Living Paycheck to Paycheck: 7 Strategies for Survival

Post adapted from a U.S. News Money article, by Geoff Williams, contributor.

If you live paycheck to paycheck, and you often find yourself falling short on cash or unable to pay bills on time, you may wonder how everyone else who lives the same way manages to do it.

Odds are, they’re doing it about as well as you. More than 25 million middle-class American families live paycheck to paycheck, according to a study from the Brookings Institution.

So if you’re looking for ways to stretch your paycheck, here are some ideas.

Budget, daily. It makes sense to come up with a system that allows you to continually monitor your finances, especially if you’re in a two-income household. If two of you are independently making money decisions, you’ll double the odds that something will go wrong.

Terri McCoy, president of Para Public Relations LLC in San Diego, says she and her husband, Kris, a musician and church worship leader, live paycheck to paycheck.

“We have daily meetings as husband and wife on how much we have in our account, what we need for that day, whether we’ll eat lunch out or buy groceries and so on, and we put all of our debits in by day’s end. If we don’t do this daily, we face consequences sometimes and have to go without items.”

For instance, the McCoys once went three days without discussing their finances only to realize they spent over $400 eating out, buying groceries and shopping for their three children. For the next two weeks, they had to cut back on meals and just make things work.

“Our daily meeting is key to knowing how much is in the account,” McCoy says. “Our Excel spreadsheet is also key, so we know when the money comes in and where and when it needs to go.”

Micro-budget. It isn’t enough to simply say you’re going to spend $600 a month on groceries and $200 on gas. You need to follow up and see if you’re sticking to your budget, says Lindsey Burgess, spokeswoman for the budgeting app

“Give every dollar a job,” she advises. “If you have assigned $400 per month to groceries, when you go grocery shopping at the end of the month, you should reference your grocery balance, not your checking account balance, before you go to the store.”

It’s a smart idea. If you’re keeping track of whether reality is matching up with what you plan to spend, you’ll have a better chance of staying within your budget.

Plan for the worst. If your money situation tends to go from OK to bad and then back to OK again, consider creating a regular budget and a worst-case-scenario budget, says Landon Vick, a financial advisor and planner in Cookeville, Tennessee. Then if your financial picture falls apart, you can switch to the latter budget, which eliminates the extras in your life.

“The buy-in from both spouses here is the most important part. We’ve used this approach, and it’s given us the relief I would have expected,” Vick says.

Trim the fat. If you haven’t done this in a while, set aside some time to look at your budget. See if there are any services you’re paying for that you no longer use and can cancel, like a gym membership. Maybe it’s time to call your cable company and ask about cheaper subscription rates. Unless you’ve done this in recent months, there’s probably something you can pare down.

Start a self-improvement program. Maybe quitting a vice will save you money. “One of my clients was a smoker who took frequent cigarette breaks. She made a commitment to cutting back and eventually quit,” says Roy Cohen, a New York City-based career coach and author of “The Wall Street Professional’s Survival Guide.”

He adds: “I encouraged her to keep the money she was no longer spending on cigarettes in a jar. By year end, she accumulated almost $3,000.”

Quitting also impressed her boss, he says. She got a great performance review at the year’s end, and with any luck, she’ll get a raise. This won’t be everyone’s luck, but then again, you never know what might happen.

Improve how you think about money. Maybe you have some bad habits you don’t think of as bad habits, such as never budgeting or adding expenses without considering how they will affect your cash flow. Or maybe you always pay bills late, never thinking about the collective damage late fees are doing to your budget.

Tim Halberg, a wedding photographer based in Napa, California, says he started putting money aside every month during the months his income spikes. “Seems simple enough, but we got caught up in the idea that whenever we had extra money, we could just spend it,” he says.

Try to save. You know this is a good idea, of course, and you know that it’s easier said than done. It may not be practical now to save for a retirement or your kids’ college education, or maybe you’re doing that but can’t save for anything else. Regardless, as Vick says, “saving, even small amounts at a time, builds a buffer for when money gets tight.”

Even if you don’t have extra money to save every month because you’re constantly dipping into your savings to pay for unexpected bills, that may be something positive and new – that you have the money to pay off the unexpected bill.

But if you can put money away regularly and hang onto it, Vick recommends saving automatically, so your money just disappears from your checking account and goes into a savings account. If that’s not going to work, Vick has another idea.

“I often suggest that folks set up a savings account at another institution that isn’t remotely close to them on a daily basis. That keeps the reserve they’re building out of mind and from a behavioral standpoint can be powerful.”

And, of course, if you can save enough, maybe you can stop living paycheck to paycheck. Then you’ll really be living!

Having trouble making ends meet? Give HV a call! We might be able to help you refinance or consolidate your current debt to lower your monthly payments. Contact us today! 

This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.