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How to save money when you live paycheck to paycheck


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According to April 2023 from CNBC, 58% of Americans are living paycheck to paycheck. If this is you, you're not alone. But if you want to learn how to save money when you live paycheck to paycheck, the answer is simple. There are only two answers: save more or earn more. Unless you're a high earner, ideally you'd be doing both.

If you make a decent amount and just have a hard time cutting back on your lifestyle (I know this struggle all too well!) here's how I saved $1000 in a month via the use of automated savings apps. 

But, if it’s going to take a bit more work and number-jiggering for you to stop living above your means, below are some steps to help you get there. And don't despair! This can be fixed — all it takes it a willingness to live within your means to break the paycheck-to-paycheck cycle.

How to save money when you live paycheck to paycheck

Start Small

CNBC recommends your savings account start at $500. Here’s why this number is important:

  • Having just $4-$500 saved for a rainy day is enough to break the paycheck-to-paycheck cycle and until you break this cycle, real wealth-building just isn’t possible. 
  • It may take a year to save up your first $500, but I believe the propensity to save is like a muscle. The more you flex it, the stronger it gets. You can save $500 in one year, and then work up to saving $500 per month (which by the way, is the amount you need to set aside if you want to max out your IRA contributions each year).
  • $500 per year is just $41.66 per month. The average American paycheck is ~$75k before taxes, or around $55k after tax which breaks into $4,583. Saving $41.66 per month is less than one percent of your monthly take-home pay.
  • Make well below the American average? Even those making $36,000 per year take home ~ $29,000 after taxes. $41.66 is less than 2 percent of your monthly take-home salary.

Once you have that first $500 or $1000 saved, then it is time to scale up and tackle bigger savings goals (see how to save $5000 in 3 months or our tutorial on how to save 20,000 in a year.) Or you could tackle a true 6-9 months of living expenses…a true emergency fund safety net.

Get a separate (High-yield) savings account

Pay yourself first

You can cut your expenses (see my suggestions below!) but the only real way you'll learn how to save money when living paycheck to paycheck….is by paying yourself first. You might be wary about paying yourself first because your finances are more spontaneous. And that, my friend, is the point. You should be “paying yourself first” so you don't spend down to your last dollar.

The best place to start to even *see* how much you could “pay yourself first” (based on your lifestyle), is a really great budget. There's no one-size-fits-all when it comes to budgets because no two lifestyles are the same. This is why (unfortunately) like dating or finding a doctor you like, you have to try out different ones to find one you feel like sticking with.

Here are the most common budgeting systems. You would just need to account for that monthly (or bi-weekly) amount in each of these alongside your other monthly expenses. Ideally, you’d save the same way you’d pay a bill, by paying yourself first.

  • Zero-sum budget- The money you bring in and the money you spend or save each month is the same, so you are left with $0 at the end of the month.
  • General Monthly Budget: This budget requires you to commit to how much you will spend in each category at the beginning of the month. Throughout the month, you'll limit yourself to the money you've put aside for anything you could need during that time. (Here are four budgeting examples from other bloggers that I really like)
  • The 50-30-20: My personal favorite. Here's how I built mine.

Save the windfalls

When trying to stop living paycheck to paycheck, I can't state enough how much “every little bit helps.” Birthday money from grandma, your tax refund. Get in the habit of saving at a regular intervals – even if it's just 1-2 times each year. Even if you're kicking booty with your budget, it won't matter unless you're saving money for emergencies.

Save close to $10 on your monthly electric bill

If you want to save money without giving up other privileges, this tip could net you up to $10 a month.

The EnergyStar.gov website, organized by the U.S. Environmental Protection Agency and the Department of Energy, states that “even when turned off, electronic and IT equipment often use a small amount of electricity. U.S. households spend approximately $100 per year to power devices while they are in a low power mode, roughly 8% of household electricity costs,”

Use a power strip or unplug your electronics from the wall when you aren’t charging them. Use a power strip as a central “turn off” point when you are done using or charging your phones, tablets, computers, laptops, electric heaters, the toaster – whatever. The power strip eliminates “standby” power consumption.

Get smart about food and save up to $100 a week on lunch

Food can really suck up your budget, especially if, like me, you lean towards preferring organic products. The key to my method is using sales and buying staples in advance. Also, don’t shop, extract. Make your list before heading to the store and stick to it.

To get the organic dry goods that I prefer, I wait for a sale and I stock up on products I tend to use a lot like lentils, beans, coconut milk, and tomato sauce. Beans and lentils are healthy, ridiculously versatile, and cheap. You don’t have to be a vegan to get into cooking with them either. Using a mix of meat with beans or lentils is a great way to stretch an extra meal or two out of a recipe.

This style of shopping acts as a food safety net, in case there’s an emergency. It ensures that no matter what, you’ll have something for dinner. It might not be as tasty as ordering in, but it’s sustenance. I don’t think all meals are meant to be a reward. Sometimes, it’s just fuel, and that’s okay. With plenty of spices, you can find satisfaction, especially if you can get your meal costs to under $3 per serving, like a pot of chili.

Drink water, save $20

I’m serious. Drink water. Why do you need bubbles and flavors every time you put something in your mouth? Think about how weird that is. Water is, for now, the cheapest thing we have going if you carry around your own refillable bottle. Get a filter for your faucet or buy it by the gallon in reusable containers.

A can of La Croix, Guayaki Yerba Mate, or a bottle of GTS Kombucha is expensive for every day, especially if you are trying to find ways to save and stop living paycheck to paycheck. It also substantially increases the bill when dining out. One specialty beverage a day can easily add up to more than $20 a workweek. Maybe limit yourself to two or three a week. 

Keep your change and convert your purchase into points

No matter how you purchase something, you can translate that into savings.

If you still use cash for purchases, bring back the piggy bank. Before I started racking up points on my credit card so I could convert my purchases into a plane ticket, I collected $50 in my change in just a few months. Remember earlier in this piece when I said “every little bit helps?”

This is that kind of thing.

Leverage apps to automatically save for you

When you check your online checking account on your device or computer, you can manually transfer money to a savings account. You can also set your online checking account to automatically send a prescribed amount to savings every month (ahem, this is the essence of “paying yourself first”.)

But where it really gets good is when you leverage technology and it sneaks away a few pennies or dollars here and there on your behalf. As a recovering spender, I love leveraging this technology to help me save more when I'm having issues doing it on my own. You don't have to actively save and in most instances, you won't even feel it. Here are a handful of my favorites.

Finally, keep a positive mindset

If you have the money mentality that your finances are a buzzkill, doing a budget and saving each month will feel like you're doing jail time.

However, when used properly, a budget and a small $500 in savings can actually help you enjoy your life better. Here’s why:

  • When you know how much money you have and where it goes every week, you'll be better equipped to save money and use it for things you want to do.
  • Sticking to your budget will also help you meet those important savings goals so you can actually increase your wealth and net worth.
  • Have you ever been one of those people who can't go and hang out with their friends because you don't have money? Or worse still, have you had to mooch off of a friend because you didn't have enough to pay to see the latest blockbuster? When you have a method to your money, you won't always look like the broke friend everyone has to take pity on.

When trying to save ask, “What motivates me?”

One of the best things you can do when you decide to implement a budget is figuring out why you are doing so. When you know why you want to get control of your finances, you can use that reason to motivate yourself to stick to it when it gets hard.

How to save money on a low income

You can only cut so much when trying to save money on a low income. The best way to save money when you're living paycheck to paycheck is to try and figure out a way to boost your income. Below are some of my favorite resources from FBL for doing just that.

The TL:DR

I hate to say this, but everything you’ve heard about saving early and often from your parents, college professors or favorite personal business website is true. You need to train yourself to save, no matter what. Because, inevitably, you will be faced with a situation where you need money to fix your car or your computer so you can keep working or you will need to pay for a necessary and expensive medical procedure. It’s not a question of if. It’s when.

— Dan Kline and Lauren Bowling contributed to this piece.

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