What does it mean to live paycheck to paycheck?
If you live paycheck to paycheck, it means you spend all the money you earn each month on things you need to survive like rent, bills, and food. You don’t have any money left over to save or spend on non-essential items.
How to recognise such behaviour?
- Financial planning attitude: Saving isn’t necessary because you make money by earning, not saving.
- Financial management attitude: Live in the moment, and don’t worry about the future.
- Consumption habit: Spending on things that provide instant satisfaction, like fancy meals, trendy clothes, new gadgets, new cars, and vacations.
- Future Planning: Not a priority or consideration.
Steps to take to break free from living paycheck to paycheck
1. Track your expenses i.e. food, transport and entertainment, and create a budget plan by using the Multiply budget worksheet.
💡 Related: Guide on Planning A Budget
2. Reduce or pay off debt by using the debt snowball method — a way to pay off debts faster by prioritising the smallest balance loan with extra payments first.
3. Cut down on your non-essential expenses and be more thoughtful and purposeful with your purchasing decisions.4. Explore opportunities to earn extra income during your free time, such as developing new skills, offering freelance services (graphic design or translation), or taking on side gigs (delivery rider or dropshipping).
5. Start saving now by working out how much you are able to save each month.
💡 Related: Guide on Savings Goals
Finally, it is important to have patience and recognise that achieving your goals takes time and effort. Success does not happen overnight, so it is crucial to stay persistent and committed to the process.