There are big downsides to living paycheck to paycheck, but there are also options to change that state.
- Millions of Americans live paycheck to paycheck.
- This means they are out of money by the time payday rolls around.
- You’re likely to get into debt when you’re living paycheck to paycheck, so it’s a good idea to break that cycle.
Living paycheck to paycheck usually means you spend all your money and wait with an empty bank account until your next payday arrives. It’s a precarious situation because any unexpected expense could force you to use credit cards to cover it – or worse, take out a payday loan.
Unfortunately, millions of Americans are currently living paycheck to paycheck. And if you’re one of them, it might be time to consider making some changes so you don’t risk getting into debt due to an unexpected accident on the road.
The number of Americans living paycheck to paycheck is shocking
According to Graham Stephan, real estate investor and YouTube personality, many people have no savings to fall back on and empty their bank accounts on payday. Stephan commented on Twitter that “58% of Americans are living paycheck to paycheck after soaring inflation, including 30% of those earning $250,000 or more.”
Stephan’s claim comes from a report by LendingClub, June 2022. The troubling information came at a time when inflation hit a 40-year high, largely due to the rising cost of basic necessities such as gasoline and groceries.
As prices have risen, people have understandably struggled to adjust their budgets accordingly, especially since wage growth is not keeping pace with inflation. With higher costs and not enough money to cover them, it’s no surprise that more Americans are waiting for their next check because they’ve already spent all they have.
Here’s how to stop living paycheck to paycheck
While living paycheck to paycheck may be common, that doesn’t mean it’s a situation you want to find yourself in.
It can be really tricky not spending every dollar as the Consumer Price Index shows goods and services cost 9.1% more in June 2022 than a year ago. But, there are some things you can do to try and break the paycheck cycle and build some savings so you have a financial cushion.
Some of your options include:
- Increase your income: This may be the best approach, since it’s so hard to cut your budget enough to offset the price hike. Many companies are hiring full-time or part-time, including for remote jobs. Consider looking for a new, better paying position in this tight job market or taking a side job.
- Replace inexpensive items with expensive items: With groceries costing a lot more, for example, you might want to consider having more plant-based meals and skipping the more expensive meat aisle.
- Consider carpooling: If you can cut fuel costs, it can make a big difference in your spending, as rising gas prices are a major driver of inflation.
- Track expenses: Consider keeping a close eye on where your money is going for about 30 days. This can give you insight into what budget cuts, if any, you can make.
By trying these tips, I hope you can be among the minority of Americans who aren’t waiting for your next payday to make ends meet.
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