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How to Stop Living Paycheck to Paycheck

Five tips to gain financial control--across all income levels

When you live paycheck to paycheck, your income is devoted primarily to paying your expenses, leaving you with little to no dollars to direct to savings or pay down debt. There is a perception that it is only individuals with low or moderate incomes who live paycheck to paycheck, but research finds that is not true.

Based on a 2017 survey conducted by, a majority of workers across a diverse range of incomes report living paycheck to paycheck.1

The survey also found that having more money didn't necessarily mean fewer financial headaches.

  • 28% of workers making $50,000 to $99,999 reported that they usually or always live paycheck to paycheck, and 70% of them are in debt.
  • Almost one in 10 workers (9%) making $100,000 or more reported they usually or always live paycheck to paycheck, and 59% are in debt.

There are many reasons you may be struggling financially. Although household income has grown, it hasn't kept pace with the cost of living. Health care and medical expenses have also risen. (See Medical Expenses are #1 Reason for an Emergency Fund).

But two of the most common reasons people struggle is that they don't track expenses or have a budget. Below are five steps that can help you regain financial control and stop the paycheck-to-paycheck cycle.

  1. Track your expenses. It's easy to lose sight of what you're spending each month. And it's easy to fall victim to lifestyle inflation—when your spending goes up as your income goes up. By documenting your purchases for at least a month, you'll be able to see where your dollars are going. You'll also be able to see where you could possibly cut back.
  2. Create a budget. In order to break the paycheck-to-paycheck cycle you need to set financial priorities, eliminate excessive and unnecessary expenses, and stick to a plan, i.e., a budget. The first step to creating a budget is to identify your net income and compare it to your expenses. Break down your spending into non-discretionary and discretionary expenses. Mortgage or rent, groceries, utilities, insurance and transportation are typically non-discretionary. Discretionary expenses include eating out, entertainment, and clothing. Determine how much you can afford to spend in each category, and look for areas where you could cut back. Be realistic. Once you start following a budget you will see how it can boost your financial confidence. Check out our blog: Five Steps for Creating a Budget.
  3. Pay down debt. Many people who reported living paycheck to paycheck also had high levels of debt. If you are burdened by debt, make a commitment to slowly but steadily pay it off. Focus on one debt. Pay minimums on the others until that one is paid off. Then move on to the next one and repeat.
  4. Automate savings. You've heard numerous times, “Pay yourself first.” It's good advice. Have money automatically transferred from your paycheck or checking account into a savings account. You won't be tempted to spend money that is not easily accessible. And having a financial cushion in case of the unexpected is financially and emotionally sound. It can save you from going into debt or back to paycheck-to-paycheck living. See our automate-your-savings blog: Expect the Unexpected: Set Up Automatic Savings Today.
  5. Have a separate savings account. Consider setting up a savings account at a different bank from the one where you do your main banking. This will help you avoid the temptation of spending your savings and will help you keep to your savings commitment. Online banks are an excellent choice for savings as they typically pay higher interest than brick-and-mortar banks.

Your financial health and well-being should be a priority. Stop living paycheck to paycheck and give yourself a financial safety net with a solid, smart savings account.

For information on accounts and interest rates at CIT Bank, visit our home page here.

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