Daryl in New Orleans, Louisiana

How to End the Paycheck to Paycheck Cycle

As I’ve gotten older, I’ve come to realize that as Americans, we aren’t very good at the whole “saving” thing. (Check out this chart to see for yourself)

Our culture is obsessed with celebrities, fancy sports cars, dining out at expensive restaurants, and whatever else we see on television.

We try to duplicate what we see on TV, and “out-do” our neighbors by buying fancier stuff than them. We go on extravagant trips around the world so we can post pictures on social media about how great our lives are.

That type of lifestyle is fine… If you’re a billionaire. But if you have to be in-debt in order to live this way, (which most of us do) then it’s not sustainable, and will lead to a life of stress and worry.

The trick to breaking the habit of consumerism (spending all your money on things you don’t need), is to first recognize that you have a spending problem. (It took me quite a while to actually admit this to myself.)

If you’re comfortable living paycheck-to-paycheck, pretending that it’s not possible for you to get fired or injured, preventing you from paying your bills, then continue what you’re doing. But if you want to learn how to save money for an emergency so you won’t have to go into debt to pay for it (which is a slippery slope), follow these steps:

  1. Pay yourself first, literally.

    • Set your bank account up it so that a certain percentage of each paycheck goes into your savings account automatically. The key here is automation. If you think you’re going to remember to manually put money into your savings… You’re not. Trust me.
  2. Pay off your debts, aggressively.

    • As soon as you pay off all your debts, you can start building your net worth.
  3. Reduce your expenses.

    • There’s a whole bunch of ways you can do this. First, figure out what percentage of your income goes to paying the bills. If this percentage is too high (60+), you need to find out what you’re paying too much for. If it’s a car payment, read this. If it’s rent, consider moving to a place with a lower cost of living. If it’s cable, shop around for other options or cut your cable service altogether. If it’s phone or internet service (most people I know pay WAY too much for this), shop around and see what’ll be cheaper for you. The great thing about being a consumer is that YOU get to choose who YOU want to give your money to. If your service provider is charging you too much money, ask them for a lower price or leave. Simple as that.
  4. Budget with the money you have, not what you expect to earn.

    • Read my guide on how to make a budget
    • This is what I struggled with when I first started to budget. It never worked. You want to take the money that you have (preferably as soon as you get it) and assign each dollar a job. I like to use YNAB (You Need A Budget) because it’s fairly straightforward and free for college students (for a year), but there are other apps out there that are similar, such as Every Dollar, Mint, and Personal Capital. You can also budget with pen and paper or an Excel spreadsheet. Whichever method you’re comfortable with.
    • This is the number one thing that helped me break the paycheck-to-paycheck cycle. Not only did it allow me to see how much money I was spending on nonsense, (usually junk food or random things on Amazon) but I was able to know exactly how much I can spend on a certain day in order to still pay my bills for that month.
  5. Save up enough money so that you can live off last month’s pay. Then two months, and so on.

Once you save enough money to where you can get fired and still be fine for 6 months (the average job search), you’ll never have to stress out about work or paying bills, ever again.

If you have any questions or would like me to go into more detail about something, feel free to leave a comment below or send me a message. 🙂

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