How to Stop the Paycheck-to-Paycheck Cycle and Save Instead - American Credit Foundation

How to Stop the Paycheck-to-Paycheck Cycle and Save Instead

stress living paycheck to paycheck

For far too many Americans, sweating it out financially until the next paycheck arrives is an all-too-common occurrence. What’s more, for those who find themselves in such a sticky situation, it’s not hard to imagine that saving money is high on the priority list.

According to a recent survey from job-search site CareerBuilder, a full 78 percent of people working full time live paycheck to paycheck, an increase from 75 percent in 2016. And when it comes to building a nest egg, things aren’t much better; more than half of respondents, 56 percent, reported saving $100 or less each month.

Undoubtedly these are troublesome figures, particularly when you consider that most financial experts recommend people have an emergency fund that will at least account for six months of expenses. Bottom line, if Americans don’t figure out how to better manage their money and put some aside for a rainy day, they will inevitably find themselves deeper in debt or unable to pay their bills, not to mention any emergencies that creep up.

If this scenario sounds a bit familiar or if you feel you could easily find yourself in this situation in the future, it may be time to take a hard, cold look at the state of your financial health. Ending the month with all bills paid and savings to spare is a goal everyone should strive for. If you’re interested, the following tips are a good start.


  1. Track your spending. This is a crucial first step, after all, if you don’t know where every penny is going then you can’t reorganize your money and effectively budget, which will come next. Do this for a month and write down everything, preferably tallying your expenses by the week so you aren’t surprised at the end of the month. You don’t even necessarily have to cut back the first month, but it’s a good bet that once you start paying better attention to where your money’s going you might think twice before making any unnecessary purchases.
  2. Create a budget. This document should list all your monthly income and recurring monthly bills. Be sure to include non-monthly bills you know are coming up, like doctor’s appointments or sports registrations. Your budget should also include a bit of flex spending to deal with unexpected costs, like car repairs. Because you’re trying to save money, we recommend carving out whatever you can to put toward your first month of saving, even if it’s $15 or less. Remember, like many things in life, saving money can benefit from a bit of momentum, and seeing even a small amount of savings in your account can give you a mental boost and encourage you to find a way to sock away more the next month.
  3. Cut your spending. Once you’ve tracked your expenses and have a handle on where your money is going and you have a clear budget detailing where it needs to go, now is the time to determine where you can cut. Look at entertainment costs, dinners out, coffee runs, anything extra that you can live without. Ask for a lower car insurance premium, learn to collect coupons or buy what’s on sale. The hard truth is that many of us spend needlessly, even if just a little, and can carve out a monthly savings contribution if we’re willing to put in a bit of work, research and creativity to make it happen.
  4. Earn extra money. Think extra shifts at work, babysitting or housecleaning jobs, yard work on the weekends, a garage sale, anything to help get you out of the hole and build your savings account. Remember, every little bit counts and will account for even more if you’re decreasing monetary output at the same time. Keep in mind that momentum you’re trying to create.
  5. Set and write down savings goals. If you know what you’re working toward, it’s that much easier to achieve it. Getting your finances in ship shape will be an easy task, but having a clear purpose will keep you focused and help you reevaluate should you go astray.
    goal action plan
  6. Put the kibosh on credit card usage. If you do nothing else, stop making purchases on plastic. In 99 percent of circumstances, it’s not a good idea unless you pay off the balance every month. However, for those living paycheck to paycheck, we’d wager most of them aren’t and instead are carrying a balance month to month and incurring untold amounts of interest.
  7. Reduce your debt payments (temporarily). If your expenses are really tight and you’ve been paying more than the minimum payment amount but not saving any money, you might consider cutting your payment and allotting the difference to savings. However, this is only acceptable to do if you aren’t using your credit cards and driving up the balance. Also, this is a temporary fix that should be abandoned once you’ve built up some money, perhaps $1,000 or whatever monetary amount you determine is appropriate for your unique situation.

Though it seems money troubles are our national pastime these days, taking the right steps and thinking about your money in a responsible and even creative way can put you on a better financial path. It requires patience and persistence and perhaps some solid advice. For that, you can rely on the experts at American Credit Foundation. We are here to help with your financial needs.

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