Ask Away...: 5 Easy Steps to Stop Living Paycheck to Paycheck

Wednesday, January 22, 2014

5 Easy Steps to Stop Living Paycheck to Paycheck


I hear it all the time when someone says they live paycheck to paycheck and I tell them there's way to stop.   "I am great with money, I just don't make enough."


Well, maybe you do... maybe you just don't realize how you are spending all that you make. And if you don't make enough then there's still a way to pinpoint how much more you need a month.

So here are 5 easy steps to start the process of financial freedom and stop living paycheck to paycheck.



1. Write down all of your monthly bills/expenses.
These would include rent, mortgage, car payments, credit card bills, utilities, memberships, etc.   Subtract the total of those monthly expenses from your monthly take home pay. 

2. Check your spending from the past month.
Pull up all your bank statements and any receipts you have for a whole month and see where all the rest of your money goes.       

3. Analyze your spending.
You'll need to figure out which of those expenses can be deemed necessary or which are able to be reduced.  Starbucks every morning can be reduced.  Even a grocery bill can be reduced if you shop smart.  Then break all of the expenses into categories like this: 
Entertainment - movies, bars, etc.
Restaurant/Dining Out - Lunches you buy during the week, fast food, date night dinners.
Miscellaneous - Random things that really don't have a category at all!
Groceries  - Food and toiletries.




4. SPLIT!
Look at the number you got from subtracting your monthly expenses from your income.   And then look at how you can divy that number into all the categories you made in step 3.




5. Create a cash envelope/ budgeted spending system. 
You can refer to my post on a cash envelope system in order to discipline your spending to only a certain amount for each category This way, you aren't depriving yourself, you're just living frugally. And this post has ways to actually make a fun envelope system!

GOOD LUCK!
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86 comments:

  1. I absolutely love this!! Definitely going to try this all!
    xo
    www.jennaleeann.com

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    1. Thanks Jenna let me know how it goes!!!

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    2. very organized, efficient.

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    3. I would cut the phone bill down to a prepaid phone $25-35.00 a month. Maybe take out parking and use public transportation.

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    4. I would cut the phone bill down to $25-35.00 a month with a prepaid phone. Also try pubic transportation since you have to pay for parking. Pay extra on the credit cards to cut down on the interest the credit cards charge you.

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    5. A really good idea!

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    6. Where did you get the booklet/envelopes for your cash system?

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  2. Simple, practical, do-able! This is great advice. Thanks for sharing it!

    P.S. Thanks for your super sweet comment today!
    Alison

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  3. The envelope system really is smart! We don't use it- but we have recently been saving for a house, and have very much cracked down on where we are spending money and monitoring it closely in order to be better about saving!

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    1. Good for you!!!! hope everything goes well with saving for the house :)

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  4. Definitely checking out your envelope system. I'm terrible with money, it's my goal this year to improve. I know where it's going (the restaurants/bars and transportation categories) but I can't seem to stop myself!

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    1. i know... thats why the cash helps because it nearly makes it impossible for you to spend it when the envelope is finally empty!!!

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    2. That's so true! An empty envelope is much better than an overcharge fee at the bank!!! I used this system years ago, and what I found was if I budgeted 300 for groceries and only spent 280, guess what, that 20 became spending money if I was absolutely feeling deprived!!! Or, it went into savings like a good girl :)

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    3. Yep! An empty envelope reminds you to question DO i really need what i want to buy? Nope!

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  5. Great advice! I would say that I am good with managing my money, but there is always room for improvement!

    PS - can I live where you do? $300 for rent sounds like a dream.

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    1. haha i moved back home with my parents temporarily...its not the greatest but it def helps me save and pay off my debt in the meantime!

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    2. That's how I saved for my first house. It was tough moving home at 28, but I pretended to have a mortgage for 2 years. I put "rent" away in a money market account on the1st of every month and assumed the $500 I paid the 'rents would cover utilities and other home costs.

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    3. I live in a nice one bedroom apt in east Tennessee. Water is included for $275 month

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  6. Great tips. I really enjoyed it!

    Christina
    http://www.christinasstyle.com/

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  7. These are great tips! I have a coworker who is constantly complaining about money but doesn't do anything about it. I just want to tell him to make a plan and stop spending so much!! Writing down your spending really helps so much!
    www.amemoryofus.blogspot.com

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    1. I know right! Thats why I'm like EVERYONE READ THIS SO YOU CAN STOP COMPLAINING! haha! Thanks for reading Darcy!

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  8. There are truly those people who don't make enough to cover the essentials - food, rent, utilities. But most of us complain and don't realize that 3 or 4 Starbucks coffees a day adds up to rent money for the month. Thanks for making it simple and not "preachy".

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    1. so true jill!! Glad you liked this post. i always look for feedback from people!! i really appreciate it!

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  9. what if your paycheck isn't enough to cover your everyday things, car, morgage, condo fees, gas food + debt that your in :( HOW DO I GET OUT OF CREDIT card debt soo screwed :(

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    1. The way I did it, I chose the credit card with least amout owed and applied an extra $100 per month to pay it off. While doing this I only paid minimum amounts on the other credit cards. Once I paid off the first credit card I used that full amount plus what I would normally pay on the next card and paid it down until all cards were paid in full.. You will be surprised at how fast this will work. You can also choose to pay off the highest interest bearing card first. Just start somewhere and cut back on the stuff you really dont need. :)

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    2. This is a great system but make sure you pay off the card with.the highest interest rate first otherwise you end up spending more in the long run. This strategy is perfect though!

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    3. Oops. Just read the end of tour post. :)

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    4. I use that method to pay off all my student loans. It is a slow process at first but after a few month you start to really see the difference!

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    5. I work in title loans an we have high interest rates I always advise customers to break up min so it easier for them to pay over due to minimum is only intrest

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    6. FYI - highest interest isn't always the best strategy, there are other factors involved such as balance, payment amount, you really have to run the numbers and scenarios to truly know. Most recommend paying lowest balance account first to have the snowball effect quicker.

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  10. Where did you get the cash wallet shown in this picture?

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  11. how about when you pay 800 for rent? and150 for insurance? there is nothing left to save even if you want...

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    1. Then it's time to look to make extra income! What if you worked towards yourself instead of your bosses pay check

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    2. It would be lovely to just work for yourself while working 9-5, but that's not always a simple solution. No matter what business you go into, you don't make money right at the jump. Of course work hard and the reward will come, but it's not a quick fast solution. It's definitely an idea to look into so I'm not saying to rule it out.

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    3. Start looking for a roommate or maybe you aren't living in a place that you can truly afford on what you are taking home.

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    4. Maybe look for an extra part-time job, or send what you have around home, that you don't need, love, use. See about selling those things, taking all that money, however much or little it may be, and put it all towards the 1 debt you are starting your payoff with. Then in a couple weeks or months, look around again for more you don't use, need, love. Repeat.
      Jobs. Consider pizza delivery, newspaper delivery, etc. Or as a stocker in bigger stores. Or bagger or such in grocery store. Never easy, but doable, even if you have some disability.

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  12. I'm due with my first child in May! I'm really hoping this works, I want to be able to save money for my 6 weeks of maternity leave.

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  13. My question is how do you begin to put funds for future bills (even the next week's bills) in an envelope when you have no money left from your current week's/month's bills to spare? I sometimes have maybe $10 or $20 dollars left after groceries, gas, bills, etc. How can I start the envelope system when all my money is already virtually gone? I guess I just need to know how to get started putting money back for expenses when there's none there.

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    1. I know, its very tough at first. What i did after a few paychecks (you gotta get on a schedule) isfigure out which paycheck which bills would come from. Or if i have to take some from one paycheck and some from another. You may not have as many categories as me and thats okay but like for groceries, i looked at what i spent every month on my debit card, and i took around that much cash out then... i split it up... if i spent 400 a month on groceries (i didnt but just using as an example), I would take 200 out of every paycheck (2 checks). .

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    2. I have had to scrimp through some pretty lean times with a family of six (especially when I was out of work and my husband was/is a teacher), and I can really stretch a dollar, especially grocery dollars. Really be careful at the grocery. Cut out junky snacks; make healthier, less expensive stuff at home. And I am lucky to have an Aldi's nearby, where most of my food $ went. We lived on chicken and pork for our meat from the big box grocery, and I stocked up on "Manager's Specials" since I have a freezer. I made one meatless dinner every week. My kids never noticed. I did not buy much 'convenience' food. An example of an inexpensive dinner would be a pasta with lots of veggies and a small amount of chicken added to that pasta or a stir fry. I cut the meat into small pieces, too, to make it appear to go further. We did not pay for cable or eat out much. And #1, as my parents taught me, "Pay yourself first." That means save money first. This helped us live through three tough years while I didn't work. Yes, we drained that savings, but I am so grateful I saved when I could. Our mortgage was $1000/mo, we had car payments, tuition payments, plus all the usual expenses of a family, and did it all on my husband's take home pay of $3000/mo. Sometimes, you really have to work and be disciplined to do it, but it can be done. I finally got a part time job, and we are keeping things simple and saving again.

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    3. Great suggestion!!! It's so true!! Glad to hear your story and thanks for sharing!

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    4. Awesome story. I raised two children on my own and we shopped at Goodwill and lots of thrifting and coupons. You can do anything when you set your mind to it. I still thrift and I think of it as going on an adventure. If I find good stuff, I sell on Craigslist or eBay. Happy shopping everybody.

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  14. Very true! But I would like to know where you live to have an income of $2,000, pay $300 in rent and $100 in gas...

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    1. its not accurate its just an example. I didnt want to put actual amounts in. But i live at home with my parents for now so my rent is cheap and i drive a honda civic and have a short commute to work

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    2. Live in Idaho. My rent is $350 and I pay about $50-100 in gas a month depending on if I travel or not.

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  15. Great post, I have been using this system for a few years now and I really does work. It is really hard at first but now its a game, can save more than I did last month. I have to stress though, make sure you have a little "fun" money or it doesn't work. As the old quote goes "All work and no play makes Jack a dull boy" you have to have a treat once in a while. I also save my 5 dollar bills as a slush fund, believe it or not 5's add up really fast and in a year I saved over $900, just suggestion.... Oh yeah where did you get your cash organizer? Love it :)

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  16. This sounds a lot like Dave Ramsey 's Financial Peace University.

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    1. I listen to Dave Ramsey on iheart radio everyday and this sounds a lot like his show also.

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    2. Exactly what I was thinking. Even the terms "Financial Freedom" are from his show.

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    3. Lol well uhh yea i did say all over this blog that i love dave ramsey and most of the stuff i've done is from his method.

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    4. I didn't see Dave Ramsey mentioned once (in this post at least) and it seemed to me that you were taking all the credit for his ideas and methods. Glad you commented and corrected this. Its a great system and really works! Thanks for spreading it even more :)

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  17. What would you suggest to a Senior in High School who has a minimum wage job! Pays for no "bills" like gas and car etc.... But loves to shop and has realized how much they spent in 2 years and wants to to learn how to manage money and save!!!

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  18. I'm not sure if I just missed this part or if I'm just confused but what do you do with the $440 difference? what do I do if I have a less that $10 difference?

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    1. I think the $440 difference was what you could be saving. Tracking how you spend what and when you spend it helps you see that. After you figure out what you need them you can try to cut back on what you really don't need. That's where your savings can start. And for now if it's just $10, save it. My Mom told me even if it's just $5 save it every month or every paycheck. You gotta start somewhere and then from there you can add more along the way when you can but sometimes it may only be $5 you can save, still save it because at least that is something going into your savings. After many attempts I finally stuck to it. I went from saving $10 a month to $100 sometimes $300. It has helped when needing new tires or a new refrigerator. I used it when heating bills or summer electric bills got out of control but still kept adding something in every pay period. You can do it, $10 is more than $0.

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    2. If u have $440 (or whatever amount) remaining put that into savings and start over the next month.
      Not only will it add up if u put it away u will not feel like u have that money to spend and it will get easier to put aside.
      I have 3 bank accounts as well as the evelopes. I don't make much so I won't say how much I set aside but eventually I saved up short term and long-term emergency fund, non monthly bills and savings.
      Don't worry about how long it takes it will get easier and eventually it will happen. It took a while but once you get there add the money to savings before removing it so the amount doesn't go down.

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  19. What is the envelope picture under step 4? I have done the envelope system before but that looks durable and I would like to purchase one like it.

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  20. I recommend getting a safe to keep this in. You never know what's going to happen.

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  21. This is a great idea! My struggle is that I get paid once a month, and nearly half of my paycheck goes to childcare.

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    1. I have the same issue. By the time I pay childcare over 1/4th of my check is gone.

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  22. I have done a saving system on this order for years except I take each bill and devide it by four. This way my money is saved and ready to pay my bills! I use a coupon holder listing each bill, I also put a section for Christmas funds. The only way this will work is don't touch the money if you need to you have to pay yourself back.

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  23. I have found that this works great if we remember to tithe. I always thought that I could not afford it. A lady at work told me a story that her mom had told her about not tithing. I then started tithing. After that, it seemed like I never had financial problems. So, believe me, you can't afford not no tithe.

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  24. Thank you so much for this post. Years ago I use to be great at budgeting. Then I was married, had children and had to furnish a house and provide for a growing family. My budget went out the window, because of the "things we needed." I was able to take your budget model and model it into one of my own. I now feel comfortable and stress free, knowing that I have money to save, money for emergencies and monthly bills. No more living paycheck to paycheck in hopes that it will all work out with nothing saved. Thank you.

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  25. This is a great practical way to budget. We wish there more people like you sharing your tips!

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  26. Great tips! Do you just cash your check and put it in an envelop? I love that idea. I think it's great and really helpful!

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    1. My check gets direct deposited so every friday i go to the ATM and get the cash out and put it in my envelopes :)

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    2. Where could I buy the exact or similar organizer at? I saw that you said Target but do you have the name of the organizer?

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    3. If you go to target it's in the area that has all the notebooks, office supplies, and file folders. Youll see them there!

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  27. For folks who are REALLY strapped...been there. You can really scrimp on food for a few months. Cook everything at home. Use what food is in the cupboard instead of just shopping for more. Go to a food cupboard to help supplement. Don't be picky. Rice and beans with grated cheese on top is cheap. Shop at Aldi, not at pricy markets! Drop cable. Drop smart phones. Don't get your car washed. Don't dry clean..just wash your own clothes. Drop internet if you need to...you can always bike to a library to use internet, yeah it sucks, but might help you climb out of a financial hole. Read up on more budget tips online, that's what I did.

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  28. This is all great information! Thank you Ellen for sharing and to all others who left advice, thank you. Saving money has never been something I've been able to do and living from paycheck to paycheck has become rather the norm for me. By the grace of God, I somehow purchased my first home. I realize I need to be on a budget so if something goes wrong, I could get it fixed. I don't want to drown in debt and right now I'm doggy paddling in it. I will try this method and truly appreciate the advice. Take care all.

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  29. I have always wanted to Try something like this but I never know where to begin and it very hard when mine and my husbands paycheck differ every month..they are never anywhere near the same..what do I do

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  30. I pay everything electronically so I don't think this would suit me, but for someone that uses cash it looks like a pretty neat system!

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  31. I was going to comment the same thing. I have dropped nearly all I can drop and pay electronically as well. I buy gas from Costco and the only form of payment is a debit card with at least $100 on it for authorization. The price for the gas is way cheaper, but that cuts out the cash option. Any suggestions? Also, I think I spend more with cash on hand...not sure how to become more disciplined

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  32. I tried this & will never go back!

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  33. Thank you for your tips! I really need to analyze my spending habits. Especially the smartphone. After seeing how much you pay each month, I know I need to cut the cost of my service.

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  34. Oh Very nice. I see your post.. It's a very essential post and a big useful post for us. Thanks for share your effective content.I see this kind post a another website paycheck stubs keyword related.

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  35. Wow that's great! Yes I believe you must tithe! What percentage do you tithe?

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  36. At one time my hair stylist worked in a salon next door to a Starbucks and had several of their employees as clients. They told her that a number of workers from surrounding businesses (small strip mall retail stores, where nobody was getting rich) bought coffee two or three times a day. She and I did some rough math and figured out those folks were spending every month on coffee what she and I were spending on our mortgage payments. What a waste of money!!

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