You are a rat in a wheel. You wake up early, scurry to work (among the masses on the highway that inevitably slow you down….every….morning), run around like a chicken with your head cut off while you’re there, you trudge home, somehow get a meal together for yourself, crash in bed, and then do it all again the next day.
But, when the end of the month comes, you have no more money than when you started. You keep running around, working as fiercely as you can, but your savings never increase, you can’t afford to invest in your retirement, and you’re feeling more and more drained with each passing day.
You want off this ride, and understandably so, but no one can tell you how…until now.
Related: Who Owns Your Paycheck?
8 Ways to Escape Living Paycheck to Paycheck
Life may seem bleak, but believe me, there are plenty of ways to escape living paycheck to paycheck. In fact, I came up with 8 sound ways over a weekend of sporadic thought! Take a look, take some action, and free yourself from your rat’s wheel once and for all.
1. Cancel Your Cable
Annnnnd you’re probably ready to stop reading this article with this first step, “Cancel Your Cable”, but don’t. You need to truly understand this point.
The average personal finance blogger flippantly suggests cutting your cable as a means to save $100 a month. There’s nothing wrong with that. Cutting your cable will in fact save you $100 each and every month. BUT, I’m telling you to cancel your cable for an even bigger reason. One that supersedes all of my other “escape living paycheck to paycheck” suggestions.
The average person watches 5 hours of TV a day. How much original thought happens while you watch TV? How much money do you earn while you watch TV? None and none.
Want to earn more money? Then I’d aspire to be like the Asian race.
Asians watch fewer hours of television than any other race, and guess what? They earn more money. Instead of allowing their brain to turn to mush every single day like the rest of us, they feed their minds with reading, studying, and other forms of mental growth.
Want to escape living paycheck to paycheck? Throw your TV out the window and start thinking for yourself for a change.
2. Pay Off (or Sell) Your Car
Do you realize how ridiculous this is? I mean, you could buy groceries for a family of four for just $400 and still have $103 to spare! Why on earth do you need a $500 car payment?
The truth is, you don’t.
You don’t need a $500 car payment. You simply wanted the car. If you truly want to stop living paycheck to paycheck, you’ll ditch the ridiculously expensive car and buy a reliable used one for $5,000 or less with CASH (don’t think it’s possible? Check out this list: Top 10 Cars For Digging Your Way Out of Debt)!!
“But Derek, I’m under water on my car. How can I possibly sell it?”
This is a common question. People buy stupid cars that depreciate even faster than their monthly payments. They then end up in a position where they want to sell their car, but they owe more than they can sell it for.
So what can you do? You really have two options:
- Sell a bunch of other stuff to come up with the difference
- Take out a personal loan for the difference (or slightly more to help purchase a low-cost car)
Sure, you might know approximately where your money goes each month, but unless you write it down, you really can’t study it and escape living paycheck to paycheck.
I am a natural born saver. I really don’t spend money on anything. But, it wasn’t until I decided to buckle down on my debt and reduce my expenses that I realized how wasteful I was being with my money!
Here’s what happened when I started writing down my monthly expenses:
- Car Insurance: $1,200 a year – “Hmmm, that’s $100 a month. I bet if I shopped around, I could get that down to $80 a month.
- Phone bill: $80 a month – “That’s pretty steep with how saturated the cell phone market is today. I bet I could call my current provider, threaten to switch, and get that lowered.
- Mortgage payment: $724 a month – “The actual house payment is only $500 a month, what’s the other $224? Looks like PMI, home insurance, and property tax. I own more than 20% of my house, so I bet the bank would drop the PMI if I called them. And, if I shopped around on home insurance, I could probably get that amount dropped as well.
- Food: $500/mo. – “Whoa. I’m only one person! How the heck am I spending $500 on food each month? Ohhh….my grocery store is over-priced and eating out is killer, even at the cheap fast food places.
Take a look at the last three months of your expenses. Categorize the spend and take a serious look at it. Once you write it down, you can really start questioning everything. And you know what this leads to? Cash in the bank!!
4. Get Help
You’ve been living paycheck to paycheck for a while now. It’s time to reach out and get some help.
Who can you reach out to?
- Your church – many churches have programs that help you figure out your finances
- Your friends – which of your friends earns a decent wage but is extremely frugal? They’re a good place to start.
- Your family – there’s crazy in every family, and there’s also wisdom in every family. Find the financially wise family member and strike up a conversation. See where it takes you.
Reaching out for help might seem strange at first, but it’ll be extremely helpful. Think about it. Not only do you have someone that knows something about money, but now you have someone to hold you accountable!
5. Boost Your Income
You know what can seriously help you escape living paycheck to paycheck? Boosting your income (duh)!
There are basically two quick methods to do this:
- Get promoted at work
- Make money with a side hustle
If, in the next two years, there is a high probability that you can move up the corporate ladder, focus your energies on that. Work extra hours, sharpen your skills, and network with the right people. A pay jump of $10,000 means an extra $800 a month. I bet that would help your money situation!
If you don’t see a promotion on the horizon, then you might want to focus your efforts on a side hustle. Not sure what you could possibly do? Take a look at these 12 legit ways to earn an income from home.
There are plenty of ways to earn some additional income. BUT, please be wise with it. In the past, you’ve found ways to spend it all….again…and again. If you truly want to stop living paycheck to paycheck, keep your life just the way it is and use the money to pay off debts and save for your future. You definitely won’t be sorry that you did.
6. Reduce Your Home Expense
Your home mortgage should be no more than 25% of your take-home pay. Any more than this and you’ll be what’s known as house poor – meaning, you have a fricken sweet house, but you can’t afford to go anywhere or do anything fun because all your money is going toward your mortgage payment!
If you earn $______, your house payment should be no more than $_______ . Assuming a 35% tax rate. Let me fill in the blanks for you.
It’s likely that your home mortgage is WAYYY more than the recommended amount, which means you’re either living in a house that’s way nicer than what you really need OR you didn’t put enough money down when you bought the house.
If you’re serious about getting rid of your paycheck to paycheck lifestyle, then seriously consider moving in the next couple of years. Buy that modest home with a hefty down-payment and your mortgage payments will finally stop feeling like shackles around your feet. Start living your life…outside your home.
7. Start Paying Attention to Your Food
Food is expensive…especially when you’re not paying attention. Obviously, restaurants are pricey. If you want to reduce your food budget, stop eating out so much. That part is simple.
But, groceries can be expensive too. Do you shop for groceries at Family Fare, Spartan, Meijer, or Walmart? You’re getting ripped off. I know, I know, they’re supposed to have the cheapest prices around…but they don’t. Not any one store can have the best prices on EVERYTHING, no matter how big they are.
If you want to save money on groceries, you need to find a discount grocery store. In my area, these are Save-A-Lot and Aldi. We personally prefer Aldi. To give you a sense of the prices, here are the ones I have memorized from last week’s grocery outing:
- Milk – $1.89
- Eggs – $0.49
- Bread – $0.99
- Cereal – $1.99
- Crackers – $1.49
- Cheese – $0.99
- Frozen Pizza – $1.99
- Fresh Chicken – $2.49/lb
Pretty good, huh? My wife and I typically spend less than $300 on our groceries. No coupons necessary.
8. Find Your Reason Why
If you have no reason to stop living foolishly, then you’ll never change. Sure, you can take a few steps toward budgeting and saving, but you’ll quickly fall back into your old ways and nothing will change in the long-term.
To truly alter your financial future, something has to boil up inside of you. There’s got to be something that makes you squirm in your seat just thinking about it. When you keep thinking about it, you just can’t help but take action!
As I’ve heard it said before,
“When your level of discomfort exceeds the pain of change, you’ll change.”
Want to know why I stopped living paycheck to paycheck? Here are a few of the reasons:
- I was afraid – afraid I wouldn’t be able to afford food or shelter someday since I had no extra money
- I wanted options – mainly for my wife to stay at home with our children – to not have to send our kids to jail…I mean daycare….during the day as we try to make an income that exceeds the expense.
- I want to have freedom – freedom to take a vacation without charging it to a credit card and wondering how we’ll ever repay it. Freedom to give to others instead of ourselves. Freedom to have enough money so we don’t have to think about it.
Do you have a reason why? Will you finally stop living paycheck to paycheck?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.