How To Stop Living Paycheck to Paycheck

More than half of workers throughout the country live paycheck to paycheck, but you can break the cycle by changing your mentality. Know your numbers and make a plan so your career can afford you essentials and other expenses. Take advantage of free resources like personal finance podcasts and budgeting apps to steward your paycheck more strategically in the new year.

By Timothy Mably

As you begin your career, it can be easy to fall into a rhythm of living paycheck to paycheck. This habit encapsulates those who are unable to budget for a variety of reasons, describing the conditions of people who earn many different levels of income. Although most professionals live paycheck to paycheck for at least one season of life, it’s important to take steps to prevent it from becoming your future.

Currently, 63% of Americans live paycheck to paycheck, accounting for almost half of professionals who have six-figure salaries. Due to the pandemic and inflation, it’s become increasingly common for workers to rely on each paycheck for essentials. As the holiday season causes you to spend more than normal, you can begin planning for greater financial stability in the new year.

Change Your Mentality

Before making your New Year’s resolution to budget, adopt the mindset that it’s possible to not spend your paycheck in a month. Faced with furloughs, layoffs, and inflation, many professionals are struggling, but there’s still potential to save.

Find motivation to save money by considering the future and creating a vision of where you hope to be in a year. Defining your financial goals is integral to achieving them.

Career coach and one of LinkedIn's Top Voices of 2022, Emily Liou says, “Given the nature of my services offering job search support, I do have many job seekers reach out to me stating they are unable to afford my services because they have been underemployed or unemployed for far too long.”?

Fortunately, Liou’s clients usually have support systems in place, along with income and savings. However, many job seekers aren’t as financially fortunate. While offering a scholarship to her job search program this past year, Liou encountered a woman who was living in her car. The job seeker had utilized her local library to apply for work online, eventually landing a position paying $70,000. Such resourcefulness can be vital for professionals in today’s world.

Know Your Numbers

Liou says, “I strongly believe we are not put on this planet just to merely survive, but to thrive. One career transition can make a world of a difference. There’s several actions I would advise if you’re in this position.” She provides three key points, beginning by saying, “Know your numbers.”

She elaborates on questions you should ask yourself. She says, “What is your desired lifestyle budget? Instead of making general goals of making more income or earning six figures — having an exact number in mind is incredibly empowering. When you know what you want for a minimum, you can start to plan your career and map out roles that will allow you to afford the lifestyle you want.”

Be aware of how much you need to make to afford rent, groceries, and other essentials. Then, consider what additional expenses you would like to make on a monthly basis. Compare these numbers with salaries offered for your field.

Make A Plan

Second, she says you should make a firm plan for your career over a specific amount of time. She explains, “Get realistic about your next career move. Maybe the career you identified is a 3-5 year plan, but you can work backwards to find what role would allow you to have a stepping stone.”

Planning practically for your next job can be a foundational way to prevent spending each paycheck. Mapping out your professional trajectory and outlining your future can provide the vision you need to move forward.

After assessing the career route you would like to pursue, it may be necessary to take a step back to gain perspective. Liou says, “You can also do a gap analysis to find out what skills and knowledge you need to obtain to feel confident in your marketability.”?

If you’re feeling lost or overwhelmed during this process, consider reaching out to other professionals to see how they navigated this time in their careers. “Don’t be afraid to ask for help. There are so many resources, tools, and advice out there. Asking for help and being humble is a strength, not a sign of weakness,” says Liou.

Learn Negotiation Skills

Lastly, she recommends learning negotiation skills to enable you to negotiate salary and benefits with a potential employer. If you’re making ends meet by only purchasing essentials, knowing how to negotiate during the hiring phase can be a valuable skill to have under your belt.

Liou says, “Every job offer is a starting point – one of the best skills you can learn in your career is negotiating. With tact you can increase your financial net worth with a simple ask.”

Utilize free resources that can help you such as mobile banking or budgeting apps and podcasts about personal finance. This can help educate you on negotiation tactics and provide you with the confidence necessary to increase your salary when asking for a raise.

“Fortunately, while I wasn’t born rich, I was able to accumulate savings early on by educating myself on financial topics and practicing frugal minimalism,” says Liou. “There are many books and financial experts who specialize in helping people get out of debt. I believe with any goals, consistent action has the biggest snowball effect.”

Take advantage of widely accessible tools that can be beneficial as you steward your income differently. It can also be helpful to have an accountability partner to check in with each month to stay on course with your plan.

Getting out of the cycle of living paycheck to paycheck will not be easy and it will require a timeline. By knowing your numbers, making a plan, implementing negotiation tactics, and taking advantage of free resources, you can take steps toward responsible financial stewardship.

Top Takeaways

How can you take action to stop living paycheck to paycheck?

• Find motivation to save money by considering the future and creating a vision of where you hope to be in a year. Defining your financial goals is integral to achieving them.
• Be aware of how much you need to make to afford rent, groceries, and other essentials. Then, consider what additional expenses you would like to make on a monthly basis.
• Mapping out your professional trajectory and outlining your future can provide the vision you need to move forward.
• Utilize free resources that can help you such as mobile banking or budgeting apps and podcasts about personal finance.??
• It can also be helpful to have an accountability partner to check in with each month to stay on course with your plan.