Stop Living Paycheck to Paycheck

A few years ago, our family lived by being dependent on receiving a weekly paycheck. Both the husband and I maintain great jobs, but we were hardly able to pay the bills. Borrowing from Peter to pay Paul – we would push one bill to lapse its due date to pay another we ‘forgot’ about. We were never able to get ahead. It took me painstaking long years to realize that the debt ridden life was all our own making, due to poor financial habits and choices, and that I was no longer going to stand for it.

Today, things have gotten better, although we are still not in the black yet. We have an emergency fund, paid off several smaller debts and work diligently to pay off the big accounts (like the student and debt consolidation loans), and hope to pay off the Lending Club loan by the beginning of next year. We are on track to be debt free in two years and half years, with a good future in the forecast. We have also increased our contributions for retirement, learned to plan for weekend staycations, and live with a frugal mind. Our finances are much better off today than they were three years ago. It amazes me how far we have progressed and how indulgent becoming debt free feels.

If you are in a state of financial despair, like my family once was, you can climb out of it to become a your own success story. Stop living paycheck to paycheck. Take control of your financial life. I would like to share my thoughts about what has worked for our family, what I know works by having lived through this experience.

To begin, many financial advisers and blogs, typically recommend to start by tracking your spending on a daily basis. It is definitely worthy advice, but not always practical as keeping track of daily spending can be difficult. I advise you to track your expenses, but if you don’t, for whatever reason, do not let that stop you from fixing your finances.

Here is my recommendation, whether or not you track your spending (but you should), at least do the following:

Learn to walk before you run

Set up your accounts. Consider setting up one savings account, a checking account strictly for bill pay, and an account for your variable expenses (like groceries, gas, and entertainment). This method has worked great for my family. You can find about more about my bank account set up, here.

Halt. Stop using your credit cards immediately! Cut them up, or put them in the freezer in a ziploc bag filled with water, effectively freezing your cards. Also stop taking other loans, either from financial companies, banks, or family and friends. Stop getting into more debt!

Save now! Yes, you do have money to save (even if it starts out with a very small amount). The next most important step you can take, in the beginning, is to start a small savings account if you haven’t already. Begin by depositing into it regularly, at least 10 percent of your gross paycheck. If you can’t find the 10 percent then see the next step how. Set up a payroll deduction with your employer’s benefits department to have 10 percent automatically deposited from each paycheck to your savings account. If you don’t see the transfer of money, you don’t feel the pain. A savings account will help you bare the waves of Murphy’s – when an emergency comes up, like your car breaking down, you won’t be thrown back into debt trench or end up broke. You will have some cash to pay for that emergency, and you can use your regular paycheck for regular expenses.

Look at voluntary spending. If you can’t find 10 percent to save per paycheck, then you need to cut some things from your spending. This is where tracking your spending comes in handy, but even if you don’t, you know some of the extras you spend on — coffee, snacks, eating out, shopping for gadgets and clothes, going out – these are just a few of the examples. You don’t need to cut everything out, but if you can cut a few of them, that can add up (pay extra attention to your food budget). Then, take the money you didn’t spend on those voluntary spending items and add that amount into your savings each payday.

Start a debt snowball to get out of debt. Yes, there is debt tsunami and the the cash cascade, but those are for seasoned debt free adventurers. If you have not tried a debt snowball, it is easy. List out your debts and arrange them in order from smallest balance at the top to the largest at the bottom. Then focus on the smallest balance first, putting as much as you can into it, even if it’s just $20 extra. When the amount is paid off, celebrate (frugally)! Then take that total amount you were paying (say $30 minimum payment plus the $20 extra for a total of $50) and add that to the minimum payment on the next largest debt. Continue this process, with your extra amount snowballing as you go along, until you pay off all your debt. This could take several years (will be 6 1/2 years for us to be debt free), but it is very rewarding. By focusing on the smaller debts first keeps you motivated on your debt free journey.

Walk a steady pace

After taking those first steps, it’s time to pick up the pace. Time to start on these steps:

Start a budget (b-u-d-g-e-t). Yup, I said it. I know the word stinks like Limburger cheese. But it doesn’t need to be hard, and if you set it up right, it’s fairly simple. Here is a great link to learn about setting up your first budget.

Use the bill pay feature for your bills. As much as possible, set up your bills to be automatically paid through your bank’s bill pay feature. For those that can’t, use your bank’s online check system to make regular automatic payments. Like many of the bank’s commercials, using bill pay really can take only five minutes of your time. Now, I log on once a month to my bill pay account, set up the payments, and hit submit. Five minutes normally, ten minutes tops.

Save for your irregular expenses. Personal finance author Mary Hunt calls it a Freedom Account, it is the key to ensuring that you have smooth finances and that you stick to your budget is to take into account all your irregular expenses, such as insurance, car maintenance or repairs, gifts (think Christmas!), medical and other such things. List them out, estimate your annual spending, and begin saving for them each month. Our family saves an extra $1,000/year for increased summer camp costs. So, we put away $38/paycheck and the summer is stress free. Some banks will allow you to set up sub-accounts within your saving account for each expense and then use a spreadsheet to keep track of each. Again, this way your regular budget is used just for that, regular expenses. The Freedom Account is for the irregular expenses (just remember stress free).

Set up personal finance goals, start planning for them. When do you want to retire? How often do you want to travel? When do you want to buy that dream house? Do you want to save for your kids’ college education? Think about what you want in life, and start planning to save for them, especially once you’ve done all the above. It took our family a long time to be able to implement this step, but it did come forth. First we started with small goals like planning to pay cash for our annual camping trip. Then we were able to plan for our family’s first big vacation to Maui (the awesome memories will last a lifetime for us).

Once you’ve gotten beyond these steps, you should be past the dependency of living paycheck-to-paycheck. Now, personal finance options like investing your money for your goals become available to you. But getting past these first stages is important.

(photo credit:

36 thoughts on “Stop Living Paycheck to Paycheck

  1. Briana @ GBR

    Thanks for this post Christine! It’s definitely helpful (and a relief) to see that for some people you can’t get out of debt in a year, or even two. It takes time, and it definitely takes sacrifices. It’s also a relief to know you don’t have to sacrifice saving in order to pay off your debts.

    1. Christine Post author

      Hi Briana! Definitely takes time, discipline and sacrifice. And it doesn’t happen perfectly either – I’ve had my slip ups, but continue to move forward. If the steps are implemented, its nice to know people will start a savings account. I can’t tell you how many times the emergency fund has saved us!

    1. Christine Post author

      I tried cutting everything out just to hurry the get out of debt process, but my family became cranky. I had to compromise. And we’ve had a great time camping and going to Maui.

      Some might not think its right to vacation while getting out of debt. And 99% of our excursions are staycations by camping frugally. But sometimes, you need to still live your life. One of my big goals was to take my family on a big vacation while my kids were still kids. So, we did. And of course, we found the best prices, traveled off season, and had a wonderful time.

    2. Christine Post author

      I’d like to add – that the pocket change saved in a jar – pays for our camping trip every year. Its been a great idea to throw loose change into a jar. We have fun every year guessing how much we’ve saved up.

      1. Jacq @ Single Mom Rich Mom

        What a coincidence Christine! I have a post half written on my aversion to the Ramsey method and not cutting yourself a little slack and fun along the way. No sense doing 3 years of time that feels like deprivation vs. 3.5 years of fun and a wee bit of deprivation. I’m trying to remember the book name where I first read about this (and she had coin methods too!), it’s probably 15 or so years old and long gone from my house, but it made a great impression on me at the time that it’s amazing what we’ll give up in some areas in order to still do what we value in others. I personally think that that’s the ultimate way to determine what you really value. So maybe you cook at home 99% of the time if it means you get to have a great dinner out once every couple of months or walk, not drive if it means you get to go on a holiday. That’s how I found out what I really valued anyway and why I seem to over-spend in some areas to some people yet practice frugality in others – it’s not just being weird! 😛

    1. Christine Post author

      Okay, now if it was from the dentist issue…that is not your fault. You looked like you were doing pretty good. It doesn’t help the holidays are coming up, too! Keep track, jpkittie!

  2. Fraser Mitchell

    An excellent post. Becoming debt free is like going on a diet. If you try and give everything up at once and for ever it just wont work. You will fall off the wagon and end up yo-yo dieting. Saving up for little luxuries not only works but you enjoy them much more as you feel you have earned them!

    1. Christine Post author

      This is especially true if it is a family affair – paying off debt. If it was just me… I think I could accelerate it a bit. 😉
      but I have enjoyed the little rewards – its a gift to me to see my children genuinely enjoying themselves.

    1. Christine Post author

      Oh, nice one Evan. You do need to both to be on board with it.

      So what would you do if one spouse is not on board while the other is paying it down (their own debts obtained before marriage) like clockwork?

  3. sharon

    2 1/2 years is awesome…I know how much this debt has been weighing on you…Persevering is definitely the answer! Great ideas, and great post!

    1. Christine Post author

      Thank you, Sharon! Glad to hear you had a fabulous birthday celebration! I hope it will happen faster than 2 1/2 years. And the stars have blessed me good this year. I hope it will keep on blessing me until I am debt free. 😉

  4. Jerry

    I know that staying out of credit card debt is insurance for your future. It has been the experience for us. We were in serious credit card debt. We began selling all of the stuff we didn’t need and within in about a year we’d paid off over 20,000 in credit card debt. I am really proud of that. I feels great.

    1. Christine Post author

      Hi Jerry! 😀
      Wow, $20K? That is great! There are two specific lines of credit I am focusing on right now – to hack down immediately. I like making it a game to see how quickly I can defeat them. That is great, Jerry. Now add $20K to those investments in a year. 😉

  5. Bret @ Hope to Prosper

    This is such great advice.

    When you are in a hole, stop digging. In other words, stop accumulating debt.

    The saving 10% is the other key. If you aren’t paying yourself first, you are working for eveybody else’s benefit and keeping nothing for yourself.

    1. Christine Post author

      Easier said than done, of course. It’s easy to accumulate, but takes some hard effort to dig out of it. That is why I love blogging about my trials, because there is such a great community of support to make sure I stay on track!

      It’s so important to save 10%. Because if something happens, at least you have a cushion to bounce on. And you’ll also help aid into supporting your future.

      Thanks for stopping by Bret!

  6. Lisa

    I would say communicate with your significant other and definitely check in frequently to make sure you are both on the same path. Also, if you brainstorm ideas together, you might find even more ways to save.

    1. Christine Post author

      And there is such empowerment in working on ideas together. Two great minds together on one task…. priceless. 😉

  7. Forest

    Very sensible advice Christine. Like you I had years of bad finances but am now steadily walking to that debt free finish line with the right attitude.

    1. Christine Post author

      Hey Forest! Thank you. And doesn’t it feel so much better to be walking in the right direction? Why I waited so long to do it. 😉

  8. Mark @ SpotlightInvesting

    I love the credit card -> ziplock bag -> freezer idea! A literal freeze. Nice!

    I read about a financial adviser who cut all his clients’ credit cards up and put them into a flower vase. It became their reception decoration!

    Good luck!

    1. Christine Post author

      Thanks. But I think some people (like myself back in the day) needed to freeze the credit card in a big container. LOL. And that is a great idea for cut up CCs. I should see what other ‘art de Credit Card’ I can find on the web. 😉

      Thank you for visitin’!

  9. AJC @ 7million7years

    I like the Cash Cascade for choosing when to pay off debt, or invest elsewhere. But, I understand the psychology of the ‘pay off a really small debt first to get your fee wet’ Debt Snowball option … just flip to my method once you’ve proved that you CAN pay off a debt or two.

    Thanks for the mention, Christine!


  10. Andi

    I have been trying for 3 months to get a part time job (evenings & weekends) in addition to my full time job to help pay down my debts but have not heard back from anyone. Is it true that employers will not hire you if you have a large debt to income ratio? (which I do). I have applied to over 10 places who ARE hiring and have not gotten any responses.
    I am not late or have ever missed a payment. I just owe too much money due to fault of my own(credit cards) and 2 school loans and 1 car payment that belong to my kids (they make the payments on these).
    I completely stopped using my credit cards and have no emergency fund. I am losing sleep over all of this and am wondering if I should seek help with a credit counselor but am afraid that will hurt my future credit rating.
    Refinancing is also not an option as we have little to no equity in our home.
    Please leave my email off of the comment or response.
    Thank you.

    1. Money Funk

      Andi, don’t worry. Your email is safe.

      From experience, employers will not look into a DTR until after the interview. So, I don’t think that is the issue. I think its just really competitive out there. I would advise following up with the manager of the institution a week after you submit your resume and continue to follow up in decent intervals.

      You own a house – so you don’t plan on making any big purchase in the near future. Finding a Consumer Credit Counseling Service is a viable solution. If there is an impact on your credit score… it would not last forever. It usually means people will not extend you credit while you are on a program. That is OK. It would be better to work on a solution NOW than find yourself worse later.

      My next thought… consider spring cleaning the house by selling the unwanted and throw that cash into an emergency fund. An EF has saved me plenty of times – even if its only $1K.

      Best of luck, Andi. I do wish you the best.

      1. Money Funk

        Another note… if you belong to a Credit Union – look into what type of financial programs they have. My CC has great programs to help you get on track.

        1. Andi

          Thank you so much for your response. I am going to do a follow up on all the job applications I submitted. I am also going to start an emergency fund TODAY. It will only be 10.00/week because it will have to come out of my grocery budget but that’s ok…I love eggs or pasta! I have already cut everything I can…groceries, no entertainment, no shopping of any kind & I always pack my lunch, I am also going to start the debt snowball plan this month. I tried the spring cleaning last year and held a garage sale…I only sold 40.00 worth of stuff and the rest went to the salvation army.
          I really don’t want to have to contact a credit counselor and do want to do this on my own, but if I don’t find a part time job by February, I will not be able to make one of my credit card payments in March and I cannot bear to have that hanging over my head. If I find myself in this situation, is it better to contact the credit card company directly or go to a credit counselor?
          I do belong to a credit union and did contact their 800# once to inquire about one of their programs but they refered me to my local branch and I never followed through because I know all of the employees so well and I am quite embarrassed over my situation.
          Thank you again for your advice. It is so helpful to finally be able to talk to someone about this.

  11. anita

    I am a caregiver and work out of the home and go to school fulltime.I am getting ready to graduate right and are looking for a 2nd pt job at home.any recognizations.

  12. anita

    I am a caregiver and work out of the home and go to school fulltime.I am getting ready to graduate in February and have been looking for a 2nd pt job at home.Any recommendations.

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