For most households in the U.S., living paycheck to paycheck is completely normal. According to CareerBuilder.com, as many as 78% of American families were living paycheck to paycheck in 2017!

This statistic hits close to home for us because we lived like this early on in our marriage. Before we started working on changing our financial life, we struggled to make it from one pay period to the next.

78% of about 126 million U.S. families is a large number, so we know that we aren’t alone. Here are some tips that helped us escape the paycheck to paycheck cycle:

1.) Assess Your Financial Situation

Before you can really take control of your money and change your financial future, you have to figure out where you are right now. It might seem like a daunting task, but you’ll need to sit down and lay out your entire financial life.

Essentially, you will be figuring out: Income – Monthly Expenses – Debt Payments = ???

Hopefully, the remainder is a positive number. That means your income completely covers everything you spend each month.

If it’s negative or very close to $0, you’re possibly stretched thin and putting your excess spending on credit cards or some other type of debt (like we were 😞). That is usually why people continue living paycheck to paycheck and stay trapped in the destructive debt cycle.

2.) Create a “Paycheck to Paycheck Budget”

Once your situation is laid out in front of you, you’ll need to create a plan. Creating a budget is the next logical step.

But here’s the thing:

Not all budgets are created equally.

Most advice would say a ‘monthly budget’ is all you need, but in reality, if you’re living paycheck to paycheck you actually need something different.

We didn’t realize it at the time, but we were budgeting by paycheck within a monthly budgeting spreadsheet we had created. It was ugly and slightly complicated but the overall process really helped us manage our finances.

In order to budget by paycheck, you need to know when you’ll be paid and when all of your expenses are due.

Monthly budgeting systems don’t normally account for this in most cases. Usually, they only show the month as a whole and don’t break things down by pay period.

Thankfully, Dannie created a “Biweekly/by Paycheck Budgeting Spreadsheet” that can help you with this!

Timing is everything, so having the ability to actually see everything split up on one screen is liberating. This is literally the easiest way to see where you have mismatches so that you can adjust when some of your monthly expenses are paid in order to free up extra space in your budget between paychecks.

It works. I promise.

3.) Track Your Monthly Spending

Once your budget is created you HAVE to track your spending throughout the month. Whether you carry around a pen and paper or use some type of mobile app, tracking your spending is imperative.

The reasons for this are two-fold:

• It helps you actually stick to your budget throughout the month
• It gives you the ability to compare your actual spending to your budgeted spending

There will be times where you’ll go over budget or your expenses might change unexpectedly. Cut yourself some slack, because it happens to the best of us!

But, the only way you’ll know that this is happening is if you’re actually tracking your expenses. After a few months of budgeting and tracking everything you’ll be able to determine if you need to start looking for ways to:

• Increase your monthly income
• Decrease your variable spending
• Get rid of some expenses altogether

4.) Don’t Give Up On Yourself

Perhaps, the most important part of this whole process is your mindset.

Keep your goals in mind and believe in the fact that things will eventually get better for you. When we were living paycheck to paycheck we never imagined we’d be able to:

• Clear $130,912 worth of debt
• Get one month ahead in our finances
• Increase our credit scores to 800+
• Purchase a home in California

We also had to learn the importance of not comparing our financial journey to anyone else’s. You may struggle with this now, but I assure you that persistence is the name of the game. Enjoy the process and ALWAYS give yourself credit for what you’ve done already!

Continue to educate yourself on different tips for managing your finances and use the methods that make the most sense for you!

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I sincerely hope that this breakdown made sense. With so many many families living paycheck to paycheck, we know that this is a problem many of us are likely to face at some point in our lives.

If you currently struggle with living this way, please use the tips I’ve provided above to start making real progress and give some serious thought to trying out our new “Biweekly/By Paycheck” Budgeting Spreadsheet!

$tay Wealthy Friends,

–DJ