Living Paycheck to Paycheck? Here’s How You Can Save Money

Are you waiting for your next paycheck to cover monthly bills? You’re not alone. According to a recent Reality Check study, 54% of Americans are living paycheck to paycheck. That’s 124 million adults in the exact same boat that you’re in right now. The average level of savings for these folks is under $4,000.

The Reality Check study revealed that 70% of all Americans have less than $15,000 in savings. That’s not counting retirement accounts. Employer sponsored plans, like 401(k)s and pensions, take care of most of that. Whatever is left over seems to go to paying off debt and covering living expenses. If that’s your story, try our simple three-step approach.   

Step #1. Start budgeting your money

This may sound like an obvious suggestion, but many consumers don’t have a budget. They simply pay their monthly bills and spend what’s left on what they feel are their “needs.” You’d be surprised at how unnecessary some of those needs are. Create a budget and review each of your expenses, marking them as real needs or simply wants.

For example, if you have a monstrous cable bill, you may want to consider cutting the cord. There are streaming services that are far more cost effective if you really need to watch This Is Us. In fact, most of this year’s Emmy nominations are from HBO Max, Netflix, and the like. You could also dump those expensive movie channels and stick to basic television. Don’t want to watch commercials? Start cooking at home during the breaks and save on takeout expenses. 

Step #2. Eliminate credit card debt

In 2021, the average credit card interest rate is 18.04% for new offers and 14.61% for existing accounts. That’s assuming you have a relatively good credit score. Credit card interest rates can run as high as 30% for those with lower scores. That’s money that could be in your savings account. Making debt payoff a priority after paying your budgeted living expenses. 

The first step to eliminating credit card debt is to stop using your credit cards. For several folks in the paycheck-to-paycheck category, relying too heavily on credit cards for daily purchases is the primary reason they’re in the situation they’re in. Put the cards away, apply for a debt consolidation loan to pay off all your outstanding balances, and start saving money.

Step #3: Develop a savings mentality

Everyone has a friend or relative who constantly turns off lights and lowers the thermostat in winter. Those folks almost certainly have significant savings in their bank account. There’s a lesson to be learned there. Start thinking of this as a savings mentality, rather than an odd behavior. Retrain your mind to start thinking in a similar fashion.  

You don’t have to live uncomfortably to have a savings mentality. Turning off lights and unplugging household electronics when you’re not using them lowers your electric bill. Setting the thermostat at 68° instead of 70° in the winter will save you on oil or natural gas.

The Bottom Line: Saving is a Mindset

You’ll be pleasantly surprised at what you can accomplish once you adopt a savings mentality. Evaluating each expense as necessary or unnecessary will become second nature. You’ll look for sales at the market and maybe even use a coupon or two. Once you eliminate debt and become more cost conscious, you’ll have the extra funds you need to build savings. 

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Kevin Flynn is a former fintech coach and financial services professional. When not on the golf course, he can be found traveling with his wife or spending time with their eight wonderful grandchildren and two cats.