How Do I Save Money When I Live Paycheck to Paycheck?

Do you find yourself living paycheck to paycheck and struggling to save money? You’re not alone. Saving money is no easy task, especially when over 30% of Americans

are in the same position as you. But there are ways to budget your money even when your financial situation is stuck in between paychecks. Let’s learn how to stretch your cash and save some money for the present and the future, using a couple of effective strategies down below. 

Understand the Big Picture of Your Finances

Saving money is possible, but before you can do anything, you need to put in the work and paint a clear picture of what your finances look like. Some people may prefer a more practical way to view their finances like charts, Excel sheets, or a plain notebook on paper situation. No matter what your preference is, visualize your budget to get started. 

- Calculate your monthly income and then add up all your monthly expenses. Ideally, your income should exceed your expenses, leaving you with extra cash each month to save. But, that may not be an option for you right now if your paycheck doesn’t stretch as much as it used to. 

- Examine your budget and look for any areas where you can trim down. This can be anything from the highest wifi plan that costs you three times the normal rate, video games, coffee runs, and Netflix subscriptions.

- Eliminate some non-essential expenses. Consider cooking at home instead of dining out, and try to save a few dollars on groceries by buying generic brands or using coupons. Shopping at discount and bargain stores is another effective way to save as much as possible throughout the month. Eating generic may not be as glamorous, but it can help you catch up on your bills and make your paycheck last longer.

If you're already living on a tight budget and can't cut costs any further, try finding ways to make more cash on the side and increase your income. Become a freelancer, sell things online, or even offer a service like tutoring students. Can you take on overtime at work or pick up a side hustle? These are great questions to ask yourself when looking to make more income. The more income, the more money at the end of the month to save or spend guilt-free.

Stop Accruing Debt

Your debt-to-income ratio should not exceed over 30% according to most experts. While that ratio may not be feasible for someone who lives paycheck to paycheck and relies on credit to make ends meet, it is a goal you should have. 

Take a moment and ask yourself if what you are purchasing is a want or a need. Needs are things that must be met before spending money on wants. 

Needs are things like rent, water, food, gas, light bill etc. Wants typically include things such as: travel, entertainment, clothes (in most cases), gym memberships, etc. Wants and needs won’t be the same for everyone but it's important to determine what is what for you. If you don’t have a clear definition between the two, it’s easier to partake in impulse spending and waste money throughout the month. That’s money that could go into a savings account!

​Building up your savings is essential because it allows you to cover unexpected expenses without relying on things like credit cards or trying to find a loan without SSN. Credit card debt can quickly get out of control, leading to a never ending cycle of paying it off and using it just to get by each month. By prioritizing paying off your debt and avoiding new debt, you can start putting that money towards other financial goals, like a savings account with at least 3-6 months’ worth of expenses. Breaking the debt cycle is key to building a solid financial future.

How Do I Learn How to Budget?

No one is born with the tools they need to budget correctly. In fact, budgeting can look different for everyone! But the easiest way to learn how to budget is to just get started and use a free tool. 

Some online banks have tools that come as a perk with your online checking account, and it explains where your money is going into and what areas are high compared to others. You can usually find these tools on the bank app, under dashboard and spending. The neat thing about using your bank for budgeting information is that your paycheck is already in there, and you don't have to manually add your spending if everything is connected. 

There are many free online budgeting tools that can be useful depending on your situation. For example, Rocket Money has an app that helps you automate your savings and cut down on subscriptions, so you can control more of where your money is going.

As your life changes, you can work with a finance coach to help keep you on track or use something more practical like a monthly budget sheet like this one: Monthly Budget Sheet. 

What are a Few Ways I Can Start Saving Intentionally?

Saving money can come in different forms and from various methods, but ultimately, you have to be as intentional as possible if you want to build a savings fund. Have a plan and then pick a purpose of what or where the money you are saving will be for. 

Working toward specific goals can be one of the most effective ways to save money because it puts a reward or accomplishment in sight. Pick a goal and motivation, then estimate how much you think you will need (always round up) and determine a date when you want to finish your goal. 

Short-term financial goals are objectives you want to achieve in a short amount of time, such as a year or less. Long-term finance can be defined as any goal with an end date of 5 or more years. Some examples of goals are: 

- Common short-term goals - Pay off credit card debt, create a small emergency fund (three to six months of living expenses), plan for an out-of-state vacation, or get the down payment for a car. 

- Common long-term goals - Down payment on a home, finance a home renovation project, pay for a dependent’s higher education, or save for retirement.

Saving a small amount at a time is a good way to get started, but as your financial situation gets better, you should adjust your strategies and work towards bigger goals. Every little bit helps, and the more effort you put into getting your finances back on track, the easier it will be to build an emergency fund even on a tight budget. The sooner you start, the better! Having an emergency fund to pay for unexpected expenses can help you navigate life without adding a layer of financial stress. If you have an emergency fund, it’s harder for a vet bill or car repair to catch you off guard. 

You CAN Save Money When You Live Paycheck to Paycheck

Many people work for years with the goal of retirement, but how can we be sure we’ll have enough money when the time comes? It’s essential to plan ahead, even if saving seems tough right now. Just remember that many people are in your shoes when it comes to living paycheck to paycheck. 

Start with one small step, like tracking one week of your spending habits, or setting up a savings goal on an app. With all this being said, it’s important to save, but don’t let saving money steal away from your happiness. Remember these tips and strategies to stretch your dollars to the max and save your money but also enjoy and live your life to the fullest.