Want to Avoid Living Paycheck-to-Paycheck? Here are Simple Steps to Follow

"Living Paycheck to paycheck" is an expression that is being increasingly used among American workers who struggle to make ends meet with rising prices outpacing their salary hikes in an uncertain economic climate. As they are unable to save anything, those living paycheck to paycheck are set to face extreme difficulties in meeting their financial obligations if they lose their job. However, there are ways in which people can improve their spending habits and stop living this way.

Anne Lester, former head of retirement solutions at JP Morgan Chase, who once lived paycheck to paycheck, shared a few things that she did to improve her financial habits with the Business Insider.

Create a spending plan

Lester advises people to be honest with themselves while determining how much they can spend every day/week or month. This would help in creating a budget and people can cut back on spending the next day/week if they end up spending a lot on a particular day or week.

Avoid paying in cash and checks

The idea that paying for things can cause varying pain levels was studied by a Ph.D. student at Carnegie Mellon, Ofer Zellermayer, in the 1990s, the report said. Thus, the more uncomfortable the payment process is, people become less likely to spend money. She also recommends using checks if possible as it makes the process even more difficult.

Make lists

Don't enter a store or visit an online marketplace without making a list of things to buy beforehand. The rule to follow would be that if something is not on the list, it is not required and thus, it should not be bought.

That same advice goes for clothes as well. Lester says the more clothes people try the more likely they are to find them appealing which may cause them to spend more money than they intend to.

Avoid "auto-renew"

The Insider report cited a survey from C+R Research conducted in 2022, which found that the average American has a monthly subscription worth over $219. On top of that, nearly half of the respondents said they had forgotten about a subscription and were paying for something did not use. Not opting for auto-renewals can save people from spending on services they don't even use.

Practicing positive reinforcement

Lester recommends that people should reward themselves when they hit their financial goals to encourage positive reinforcement. She further urged people to pinpoint the things that are consistently derailing them from their goals and learn from their mistakes to do better in the future.

Several studies suggest that a growing number of full-time workers in the U.S. are living paycheck to paycheck. A 2023 survey conducted by Payroll.org found that about 78% of Americans are living this way. This was a concerning 6% increase from the previous year. One of the leading contributing factors behind people adopting this lifestyle is that the salaries of workers have not increased enough over time while inflation and cost of living have soared in the past few years.