8 Ways To Escape Living Paycheck-to-Paycheck — Without Sacrificing Your Lifestyle

Asian woman stressed while calculating money expenses and planning budget at home, working at home and Personal finance concept

When you live paycheck-to-paycheck, you think defensively. You worry about the heavy debts on your back, about how you’ll pay for every bill due this month. It leaves little room for long-term strategic planning — or for setting ambitious goals and enjoying daring dreams.

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To start playing offense and planning for a brighter future, you need to stop living paycheck-to-paycheck. But how do you break the cycle?

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1. Freeze Lifestyle Creep

You got into this situation in the first place because you let yourself spend more money as you started earning more money.

Think back to your very first paycheck and compare it to your current pay. You used to live on less, which means you know it’s possible to do.

Lifestyle creep, or lifestyle inflation, occurs when you spend more money as soon as you start earning it. It’s what causes you to keep living paycheck-to-paycheck no matter how much you earn.

Before getting into actual tactics, start with a mindset shift and a commitment: “I will freeze my current lifestyle spending, even as I earn more money.”

Otherwise, you’ll still be broke even when you earn 50% more than you do today.

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2. Fix a Budget

If you had a working budget, you wouldn’t be in this fix either.

Most people get budgets backwards. They start by adding up their expenses, and put savings as the last line at the end of the month. The leftovers, in other words.

Start with your target savings rate before writing in a single expense. You build your lifestyle expenses around your savings rate, not vice versa. Decide on a certain percentage of your income that you plan to save — then force your living expenses to make it work.

That order of operations goes beyond just planning your budget. You need to set aside your savings first, before you have a chance to spend it. Automate your savings by asking your employer to split out a percentage of each paycheck to go into your savings account. Or, create automated recurring transfers after each paycheck.

Of course, that leaves you with fewer dollars to actually spend each month. So where do you trim, if you don’t want to sacrifice your quality of life?

3. Ditch Low-Impact Splurges

Every discretionary dollar you spend comes with a “return on happiness,” low or high. And it’s different for each of us.

You might absolutely love your lunches out with coworkers, but the drive-through coffee and doughnut on the way to work are just something you grab for convenience. Or vice versa.

You have to cut spending somewhere. Put every dollar you spend under the microscope. Which ones make your day? Which ones could you give up without spending the rest of the day moping?

Make your own coffee to take in a thermos each morning. Make extra food at dinner to take as leftovers for lunch. Stop ordering take-out or delivery.

Leave yourself one or two tiny splurges that make an outsized impact on your happiness. Relinquish the rest.

4. Cancel Rarely Used Subscriptions

Likewise, you’ve probably accumulated more subscriptions than you realize.

A few of them you probably use every day, or at least every week. Keep those.

Cancel the ones that you don’t use every week, after doing a thorough audit of every single subscription you pay for — and how often you use it.

5. Boost Your Salary

You can increase your savings rate from two directions: spending less and earning more.

Start with some of the simple cuts above — those that don’t impact your lifestyle much. But the real savings potential comes from your larger structural expenses, like housing and transportation. These expenses make a huge impact on both your budget and your lifestyle.

If you’re committed to keeping your current lifestyle without living paycheck-to-paycheck, come at the problem from the other side. Negotiate a raise. Pursue a promotion. Start shopping around for a new job at a different company. Level up your skill set. Get a new degree or certification.

Just remember to freeze your current spending!

6. Start a Side Gig

Don’t see much room to grow your salary at your day job, and want to keep working it?

Pick up a side hustle.

Start by looking at your existing skill set and brainstorming ways to charge for what you already do well. That could include freelance graphic design, photography, website development, accounting, or bookkeeping. Or you could start a side business. Or pick up a part-time job.

Get creative as you brainstorm and research side gigs, and find something you enjoy that pays decently.

7. Build an Emergency Fund

One of the (many) downsides of living paycheck-to-paycheck is that you get derailed by every “unexpected” expense that comes along.

No one wants to hear it, but unexpected bills are the norm, not the exception. Last month it was a medical bill. This month it was a car repair. Next month it’ll be a home repair or a job loss or a replacement laptop after coffee gets spilled on it.

Build an emergency fund for irregular but inevitable expenses. You can’t always predict what each will be, but you know they’re coming. Fail to budget for them, and each one becomes a full-blown financial crisis.

8. Pay Off Unsecured Debts

It’s hard to get ahead in life when you pay 25% interest on credit card balances.

Prioritize paying off high-interest unsecured debts. These include anything other than your home mortgage and car loan (although eventually you may want to pay those off, too).

Focus on your smallest debt first. Once you knock it out, you’ll have more money each month to funnel into paying off the next smallest, and so on until you pay off your last unsecured debt.

If you have credit card balances you can’t pay off in full each month, start by locking away your credit cards in a drawer. Delete your saved card payment information from ecommerce sites. Only pay for goods with your debit card or cash until you knock out all debts.

Final Thoughts

Living paycheck-to-paycheck is a stressful way to exist.

Sure, it’s no fun writing out a budget and going through your current spending habits with a giant red marker. But as you start reaching milestones like creating an emergency fund, like paying off a debt, like adding extra income without spending every penny, you find yourself sleeping soundly at night without worrying about money.

And that peace of mind is worth every inconvenience on the way to getting there.

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This article originally appeared on GOBankingRates.com: 8 Ways To Escape Living Paycheck-to-Paycheck — Without Sacrificing Your Lifestyle