How to break the paycheck-to-paycheck cycle

Living paycheck-to-paycheck is like living on the edge — you are constantly scrambling to make ends meet. Running out of money before payday can be truly problematic because you feel like paying bills (or sometimes debt) seem to be an endless cycle. From a financial perspective, living from one paycheck to the next is disastrous and it is nearly impossible to get ahead financially. Besides, it also robs you of your peace of mind due to the stress it brings you.

It’s about time to get out of the rut — now. Here’s what you need to do to start breaking off that vicious cycle.

How to break the paycheck-to-paycheck cycle

Recognize the problem

The first step you need to do in order for you to break off the cycle is to recognize the problem and to get real to yourself that you need to change. Or else, you will just continue living the paycheck-to-paycheck cycle until a serious financial setback comes along and put you in the worst spot. It will be a tough process to do but if you want to start moving towards financial prosperity, you have to face the music and be honest with yourself.

Consider downsizing

Trimming down your regular expenses can improve cash flow tremendously. So this might be the time to consider making a lifestyle change so you can improve your financial situation. That may mean reducing some of your bills like electric bill or getting rid of unused memberships like gym memberships. Start using public transportation instead of bringing a car to work. Start cooking more meals at home instead of eating out at restaurants. All of these will help you tone down your expenses so you can get ahead a little and eventually get out of break-even point.

Track your spending/Create a budget

Nothing will be changed if you will not pay attention to where your money is going each payday. It will be wise to track your spending since it tells you exactly where your money is going. Once you have an idea on where your money went, it’s a lot easier to find the areas where you need to make a change. You should also have a budget set and ways to track if your spending is according to your set budget. Having both things working together will keep you in control which will eventually help you to break the cycle.

Break free from debt

Having debt is one of the roadblocks to achieving financial success. Debt robs you of extra money and the more you owe, the more it is a struggle to break free and to become financially independent. To stop yourself from being enslaved to debt, take the money you saved from trimming the unnecessary expense and take a large portion of cash to pay off your debt. You can either pay off the highest interest first or deal with the smallest balance first. It doesn’t matter which goes first as long as you are committed to clear off your debt. Remember, the less you owe, the more you can keep.

Pay yourself first

If you plan to spend your paycheck first and save whatever’s left, you will never save anything. In order for you to build your savings, you should put aside money for savings first and use the rest of the money for your expenses. Each payday, automatically transfer a certain amount of money from your payroll account to your savings account. Make sure you pay yourself first before using the rest of your money to pay off your bills. Setting up an automatic transfer from your payroll account to your savings account will help you to build your savings effortlessly. The more that it’s autopilot, the better.

Final Thoughts

Breaking free from having a paycheck-to-paycheck lifestyle and have a sudden shift to being financially responsible is one of the hard things to do. The situation is similar to someone eating mostly junk foods and unhealthy meals and suddenly moving towards a healthier lifestyle. But, be patient to yourself as you move toward breaking the paycheck-to-paycheck cycle. It won’t be accomplished overnight but it can be done if you start taking steps today.