How to Break the Cycle of Living Paycheck to Paycheck

Living from Paycheck to Paycheck

Living paycheck to paycheck is a reality for many people. In fact, 60% of Americans live paycheck to paycheck.

It can be a difficult cycle to break, but it's not impossible.

You’ve got this.

If you're tired of struggling to make ends meet, there are steps you can take to help you get on the path to financial stability. In this post, we'll share some practical tips for how to get out of living paycheck to paycheck.

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#1 Create a budget

Wondering how to stop living paycheck to paycheck?

Set a budget.

Budgeting helps you get a clear picture of your income and expenses, and identify areas where you can cut back (ahem, expensive brunches every week) 🍸

And it also helps prepare you for those unexpected expenses.

You could start by making a list of all your income sources and monthly expenses, including bills, rent or mortgage, groceries, and transportation. Then, subtract your expenses from your income to see how much you have left over each month. This will give you an idea of how much you can put towards savings or paying off debt.

Alternatively, if you’re looking for a budget app to help you do it the easy way, we’ve got just the thing.

Making a budget that works for you is all about understanding your expenses each month and having the flexibility to adapt if circumstances change.

All you need to do is answer a few questions around your income and bills in the Cleo app and you’ll then be able to set a realistic spend limit and start saving 🚀

For more on this, check out How to Make a Budget With Cleo.

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#2 Cut back on expenses

Once you've created a budget, look for areas where you could cut back on expenses.

For example, you could choose to cook at home instead of eating out. And you could reduce your grocery bill by choosing the cheaper options at the supermarket. Perhaps switching out your usual pasta sauce for the store's own version.

Another easy way to cut back on expenses is to cancel any subscription services that you don't use. Check to see how many times you’ve used the subscription service over the last few months to see if you can justify carrying on with it.

Finally, tons of people are unaware that you can actually switch to a cheaper cell phone plan, or negotiating a lower rate for your cable or internet service.

All you need to do is follow the 5 step method:

#1 Do your research. Start by researching the prices and plans of competitors before negotiating with your current provider. This’ll give you evidence of being able to get a better deal elsewhere 💅

#2 Call between 9am and 5pm. Give the company a call or email between 9am and 5pm during the week when the customer service reps aren’t as overwhelmed as they would be on the weekends. Ask if there are any available promotions or discounts

#3 Say you’re thinking of switching to a competitor. If there aren’t any promotions or discounts available, hint that you’re thinking about switching to a competitor and give examples of the best prices you’ve seen. Welcome to the world of ✨ haggling ✨

#4 Always be friendly. You should be nice to reps ALWAYS so this should be a given. Remember that the customer service representative is not the CEO and they’ll be more equipped to help if you’re not yelling at them

#5 Don’t give up. If at first you don’t succeed, try again. If you feel like you’re not getting anywhere, perhaps try a day or so later and speak to someone different
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For more tips and tricks, here’s our Negotiating Bills Guide💡

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‍#3 Build an emergency fund

Unexpected expenses can quickly derail your budget and put you back in the paycheck-to-paycheck cycle. That’s why it’s important to start putting money aside for an emergency fund. It doesn’t matter how much you put away each month to start with – every little counts.

If you’re wondering how to stop living paycheck to paycheck, building an emergency fund could really help.

You could start by setting aside a small amount each month, such as $50 or $100. Over time, this will add up and give you a cushion to fall back on when you need it ☁️

Try to avoid dipping into your emergency fund. It should really be reserved for true emergencies, such as unexpected job loss or medical bills (and not a last minute mimosas date 👀).

The easiest way to save is by setting up an automatic transfer from your checking account to your emergency savings account. And Cleo can help you do just that.

With Cleo, you’re able to:

💸 Set money goals
‍💸 Get access to save hacks like round ups and swear jars
‍💸 Speedy withdrawals
‍💸 Custom plans to help you save even more each month

Cleo helps you do what’s right for you. She can show you how to get out of living paycheck to paycheck by helping you avoid overdraft fees and building a plan you can actually follow which should help improve your spending habits over time.

Happy saving ✨

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‍#4 Pay off debt

Wondering how to stop living paycheck to paycheck? Chip away at your debt.

Debt can be a major barrier to financial stability. If you have credit card debt or other high-interest loans, it’s a good idea to make a plan to pay them off as soon as possible.

Consider consolidating your debt or negotiating with your creditors to lower your interest rates. It might be rough at first but as you pay off your debt, you'll free up more of your income to put towards savings or other financial goals. And it’ll work out better in the long run as you’ll be paying less interest.

If you’re a victim of debt, Cleo’s resident financial advisor discusses Everything You Need to Know About Debt Management 💙

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‍#5 Increase your income

Finally, consider ways to increase your income.

There are several ways you could do this:

Ask for a raise: Ask your employer for a salary increase. But obviously prepare a convincing case for why you deserve the raise which highlights your achievements and contributions to the company. If you don’t ask, you don’t get 🌱

Look for a better-paying job: If your current employer is unable or unwilling to increase your salary, consider looking for a new job that pays better. Research job openings in your field and network with professionals in your industry to learn about opportunities. LinkedIn is a great start.

Start a side hustle: Consider starting a side business or freelancing to earn additional income. Look for opportunities to use your skills and expertise to offer services to others. Examples include tutoring, graphic design, writing, and consulting. If you need tips on how to get started, check out How to Make Money on Fiverr 💻

Gig work: Look for opportunities to earn extra money through online platforms like Uber, Lyft, or TaskRabbit. These platforms offer flexible work arrangements and can provide a source of additional income. With the help of the internet, making money online isn’t as difficult as you think it may be.

It may take time and persistence to achieve your financial goals, but with the right mindset, it’s possible to increase your income over time.

And hopefully, you now have more of an idea on how to get out of living paycheck to paycheck 💕

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Big love. Cleo 💙