Living paycheque to paycheque can be stressful. It feels like you’re constantly running in place, always one step away from financial disaster. But you don’t have to live that way! You can take control of your finances and break the cycle. All you need is a plan and a bit of determination.
This guide will walk you through the steps to start regaining financial control and stop living paycheque to paycheque. Along the way, you’ll check off tasks, each bringing you closer to financial recovery. If you get stuck on one step, move on to the next and return later to finish it up.
Let’s get started!
Step One: Acknowledge Your Current Financial State
Before you can make any changes, you need to know where you stand. This first step is all about understanding your current financial situation.
- Know how much money you have
– Take a moment to check your accounts. Do you know how much is in your savings or checking account right now?
- Know your debt
– Write down every debt you owe, from credit cards to loans. Get a clear picture of what you’re working with.
- Are you living paycheque to paycheque?
– Be honest with yourself. If your money is gone as soon as it hits your account, it’s time to make a change.
- Understand interest rates
– Write down the interest rates for each of your credit cards. This will help you prioritize paying off debts.
Step Two: Know Your Income and Expenses
Now that you understand where you are, it’s time to dig deeper into the details. This step will help you get a clear picture of your income and what you’re paying for every month.
- List your income
– Write down all your sources of income, including your main job, side hustles, or any government assistance. Add them up so you know how much you bring in each month.
- List your monthly expenses
– Make a list of every monthly bill you pay, from rent or mortgage payments to utilities, phone bills, and groceries.
- Subtract your debts
– Subtract your monthly expenses and debt payments from your income. Do you have money left over, or are you in the negative? This will give you a sense of where you stand.
Step Three: Cut Excess Spending Today
Once you know how much you earn and spend, the next step is to cut out unnecessary expenses. This isn’t about making huge sacrifices—it’s about trimming small, unnecessary costs that add up over time.
- Track your spending for 7 days
– For the next week, keep track of everything you spend, down to the last coffee or snack. This will show you where your money is really going.
- Identify frivolous expenses
– What are your biggest “wants” that you can cut back on? Think about coffee, snacks, eating out, clothes, or entertainment. Write down your top indulgences.
- Review your expenses
– Go back to your list from Step Two. Is there anything you can reduce or eliminate? Maybe a subscription you no longer use or a service you can downgrade?
- Eliminate one expense
– Choose one monthly expense to cut entirely. Maybe it’s a streaming service, a gym membership, or unnecessary shopping.
- Reduce two expenses
– Pick two other expenses to reduce. For example, cut back on eating out or switch to a more affordable phone plan.
- Take control of your credit cards
– Remove all your credit cards from your wallet except the one with the lowest interest rate.
- Label your card for emergencies
– Write “For emergencies only” on a sticky note and attach it to the one card you keep in your wallet. This will remind you to use it wisely.
Here is a free personal financial habit tracker and many other useful planning materials. Note: We add to this list from time to time.
Step Four: Start Saving Money This Week
Even if you’re struggling, you can start saving money right away. Every little bit helps, and starting the habit of saving will put you on the right path.
- Get a change jar or container
– Use an old jar or container to collect any loose change and $1 bills. You’d be surprised how quickly it adds up!
- Make a habit of saving change
– Every day, put your leftover change into your jar or container. Do this consistently.
- Deposit savings at the end of the month
– At the end of each month, take your change to the bank and deposit it into your savings account.
- Set a weekly savings goal
– Decide on a small amount to save each week—maybe $5 or $10. Deposit this amount regularly, even if you can’t make it to the bank every week.
Step Five: Begin Paying Off Your Debt
Debt is one of the biggest challenges when you’re living paycheque to paycheque. But you can chip away at it, one card at a time.
- List your credit cards and balances
– Write down all your credit cards, their balances, and interest rates. This will help you figure out which debt to tackle first.
- Choose one card to pay off first
– Focus on paying off the card with the smallest balance or the highest interest rate, depending on what motivates you more.
- Move on to the next card
– Once you’ve paid off your first card, move on to the next. Keep paying down your debt, one card at a time.
- Use savings to pay off debt
– If you’ve been saving for a while, use 50% of your savings to make a larger payment on your current debt. It will help you get ahead faster.
See our spreadsheet for help – Free Getting Out of Debt Spreadsheet
Step Six: Earn Extra Income
Sometimes, cutting costs isn’t enough. If you’re still struggling to make ends meet, consider finding ways to earn extra income. This step is about finding simple ways to boost your earnings.
- Take an inventory of your skills
– What can you do? List your talents, whether it’s yard work, babysitting, cooking, or tutoring.
- Choose jobs you can do for pay
– Pick a few jobs you’re willing to do, like mowing lawns, cleaning houses, or helping neighbours with odd jobs.
- Write an ad – Keep it simple:
“Looking for yard work, babysitting, or other odd jobs. Call me at [your phone number].” 4 Simple but Powerful Tactics for Writing Compelling Ad Copy.
- Advertise locally
– Place your ad in free local newspapers, flyers, or online groups.
- Look into working with the elderly
– Consider offering your services to independent living facilities or seniors who might need help with daily tasks.
- Reach out to small business owners
– Let local businesses know that you’re available for part-time or temporary work.
- Start right away
– Don’t wait to find the perfect opportunity. Begin working, even if it’s just mowing lawns or babysitting.
Step Seven: Save Half of Your Savings
Once you’ve started saving, it’s important to keep it going. You can’t just save for a rainy day—you need to build an emergency fund.
- Keep saving until you have a six-month cushion
– Set a goal to save enough to cover six months of living expenses. Once you reach that, move the money to a separate account.
- Save $500 for emergencies
– After that, save $500 for unexpected expenses like car repairs or home maintenance.
- Continue saving
– Make saving a habit. Keep building your savings, even after reaching your emergency fund goals.
- Save part of your raise
– If you get a raise, save half of the increase automatically. This will help grow your savings without feeling the pinch.
Step Eight: Design a Budget and Stick to It
The final step is creating a budget that works for you. This is your financial roadmap, and sticking to it will help you stay on track.
- Find a budget form
– There are many budget templates online such as ours, apps such as (YNAB), the free app from your bank, or you can simply write it out on paper.
- Fill out your budget
– Write down your income, expenses, savings goals, and debt payments. Make sure everything adds up.
- Review your budget regularly
– Look at your spending and budget often to make sure you’re staying on track. Adjust as needed to keep improving.
Our Free Budget Spreadsheet is available at Free Budget Planner
Congratulations! You’ve taken significant steps toward financial control. By checking off these tasks, you’ve learned new skills and practised excellent money management. Keep going, and you’ll soon find yourself free from the paycheque-to-paycheque cycle. Stay positive, stay determined, and remember—small changes can lead to big financial impact.
Disclaimer for ManageYourMoney.ca
The information provided on ManageYourMoney.ca is intended for educational and informational purposes only. It should not be taken as financial advice. The opinions shared are those of the authors and are meant to encourage sensible financial habits and decision-making. We recommend that you do your own research or consult a certified financial advisor before making any financial or investment decisions. All investments come with risks, and there is no guarantee of success. Past performance is not a reliable indicator of future results. Always consider your personal financial situation and risk tolerance before pursuing any investment opportunities.
As always, I am not a qualified financial advisor. I just relate financial management to my own experience which may not resemble yours at all. Advice is frequently worth exactly what you paid for it. Most of mine came from expensive experiences.
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