When I graduated from school I had student loan debt, credit card debt, and a car loan.
Even though I worked full-time I was cutting it pretty close between my living expenses and debt payments. I got paid monthly, so I spent the last week of every month stressing out over my bank account. It was exhausting and anxiety-inducing.
I knew I had to break the cycle, but figuring out how to stop living paycheck to paycheck was tough.
When you’re living paycheck to paycheck
If you’re living on a tight budget, the idea of saving money can seem impossible to achieve.
Recurring expenses can devour a small salary, leaving you with not much to work with. But that doesn’t mean you’re stuck. Start small and keep at it consistently by following these four steps.
If you’d like to break the cycle and stop living paycheck to paycheck, read on to find out how you can save $1,000 in no time (even on a tight budget).
1. Track your spending
Before you can start saving, you need to know exactly where all of your money is going.
For at least two weeks, write down everything you spend in a notebook or a spreadsheet. Consistently keep track of the amount spent and what you bought each day. You can also try tracking expenses with an app.
Many people find they frivolously spend very small amounts of money. I know when I tracked my spending, I was amazed to see how much packs of gum, magazines, or fast food can add up.
Once you see where your money is going, you can identify areas where you’re wasting your cash.
You may still have a deficit — the amount of money you spend each month that surpasses what you bring in — but eliminating little treats can help close the gap.
Ultimately, this will make it easier to figure out how much extra money you need to make later on.
I had joined a professional group when I moved to another state. While it was worthwhile, once I found a job I didn’t need it anymore.
Yet I didn’t realize that, after an introductory period, they would charge me $50 a month to be a member. Once I caught the charge on my account, I was shocked I had just thrown money away on a service I wasn’t even aware I still had.
While auto-pay is convenient, when you are trying to break the cycle of living paycheck to paycheck, it can be dangerous.
When you sign up for subscriptions like Amazon Prime, Netflix, or other services, the monthly amount for each individual service might seem small. But add them all up and you could easily spend up to $100 a month without realizing it.
Review your bank and credit card statements every month. Look for any services that charge a monthly fee. If you do not use them, cancel them right away. That will free up more money in your budget to cover your deficit or give you a head start on your savings.
3. Pick one area to improve
Trying to be frugal in all things can be overwhelming. When I had my wake-up call, I was determined to follow every personal finance blog tip. And I may have gone a little overboard in the process.
I made my own laundry detergent, walked everywhere, and basically only ate rice and beans. It was awful, I lost a ton of weight, and my clothes looked funny. Doing too much at once was impossible and I was miserable.
Instead of doing what I did, choose one area at a time to make a difference. For example, if you notice you spend a lot of money on food, spend two weeks solely focused on reducing your food budget. Reinvent leftovers or use a slow cooker to create tasty meals for a low price.
Once you’ve made something a habit, then you can work on another area. Except you should skip making your own laundry detergent (it was a poor life decision).
4. Lower your debt costs
Debt can keep you stuck in the paycheck-to-paycheck cycle: You have debt that eats up your money, so you end up with a deficit in your budget. You have to borrow to cover your expenses, which increases your debt. Then your payments — and your expenses — go up, as well.
If this sounds like you, get strategic with your debts and look for ways to lower these costs. Look at one type of debt at a time and look for options to refinance or restructure those debts.
For credit card debt, consolidating with a personal loan or transferring the balance to a 0% interest credit card can lower interest rates and monthly payments. You can refinance student debt to a lower interest rate, or get on a new student loan repayment plan with smaller monthly payments.
5. Increase your income
Even after cutting my expenses back and tracking every penny, I still had a deficit.
After paying my bills and my living expenses, I was about $400 behind every month. There was no way to cut back any more, so I had to increase my income.
I took a lot of side jobs. From freelance writing to selling things on eBay and Craigslist, I did extra work whenever I could to make up the difference.
Eventually, I started bringing in about $500 a month in extra income. Not a fortune, but it was enough to fill the gap and allow me to put away $100 each month. Within ten months, I had $1,000 saved up.
When you’re living paycheck to paycheck, you can only reduce your expenses so much.
To get ahead, you ultimately need to increase your income. Here are some ideas to get you started:
- Ask for a raise
- Walk dogs
- Sell things on eBay
- Drive for Uber or Lyft
- Grocery shop for Shipt
- Babysit through Care.com
- Write or design things on Fiverr
If you can dedicate just a few hours a week to a side-hustle, you can increase your monthly income by hundreds of dollars. And if you transfer that money to your savings account, you can save $1,000 in just a few months.
Living paycheck to paycheck can be an exhausting experience. However, I also found that taking charge of my finances and working to increase my income gave me a greater sense of security and peace. It was a hard battle, but I was able to turn my financial life around.
If you are ready to end the cycle and start improving your income, check out this guide on launching a side hustle that pays up to $50 an hour.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.46% – 6.97%1||Undergrad & Graduate|
|2.57% – 8.44%4||Undergrad & Graduate|
|3.05% – 6.47%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|