6 Tips to Break The Cycle of Living Paycheck to Paycheck

• According to a study by PYMTS.com, 59% of Americans live paycheck to paycheck.
• It can feel impossible to break the cycle of living paycheck to paycheck. 
• But since a cycle can be difficult to break, there must be extreme discipline, financial self-control, and a complete change of mindset for a person to at least have a chance.

We’ve all heard the phrase “living paycheck to paycheck.” You may have even used it to describe yourself. But what does it actually mean? And how can you get out of that cycle?

The answer to these questions are surprisingly simple, but doing it is anything but easy.

What is Living Paycheck to Paycheck?

Living paycheck to paycheck is self-explanatory in the name. By the time you get to your next paycheck, the previous one has already run out. This means your expenses are greater than or equal to your income. If you spend more than you make, then it can be dangerous for your financial health. 

When you’re living paycheck to paycheck, you know that you have a certain amount to spend each month, and that is what you spend. The problem arises when you have an unexpected expense. Say you have an emergency dental bill, or you have to travel for a funeral, or your car breaks down. Any one of these emergencies can derail your delicate paycheck balance and spiral you into debt.

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If you’re living paycheck to paycheck, you must be poor and making very little money, right? Not necessarily. Living paycheck to paycheck is simply the condition of running out of money before your next paycheck comes in. If you make $10,000 a month and spend $10,000 a month, you are living paycheck to paycheck, just as much as someone who makes $2,000 a month and spends $2,000.

In fact, the number of Americans living paycheck to paycheck and the range of salaries of Americans who live paycheck to paycheck will surprise you. Of course, there are a lot of advantages to making a higher salary, but it doesn’t protect you from making poor financial decisions.

Paycheck to Paycheck by the Numbers.

So who is living paycheck to paycheck in America? Millions of Americans are living paycheck to paycheck.

According to a study performed by PYMTS.com in conjunction with Lending Club, 59% of Americans live paycheck to paycheck. Unfortunately, that means that more than half of all Americans pay their bills every month and have nothing left over, or worse, they get into debt.

While the effects on those who make $50,000 or less are higher (nearly 75% of people in this group report living paycheck to paycheck), those making higher incomes are not immune either. Nearly 43% of Americans earning over $100,000 also reported living paycheck to paycheck.

Besides the raw number, “59% of all Americans live paycheck to paycheck”, two other pieces of this study should not be ignored. First, it is getting worse. In May 2021, 54% of Americans were living paycheck to paycheck. So Americans living paycheck to paycheck has increased by 5% in the last year. Second, this increase has much to do with the pandemic and recent increases in inflation. Nonetheless, it is still concerning.

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On the other hand, the percentage of people living paycheck to paycheck who aren’t paying all of their bills every month decreased. That means that living paycheck to paycheck, in general, is increasing. Still, the number of people who are at least financially stable (meaning their expenses don’t exceed their income) is also growing.

If you are currently in the first stage, living paycheck to paycheck without covering your bills every month, then your first step would be to become financially stable. Then from there, you can take steps to break the paycheck-to-paycheck cycle entirely and start growing from financially stable to financially independent.

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How to Break the Cycle of Living Paycheck to Paycheck

Now that we realize that living paycheck to paycheck is a problem, the question is, how do you get out of it? Is it only possible to break this cycle with a windfall like inheriting money or winning the lottery?

Actually, it is very much possible to break the cycle. But since a cycle can be difficult to break, there must be extreme discipline, financial self-control, and a complete change of mindset for a person to at least have a chance.

6 Tips to Break The Cycle of Living Paycheck to Paycheck

Living paycheck to paycheck can be difficult, especially when all your money goes toward necessities like paying rent, utilities, and buying groceries. However, here are five tips to help you break the cycle of living paycheck to paycheck.

1. Negotiate a higher pay at your job - In today’s job market, it’s important to ensure you are getting paid what you are worth. Research various salaries that employees in your position are getting paid. If you are getting underpaid, then you should negotiate a higher salary. 

2. Find a new job - If you tried to negotiate a raise, or feel you are overqualified for the job you have, then find a new job that better suits you. Discuss the salary and benefits before accepting the offer if the job chooses you to fill the position. 

3. Start a side hustle - Do you have a hobby like baking, designing clothes, or creating content? Turn your side hustle into a business by following these steps. A side hustle has many benefits, like earning extra income and doing what you love. 

4. Get certified for a skill - Do you want to learn how to sell or market so you can eventually market your business and sell your products? Then you should take a course that teaches you the skills you want so that you can continue your education. In addition, a skills certification can help you grow personally and professionally. This will allow you to add value to your job or your business. 

5. Rent out a space in your home - If you own a home, you can rent a space like your guest room, garage, or driveway. You can earn additional income by simply helping others.

6. Budget efficiently - Many people think that they are living paycheck to paycheck when really its a lack of budgeting. By tracking your income and spending, you can see if there is a small amount of wiggle room (of at least $5, if not more) to set aside for emergencies. You can better manage financial surprises if you have an emergency fund. A budget will align your money with your financial goals. 

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The Money Wrap-Up 

If you are one of the Americans living paycheck to paycheck, first realize that you are not alone. There are many reasons you can experience living paycheck to paycheck, like economic inequities, being a low-wage earner, and inflation-increasing living expenses. However, it is possible to break the cycle by following the steps listed above.