How to Stop Living Paycheck to Paycheck 

Key takeaways 

• Living paycheck to paycheck is a vicious cycle that saps your ability to save, and to spend comfortably on the things you value. 
• Paying down your debt is an important first step to breaking free. 
• Bringing your spending under control is another key step. 

If you’re living paycheck to paycheck, you are not alone. According to a 2023 survey from Payroll.org, 72% of Americans would be in trouble financially if their paycheck was delayed.  

There’s no shame in being financially strapped. But there are better ways to live. If your living expenses swallow up your entire paycheck, you have no ability to save, and you may not be able to pay down any existing debt you may have. That may mean that you have to go further into debt to manage any emergency expenses that arise, which only makes things worse. 

With a little preparation, however, you can get yourself out of the vicious cycle.  

There are a lot of reasons it’s hard to build up your savings, and the cost of living is a big one. Everything from homeowners’ insurance to groceries is more expensive now than just a few years ago.  

Still, there may be some things that are within your control. You can eliminate high-interest-rate debt, which erodes your buying power. And allowing yourself little splurges may not be helping, either. In this piece, we’ll cover those topics, as well as a few other things you can do to get your financial house in order.  

Paying off debt 

You probably already know why it’s less than ideal to have a lot of expensive debt, but we’ll say them again: 

• It costs you a lot in interest. 
• It may negatively impact your credit score, which can impact your ability to borrow in the future, your auto insurance premiums, ability to rent an apartment and even sometimes get a job you want. 
• It may become difficult to keep on top of if you owe money to multiple creditors. 
• It may keep you living paycheck-to-paycheck, with less flexibility to spend on things you really value, or to save any money. 

How can you get out of the debt spiral? We have a lot more detail about different strategies for tackling your debt elsewhere on the blog, but here are some of the best options. 

Start by listing your debts and deciding on the best approach for paying them down. There are many strategies, including the debt avalanche and debt snowball approaches. A personal loan that consolidates other types of debts may also be an option for you, but you’ll have to make sure any new loan you take out has a lower interest rate than the ones you’re trying to pay down. If your debt has grown to the point where you are having a hard time even making your minimum payments, you may want to research debt settlement. 

Or you may be able to tackle it all at once by tapping your home equity. 

If that sounds good to you, a home equity agreement (HEA) from Unlock may be able to help. If you own your home and you’ve built up some equity, an HEA might be you’re a good bet for paying off debt. As a reminder, equity is the difference between the amount your home is worth and what you owe. With an HEA, you get a cash payment upfront in exchange for a percentage of your home’s equity.  

By taking action, it is possible to pay off your debt, and emerge with a stronger credit profile – as well as better financial and mental health. That’s a huge step toward kicking the paycheck-to-paycheck cycle. 

Stop overspending 

You probably don’t need us lecturing you on how to spend. But here a few areas where you might be most easily able to cut back, just in case: 

• “Fun” things like entertainment or take-out food 
• Brand-name essential items where generic versions are readily available 
• Your utilities (electrical, phone, cable)  
• A new (or newer) car or mobile phone 

One of the best ways to manage your spending is by starting to budget. Building a budget is simply creating a spending plan. You should start by thinking about your goals — what you want to be spending on — and listing what you do spend on now.  

Group your expenses into the four categories: fixed costs, variable must-buy costs, savings and discretionary expenses. Start keeping track of your spending and see how you match up to your goals. By keeping discretionary costs last on your list and prioritizing things like debt payments and savings, you’re setting yourself up for a better financial situation. As you make progress toward your goals, you may find you don’t even miss the little splurges. 

One other possibility may be hiring a financial coach to help you get hold of your spending. These professionals can be invaluable in helping you get your financial house in order, especially if you try to tackle some of the steps listed above and find you’re struggling.  

But “invaluable” doesn’t mean “free,” and if you’re already living paycheck-to-paycheck, paying someone to help you may not make sense, at least not right now. 

Take the next steps 

If you’ve taken the first steps to rein in your debt, and you’re tracking and monitoring what you’re spending, you should feel good about your progress. The next step towards ending the paycheck-to-paycheck cycle is to build a cash cushion in case something goes wrong. Here are some ideas to get you to that next step: 

• Consider taking on a part-time job or gig work to supplement your income. 
• Ask for a raise, a promotion, or a bonus, at your job if you are eligible and deserving. 
• If you own your home and have room, consider taking in a paying tenant. 
• Make sure you always prioritize paying into your savings fund so that you have a cushion if something does go wrong. 
• Consider a home equity agreement from Unlock. If you’ve got equity in your home, you can tap it to help pay down your debt, as we mentioned earlier. Or you can use it to fund that cash cushion – otherwise known as an emergency fund.   

Conclusion 

If living from paycheck to paycheck is a cycle you’d like to kick, we salute you. There are some important big steps that you need to take to get there, such as reducing the expensive debt you’re paying, getting a handle on your spending and starting to save on a regular basis. Unlock’s HEA is designed to help people who are embarking on the same journey as you are.