Money Savings

7 Reasons You’re Living Paycheck to Paycheck (And How to Fix It)

October 12, 2016
In order to stop living paycheck to paycheck, you must understand the "WHY" of the matter. Then you can defeat living paycheck to paycheck. Read on to learn the why and how!
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The major contributing factor to the growing trend of people living paycheck to paycheck is a lack of savings. Across many income brackets, 47 percent of folks can’t even come up with $400 during an emergency.

You may be apart of that 47 percent and despite many efforts, you continue to fail miserably at getting ahead of your expenses, saving a decent amount of money, and putting a dent in your debt.

I know many of you have been led to believe that if you just cut a few expenses here and there, create a budget, and focus on earning more that your money woes will go away. Unfortunately, that is only a part of the equation to help you overcome living paycheck to paycheck.

While creating a budget, earning more money, and living a frugal lifestyle will undoubtedly help you stop living paycheck to paycheck, there’s one important piece that folks often struggle with the most. That piece is understanding why they are living paycheck to paycheck.

We all have behaviors, beliefs, values, and different sets of circumstances that contribute to who we are. These same behaviors, beliefs and such play a major role in how we handle our money.

Without understanding the why of the matter, you’ll never defeat this way of living. This isn’t time to hit the back button. Grab some tea (or vodka) if you will and get cozy. Let’s understand why you tick the way you do and discuss 7 reasons you may be living paycheck to paycheck and how to fix it.

 

To stop living paycheck to paycheck, you must understand the "WHY" of the matter. Then you can defeat living paycheck to paycheck. Read on to learn the why and how!

 

7 Reasons You’re Living Paycheck to Paycheck (And How to Fix It)

 

1) You don’t understand the basics. Basically, you’re financially illiterate.

If you don’t know anything about money, how are you going to become a better manager of it? This took me a long time to realize considering I come from a financially illiterate background.

I’m no stranger to the struggle. I’ve shared my bankruptcy story and my money miseducation. It took several years of studying, struggling, and learning from financially competent individuals before I turned my finances around.

I literally knew nothing but how to make it paycheck to paycheck. I had no financial goals, I didn’t know how to save, and I used credit inappropriately. Once I learned the financial basics —  such as living within my means and paying myself first — I was able to overcome living paycheck to paycheck.

Let me stop here with a few things you should understand (things I basically had to learn before I defeated paycheck to paycheck living):

  1. Money is a tool, you should treat it as such.
  2. The amount of credit you have is not an indicator of your wealth. It’s an indicator of your ability to pay your bills on time each month; however, a high credit score does not mean you are balling.
  3. A true investment in yourself is non-materialistic. Of course, you’ll look cute with that new Michael Kors purse. But what’s really cute is having some money in that matching billfold, not a bunch of maxed out credit cards.  (I just had to add that tidbit in there.)

Okay, now we can carry on…

 

Related Reading: The Real Reason You’re Broke and Do You Need a Wealth Cure

 

2) You don’t know where your paycheck is going.

You might think you have an idea of where your money is going, but tracking your expenses is an eye-opening experience. If you’ve never done this, it is definitely necessary.

Do I still track my expenses today? No, but doing so for a short period of time helped me to create a household budget that truly reflected my family’s spending habits. Without this information, you could be budgeting too much or too little for certain expenses.

If you budget too much or too little, you’re exposing finances to the unknown. If you think you spend $50 in gas each week, but actually spend $100 —  you could be digging a hole for yourself. If you don’t have the extra $50 to cover the true amount you’re spending, you might resort to using debt to cover the expense.

There are plenty of ways to track your expenses. First, you can sign up for a free tool such as Personal Capital and aggregate all of your accounts (checking, savings, retirement, credit cards) in one place. This will help you see spending habits based on your debit, checking, and credit card usage.

You can also use a spreadsheet to track expenses. I’ve created a free expense tracker that you can download for free to help you monitor your expenses on a monthly basis. If you would like a copy, drop your email in the box below and check out this post on how to use it.

 

budget-expense-tracker

Last, you can go old school and track your expenses manually using pen and paper. When I was tracking my expenses, I used a journal and tracked expenses per paycheck until I got a better understanding of my spending habits.

 

 

3) You pay everyone first but yourself.

I get it, you got bills. Understandable. However, what’s not understandable is giving your paycheck to all these people and not keeping some of it for yourself. You are the one that works 40 hours (sometimes more) per week for that paycheck.

How fair is it that you have a dollar after paying the light people, rent people, and insurance people?

Nah, that ain’t cool one bit. Instead of paying everyone else first, take your cut off the top and live off everything that’s left. That means if you make $700, you take your share first ($100 for example) and live off the remaining $600.

 

Related Reading: How to Save Living Paycheck to Paycheck

 

4) You’re living like the Joneses.

The Joneses reside in every neighborhood. You might even be the Joneses yourself.

Yeah, that new car that Trisha has in the driveway at her 3 bedroom, brick, ranch style home is cute. However, that $400 car payment is beating her senseless every month.  And we’re not going to talk about the property taxes homegirl shells out every year.

Oh and let’s not forget your mama/sister/girlfriend/auntie. You know, the one that encourages you to hit those outlet malls with them every other Saturday. The one who you go with to your weekly pedicure and hair appointment.

Now by all means, if you’ve budgeted for it and have the money to enjoy these things – that’s fine. However, if you’re living paycheck to paycheck, you’re subjecting yourself to the struggle life because you’re living beyond your means.

You’re trying to keep up with Trisha, mama, auntie, sister, girlfriend – and this is costing you money you don’t have. My advice would be to pick a few things you can’t live without and budget or them accordingly. Then forget about Trisha Jones, Mama Jones, and all those other Jones and focus on you.

 

Related Reading: How to Have a Life and a Budget

 

5) You fail to plan for unexpected expenses.

If you only think of those right now expenses, you’re overlooking those major things that pop up every year or so. I’m talking about those insurance premiums, medical deductibles, car repairs, and home maintenance costs.

The list certainly doesn’t end there, but it’s important to identify your unexpected expenses and plan for them accordingly. The best way to do this is to examine your bank statements over the last 12 months and look for expenses that caught you off guard.

 

Related Reading: How to Save for Unexpected Expenses

 

6) You pay only the minimum on your debt.

If you’re paying only the minimum payment on your debt, it’s safe to reason that you have no clear plan to eliminate it. This is a problem because every month you’re paying only the minimum, your debt is accumulating interest.

 

Related Reading: 6 Step Plan to Pay off Debt and Save Money

 

The more interest your debt accumulates, the longer it will take you to pay off your debt. The longer you have debt, the more dependent you become on your next paycheck. To keep the bill collectors happy, you’ll be sweating, hoping that paycheck hits the bank on time come Friday morning.

This surely isn’t the way to live and it’s a surefire way to keep you living paycheck to paycheck. To eliminate this problem, you need to find additional money in your budget to put towards your debt. If you don’t have any money left in your budget, it’s time to find ways to earn more money.

 

Here are several articles that will help you earn more money:

80+ Ways to Make Extra Money

How to Make Money From Home Using Amazon FBA

How to Find Freelance Clients

 

7) You waste time on non-income producing activities.

Keep a log and determine how much time you spend on Facebook, Instagram, or watching television. Once you know how you’re spending your time, you can either cut back on these activities or look for ways to monetize your time.

The way I overcame wasting time watching television was by taking surveys. Anytime I was on the couch watching television, I’d pull up a survey and earn some extra cash. Matter of fact, I’m writing this article right now while I watch television.

Sign up for American Consumer Panel, Harris Poll Online, Opinion Outpost, Swagbucks, and Vindale Research (all of which are FREE) and start earning a little extra to help you stop living paycheck to paycheck.

The money making activity I used may have changed over the course of my hustle journey, but it doesn’t matter because I’m still earning income while watching television. We all have to start somewhere, and earning extra income taking surveys is a great start. You can use this money to offset your usual household expenses or save your money for gifts or holidays.

Beyond surveys, you can do some of the following:

Think of other ways you can monetize your time. You’d be amazed how much money you can earn when you decide to stop wasting time!

 

Related Reading: How to Get Ahead on Little Income

 

Wrapping Thangs Up

You may be a part of the 47 percent that can’t come up with $400 for an emergency today, but it doesn’t have to stay that way. To defeat this cycle, you must know why you’re in that cycle in the first place.

As promised, I’ve discussed 7 reasons you may be living paycheck to paycheck. I hope this information will arm you with the knowledge you need to create viable solutions to deal with your money woes.

Now that you know why you’re living paycheck to paycheck, I encourage you to educate yourself, know where you’re spending your money, pay yourself first, plan for the unexpected and stop trying to live like everyone else. Also, don’t forget to knock out those debt payments and monetize your time wisely.

Living paycheck to paycheck will soon be a thing of your past. You now know the reasons why so get busy!

 

Are you living paycheck to paycheck? Are any of the reasons discussed to blame and if so, what are you going to do about it?

 

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Latoya Scott
Writer/Creator
Latoya Scott is a personal finance writer and blogger for hire who loves talking about budgets and money. Her mission is to help women create better finances so they can live a carefree lifestyle.

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  • Chonce October 12, 2016 at 10:15 am

    All these points are so true. Trying to live like the Joneses (who are probably in debt) will keep you in the paycheck to paycheck cycle. We finally started living on at least last month’s income and it took a lot of saving and planning but it’s much easier to budget now and overall, less stressful.
    Chonce recently posted…September 2016 Online Income ReportMy Profile

    • Latoya Scott October 12, 2016 at 11:34 pm

      Yes, I strive for that living off last month’s income!

  • Rachel@TheLatteBudget October 12, 2016 at 11:10 am

    So true! During the week, I only let myself watch TV when I’m doing something productive, like blogging or cleaning. It’s amazing how much time you can waste by pressing “one more episode” on Netflix! Working to increase my income has definitely been a major factor in improving my finances. I’m able to use whatever extra money I make to save or pay off debt.
    Rachel@TheLatteBudget recently posted…How to Stop Living Paycheck to PaycheckMy Profile

    • Latoya Scott October 12, 2016 at 11:34 pm

      Exactly, I’m watching one of my shows now, but I was able to write an article in it’s entirety and respond to blog comments! Winning!

  • Kemkem October 12, 2016 at 2:48 pm

    I remember those horrible days well. I don’t miss them at all. It’s amazing how much better everything is when you eliminate the fat from your life and buckle down 🙂
    Kemkem recently posted…Jeronimos Monastery Belem Portugal: Must VisitMy Profile

    • Latoya Scott October 12, 2016 at 11:33 pm

      Very true, KemKem!

  • Donna Shana October 12, 2016 at 3:59 pm

    Yep, pretty much summed it up,. I write down every dime I spend. I try to tell people. I’m gonna share your post- hopefully they will listen to you!
    Donna Shana recently posted…Product Alert: Tabañero Hot SauceMy Profile

    • Latoya Scott October 12, 2016 at 11:32 pm

      Thank you, Donna!

  • Eva October 13, 2016 at 7:04 pm

    Those time wasters get me every time! I could have totally written a book by now given how much time I have spent crafting the perfect Facebook post…. LOL
    Eva recently posted…How Caribbean Moms “Road Trip”My Profile

  • Whit October 13, 2016 at 11:44 pm

    Im so happy my financial life is in check finally. I was doing great until I got gravely ill but im bouncing back two years later. Glad i was prepared

    • Latoya Scott October 16, 2016 at 1:10 am

      That’s awesome, Whit!

  • Tia @ financiallyfitandfab October 14, 2016 at 12:59 am

    Great list! I think another big reason is not differentiating between wants and needs. That relates to financial literacy though.
    Tia @ financiallyfitandfab recently posted…5 Money Management Misconceptions about Women in SocietyMy Profile

  • Joanna October 14, 2016 at 12:31 pm

    This was definitely me in my teens and 20s. I was just talking to my friend last night about investing and getting my money right. These points are spot on. I remember making $8, but wanting to shop in Bloomingdale’s. Granted every store has sales, but I wasn’t even getting a deal. If I knew then what I know now…
    Joanna recently posted…Fun Ways to Celebrate Fall in NYCMy Profile

    • Latoya Scott October 16, 2016 at 1:07 am

      Girl, you and me both!

  • Stacie October 14, 2016 at 1:25 pm

    This is a good list for people to get their spending together. But I do feel it’s possible for people to be underpaid as a reason for living this way as well.
    Stacie recently posted…Kohl’s Style for Every Body: It’s All About the Ankle DetailMy Profile

    • Latoya Scott October 16, 2016 at 1:06 am

      Unfortunately, that is true. Hopefully someone who is underpaid can pick up a side hustle to make ends meet.

  • Jennifer Hamra October 14, 2016 at 1:59 pm

    This is a really great article! I know many people and families live pay check to pay check. It’s really challenging, but I agree with your tips. We started paying ourselves first a few years ago. It started out very small because money was tight. But when my husband got out of the Army and started a new job, we were able to increase the amount. When I do our budget, I like to budget for a set number and if he’s paid a larger amount, we put that in savings.
    Jennifer Hamra recently posted…Rosie the Riveter: Meeting the Original RosiesMy Profile

    • Latoya Scott October 16, 2016 at 1:06 am

      Awesome! And thank you, glad you enjoyed!

  • Cleverly Changing October 14, 2016 at 2:39 pm

    I use to have friends who felt like every time I got something new they had to run out and purchase some equivalent. I don’t like competing for no reason and with no reward so I had to have a conversation with them that led to us parting ways. My desire is for my friends to live well, but within their means.

    • Latoya Scott October 16, 2016 at 1:05 am

      And that makes you one heck of a friend for being willing to drop that necessary knowledge!

  • Katherine G October 18, 2016 at 11:20 am

    This is a great list. I’m guilty of so many things on it. I recently got a job so hopefully my family’s finances will get better over time.
    Katherine G recently posted…I Found A Job & I Love ItMy Profile

  • Steven Goodwin @ MyFamilyOnABudget December 21, 2016 at 8:12 pm

    I agree with all of these! They are great points. Especially the one about saving up for emergencies! You can’t get ahead if you don’t build margin!
    Steven Goodwin @ MyFamilyOnABudget recently posted…Family Christmas Traditions: Celebrating on a BudgetMy Profile

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