personal care products, dog food and the little extras. And then I included putting money into savings. For years now, I've put 10% of my income into my savings account automatically. It's part of my budget, just like rent or car insurance.

Track spending

Once I had a detailed budget, I figured my financial situation would improve -- and it did. But I still found myself running out of money every month. Curious as to why, I saved every receipt for a month. At the end of the month, I added it all up and realized I was spending far more than I thought. All of those small purchases here and there were killing my budget.


Since then, I've kept track of my spending. Now I use online budgeting software like to track where my money goes, and I haven't gone over my budget in years.


Trim the fat

Once I got my spending under control and had some money set aside for emergencies, I started focusing on one of my bigger goals -- paying down my credit card debt. I added up how much I owed, about $2,500, and set a one-year goal to pay it off. To do so, I was going to have to come up with about $210 a month.


Here's what I cut:

  • Cable TV -- $65.
  • Gym membership -- $45.
  • Magazine subscriptions -- $33.
  • Monthly hair color at a salon -- $85.

Now I watch Netflix, take my dog for a run every day, read blogs and keep my hair its natural color. I don't miss any of it, and I was able to pay off my debt in a year. The following year, I started putting that extra money into my "vacation funds" account. Trust me, seeing my favorite bands at South by Southwest in Austin, Texas, was better than sitting in my living room reading Cosmo.


Don't trade life experiences for money

Living in New Orleans, it was just accepted that if I went out, I had to spend a ton of money. Every weekend my friends and I ate at a nice restaurant, bought concert tickets or racked up a hefty bar tab. I was new to being on my own and thought spending hundreds a month on social activities was just what adults did.


I thought I was going to have to sit alone in the dark every night to save money. So when the weekend rolled around, I told a friend that I needed to start saving money and she said, "Me too!" That is when it hit me. Most people don't love being broke. And maybe if we had something cheaper to do, we could all save some money.


So I went to my city's tourism center and made a list of every free activity I could find. I found free concerts, fireworks shows, festivals, parks and museums. Now my friends and I still go out every weekend. I still buy the occasional ticket to see the Saints play or eat at a nicer place, but most of our activities are free.


The bottom line: I didn't give up my life experiences just to save a buck. I still have fun.


More on Money Talks News and MSN Money:

Oct 12, 2012 9:37PM
Our White House and capital hill government should learn a few of these strategies. Get a budget and stop the bleeding entitlements for votes. Stop the duplicity of government programs and make just one effecient program out of it. It is time for better leadership to take charge!
Nov 3, 2012 4:48PM
Great article....purchase what you need, not what you want!
Nov 3, 2012 7:33PM
was this article wrote in the 90's whose cable is 65 dollars?
Nov 4, 2012 12:04AM

I trimmed all the fat and even some lean meat - can see bone. Cable - gone, cell phone - never had. Hair salons - keep my hair long and get a trim once a year, natural color - with some gray. Gym - get my exercise doing yard work and housework. Can't cancel  i-net  - daughter needs for school. Make  just over 2K before taxes. Mortgage -850. Have a child, no child support. Have been supporting a sibling( in another country) 100% for almost 4 years. Sometimes I do not know myself how I do it. However when times were better I was able to create an emergency fund, had to use it on a new water heater, roof repairs, etc. Try to do myself as much as possible, tiring but satisfying.

Article has useful advise for young people, how not to get into too much debt at a youg age. But not much use for someone like me: woman, over forty ( yes, I have  a college degree - actually 2) - written off. At the moment I am surviving OK, but seriously going down. Is this an american dream?

One last comment to the Pewter -do you realy think that romney would be better in the White House? People up that high serve the same lord, no matter what party they belong to, and not me or you, unless you belong to rich boy club.

US, quo vadis?

Nov 3, 2012 7:29PM
I have some relatives who are in serious financial trouble.  Any advice on how I can convince them to sell their Harley and pay off some of their debt?
Apr 2, 2013 11:48PM
Even while you still have credit card debt I recommend building a small emergency fund (~$1K) so you won't have to borrow more if something happens.  Then concentrate hard on paying off those debts.  If more than one debt bill, pay the minimum on all but the smallest. and put the rest of what you can afford on the smallest to pay it off fast.  This will help to encourage you.   As you get more debts paid off, you have one less minimum payment.  When the debts are paid off then finish building your emergency fund.

One thing I don't understand is why people will purchase on credit (except house, car and real emergencies).  You know you will have to pay it off and it will steal away from your budget and cost extra to boot.  If you can save up for the purchase then you know you can afford it  else you can find yourself in trouble.

I've read several places that recommended saving 10% of your income (minimum) for the purpose of investments.  This is a really great approach.  The same authors recommended living off 70% of your income and using the other 20% to pay off the debts.  When the debts are gone you have 30% to build the emergency fund and save for education, retirement and other investments.  Don't forget to give to charity or God and be thankful for your blessings.
Well, again this article is close, if you are in the same situation with the same amount of expenses. Trimming down can be done, but to some, at what costs?
Nov 4, 2012 1:17AM
Just remember eating out of  dumpsters is a great way to save money on food. Not only is it good for the environment but getting the runs from the germs will help you to lose weight and avoid gym membership fees. Buy lots of beer and return the bottles for deposit. The more you drink the more you will earn and ultimately  the more money you will have. Save money on toilet paper  by wiping with both sides of it . Oh sorry this is an excerpt from next weeks useless article.
Nov 4, 2012 1:05AM

If i hear one more idiotic nut sack preach the virtues of saving while still in debt im gonna puke.

 Lets do the math for once. Betty Brainless has a credit card at 15% apr with a $1,000 balance . She takes some dumb advice and opens a savings account  with an extra $1,000 that magically drops out of heaven.By the end of the year she earns a measely 1% interest if she is lucky - a whole extra $10. But on the credit card she pays 15% or $150 a year plus all their nice bonus and annual fees. Betty thinks that she is $10 ahead buts she is actually at least  $140 behind.

Nov 3, 2012 3:26PM
most ppl make less than 1000 a week and rent is 2000 a month  this article is  a steamin pile of horsesh!t
Nov 3, 2012 11:56PM
Gee Pewter - You sound like a GOP to Me!!!  I'm Voting for Obama because I think He has DONE a GOOD Job & WILL continue to do a GOOD Job, for the next 4 years!!!   At least He cares about People - every single person in the USA He Cares about!!!  It doesn't matter IF you are Rich, Poor,  Middle Class, the Working Poor - He Cares & WANTS TO HELP!!!!  What is so Wrong w/ that?!!   I kinda live paycheck to paycheck but I do put away $100.00 (that's all I can afford) from my Checking (where Paycheck is electronically deposited) & into my Savings Account.  The BIGGEST Rip-Off I have now for Bills is my Cable TV, which is $79.00/month!!   But,  Satellite TV would Cost Me even more!!
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