Life from paycheck to paycheck: how to get out of the vicious circle

Life from paycheck to paycheck is an endless struggle. Rent, loans, debts, travel, communication, food, utilities… Just get a paycheck, and already you’re sitting with empty pockets again, waiting for the next one. And the cycle repeats again. In such a situation it is almost impossible to focus on long-term goals and building savings. All energy and resources go into solving short-term financial problems. Even such innocent things as a gym membership or dinner at a restaurant often become unaffordable.

This lifestyle contributes to chronic stress. And constant background stress, studies show, leads to poor financial decisions. The circle is closing. In this article, we’ll break down how to stop living paycheck to paycheck and break this “vicious circle” forever.

What is life from paycheck to paycheck?

Many people don’t realize that they are in a vulnerable financial situation. Here are some signs that you are living paycheck to paycheck:

You don’t set long-term goals.

You don’t have a financial safety net.

You regularly take out consumer loans or small debts from loved ones.

Your income is less than or equal to your expenses.

You often put off purchases that don’t solve current problems, but affect your overall quality of life. Such as gym memberships, language courses, travel, routine health checks.

You experience anxiety when parting with money.

Obviously, one feels exhausted and vulnerable all the time in such circumstances. If you are struggling to make ends meet every two weeks, you are not alone. Almost 80% of people in Russia live the same way. So you need to stop being ashamed and hiding your financial situation (primarily from yourself). And start taking action.

Interrupting your life from paycheck to paycheck requires persistence and a clear strategy. Even if you feel like you’ve exhausted all your options, there are effective methods for adjusting your spending, income and savings.

Stop living from paycheck to paycheck: 4 steps

Remember that tracking your spending is more than half the battle. If you feel like you’re not in control of your money, start keeping a budget. This is the first and most important step to getting out of the loop. You’ll feel a little more confident financially in just a couple or three weeks.

  1. Make a budget

Plan your budget. It doesn’t matter whether you keep it in a notebook, an Excel spreadsheet, or an app. You need to try different ways and see what works best for you. Download the program Download the program Home Accounting and see how convenient and effective it is for you. A budget should include items such as your projected income (wages, part-time jobs, rent, debt repayment), your mandatory expenses (rent, utilities, transportation, insurance, car payments, mandatory loan payments), a savings and debt repayment plan, and your optional expenses.

2. Keep track of your expenses

When budgeting, look back at your spending over the past two or three months. Give yourself at least a rough picture of your standard expenses. From there, as you keep a budget, things will get more specific. Based on past spending, set goals for the next few months and start tracking your daily purchases. Do you have big expenses on the horizon, such as holiday gifts or tax payments? Document this in your budget and adjust your non-essential expenses.

  1. Get rid of credit cards

Credit cards are what keep us in paycheck-to-paycheck mode. Endlessly carrying your credit card balance from month to month is not going to do any good. Make a plan for paying off your card debt. Make the most of your available funds – temporarily squeeze in restaurants, bars, and moving around. Yes, you’ll have to change your lifestyle for a short period of time, but you’ll thank yourself later. If this method is too difficult for you, we suggest you take out a consumer loan and close your credit card. That way you won’t have the opportunity to drag your debt out indefinitely, and the interest will be less.

Once you get control of your balance, only use your credit card when you know you can pay off the debt within a grace period, without paying interest.

  1. Saving, saving, and saving again

The success of saving isn’t so much in its size as it is in its consistency. Determine an amount you are comfortable with, albeit a very modest amount. Set it aside each month. Try to slowly increase that amount to 20% of your salary. Don’t know where to get the money from? Start small. Plan your meals so that you don’t throw some of your groceries in the trash. Cut back on any unnecessary expenses that don’t make you feel good. Revise your rates for Internet, telephone, and cable TV. Reduce how often you go to cafes, restaurants and bars. Use public transportation more instead of your car or cab.

It’s important to remember that budgeting is a lifestyle change. Try to treat getting out of a difficult financial situation like a game. You need to go through the levels step by step and take on more challenging tasks. Have fun with every ruble you save. Set yourself interesting goals that inspire you. And remember that even the smallest steps, like budgeting, are a big accomplishment. There is no quick way to end life from paycheck to paycheck, so your biggest helpers will be patience and consistency. Soon you’ll start to enjoy knowing that you’ve taken control of your finances. And things will go easier and faster at once. We wish you good luck!