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7 Steps To Stop Paycheck To Paycheck Living

Living paycheck to paycheck is a straight up nightmare. I remember my days in that cycle and I remember how mentally exhausted I was, ALL. THE. TIME. I hated every minute of it, even as I sort of learned to “tolerate” it.
Turns out that 78% of the America population lives paycheck to paycheck. Wow. That number never ceases to throw me sideways.
It was like I could never ever take a “breather”. I was ALWAYS thinking about how I was going to “make ends meet” for this current month. And forget about planning for the month (or any future timeframe) to come. No time for that. I was WAY too busy just trying to survive.
It was work, work, work, pay, pay, pay, repeat, repeat, repeat.
It was overwhelming and exhausting.
 If you want the printable pdf guide to the blog post, click here or on the image above.

To illustrate the 7 steps, here's a little infographic:

If you love it, would you consider pinning this to your favorite Pinterest board(s)?

My Personal Breaking Point

This is pretty much what I looked like; frustrated, desperate, "over it".
For me, the bottom fell out of this type of living in 2004. By that time, I had racked up $43,000 in consumer debt in just about 2.5 years and the payments and interest were eating me alive.
I reached my breaking point about the time I discovered Dave Ramsey and had started consuming his material. To say it was a gift from The Lord, would be an understatement. I was absolutely at the end of my rope psychologically, physically and spiritually. I needed help, badly and immediately.
I intersected with these principles at the perfect time it turns out. You see, after having coached students in this very process for over a decade now, I can tell you that “end of your rope” is exactly where you need to be in order to make the changes you need to make.
There’s just something about dealing with money that’s so difficult, so emotional that it makes it really hard to change.
That is, until life presses up against you with unbearable force. It usually takes being broken by that force to cause you to want to change.

Ready For A Whole New Life?

She's going through the very important exercise of imagining what life would look like beyond paycheck to paycheck. Isn't it beautiful out there? 
The good news is that, once I got these very principles under my belt, I went on to get my finances in very good order and pay down ALL of that $43,000 in debt in just 2.5 years. It was amazing, one of the most amazing seasons of my life so far.
The process and results absolutely transformed me forever and I’m on a  mission the help them to transform you as well.
That said, are you sick and tired of being sick and tired? Are you ready to get out of the paycheck to paycheck cycle for good?
So, here are the 7 steps as an outline. Next we’ll take some time to dig into more granularity to help you implement them for yourself.
  1. Decide that you hate debt and being behind on your bills.
  2. Make a list of all your bills, expenses and debts.
  3. Put all of those into a written budget.
  4. Commit to tracking every single penny of expenses.
  5. Save $1000 as a baby emergency fund.
  6. Get a month ahead on your bills.
  7. List your debts smallest to largest and start paying them off in that order (The Debt Snowball).



7 Simple Steps To Stop Paycheck To Paycheck Living

The most important part is that you start. It takes the most energy to get started.

1. Decide that you hate debt and being behind on your bills. 

This is a critically important step. It sometimes appears a little “fluffy” or “feel good” to some of our newer students. And I get it, it’s somewhat natural to think that this process should ideally be all “mechanical". But, I assure you, it’s not. 
In fact, I would argue that, contrary to intuition, it’s MOSTLY behavioral. The  mechanics are just the tool to help you change your behaviors.
And let me just say that, if you’re not ready to make a change, then the rest of this post will probably be “infotainment” for you, which is fine. I consume lots of infotainment myself. 
Just know that unless and until you are totally fed up with debt and being “behind the 8 ball”, you’re not going to make the necessary changes that will lift you out of this paycheck to paycheck cycle.
It will be somewhat painful at first, but I can promise you that the pain is COMPLETELY worth whatever the initial price you have to pay.

2. Make a list of all your bill, expenses and debts. 

If you need more granularity in this step click on the image above for a complete post dedicated to this most important step.

This is what I call the “pre-budgeting” step and it’s one that most DIY budgeters miss. In decade-plus of coaching, I’ve seen that just jumping straight into the budgeting step can be completely overwhelming to most people, to the point that they give up.
Everything about getting your finances properly organized requires doing things in small, bite-sized steps that will reduce your sense of overwhelm and encourage you to keep moving forward. This is one of those critically important steps that will help you to get that all important initial momentum and keep pulling you ahead.
Here’s a free resource that will help nail this step: The Forgotten Budgeting Step (aka "Budget Insurance").

3. Put all of those into a written budget.

Click on the image for a blog post I wrote that walking you through how to do a budget, step by step.
Literally all of our students (including yours truly) say that what got them across the finish line with getting out of the paycheck to paycheck cycle and ultimately to debt-freedom was learning to live on a budget.
And most of them will go as far as to say it’s not possible to do without a deadly accurate, fastidiously updated and often-rewritten budget.
Remember, this process is all about changing behaviors and the written budget has to become your “external brain”, your external source of accountability and your prosecutor for when you’re tempted to leave the beaten bath.
You can learn more about how to actually budget at this blogpost and/or by watching the video above.
And the funny thing is that, almost all of our students say that they feel like they got an immediate raise as soon as they started getting their budget “down pat”.
One thing to keep in mind is that, budgeting is a skill and not a talent. No one was EVER born to be a budgeter. It’s going to take about 90 days of “trial and error” for you to get this process nailed down. So have patience, set realistic expectations for yourself and reach out for help when you need it.

4. Commit to tracking every single penny of expenses.

This is also pivotal (I know I’m starting to sound like a broken record, but believe me when I say that it’s ALL true). Most of what’s gotten you into the mess you’re in is not being aware of what’s “going out the door” every month. 
Most (not all) of our students earn enough money to actually get out of this paycheck to paycheck cycle, they just don’t have any awareness or control of their spending.
In order to reign that in, master your budgeting process and ultimately escape this cycle, you MUST start using one or all of the following:
  • Saving receipts (to then reconcile with your budget).
  • Writing down every expense in a journal  to then reconcile with your budget).
  • Using the cash envelope system  (to then reconcile with your budget).
Here’s a primer on how to use the cash envelope system.
Again, it’s what I used to eliminate my $43,000 in debt in just 2.5 years. Don’t ignore this step. It will dramatically improve your speed to defeating the cycle.

5. Save $1000 as a baby emergency fund.

Why $1000? We need to start building a buffer in your finances. This buffer will:
Keep you away from using credit cards for “emergencies” or comfort purchases.
Strengthen the skills and awareness you’re building in your budgeting and expense tracking.
Start to build a cash buffer in  your budget so that you can  get a month ahead on your bills.
How do you do it? There are 3 simple strategies:
  1. Sell some stuff.
  2. Cut/Reduce/Substitute expenses.
  3. Get extra work.
I go into much more detail in this quick video.
All that said, just get $1000 as fast as you can.

6. Get a month ahead on your bills.

Have a budget meeting and decide you're going to get "a month ahead". This will be SO encouraging to you, I promise.
This is just a continuation of step 5. As you can see, we’re building momentum as we progress through each of these steps. Each one lends strong to the next. It’s amazing once you’re in the process and getting traction.
Getting a month ahead on your bills is where you’ll REALLY start to get a taste of what it’s like to have more control over your financial life (can you imagine it, being a month ahead?). Depending on your level of income, this could be pretty challenging, but I promise you it’s a challenge worth accepting.
Just stay in the process of budgeting, tracking expenses, selling stuff, reducing expenses and getting extra work and this beautiful cycle will bear much fruit for you.
Do you "get down" with Pinterest? Would you consider pinning this to your favorite board?

7. List your debts smallest to largest and start paying them off in that order.

This is known as the debt snowball and I LOVE it! 
This is where you REALLY start to get traction and momentum. Once you have at least $1000 as an emergency fund and perhaps are a month ahead on your bills, this is where you can really start to make a dent in your debt.
So, you list your debts, smallest to largest by total amount due, ignoring the interest rate.
“But why regardless of interest rate”, you ask.
Because remember, this process is ALL about behavior modification and LESS about the actual math.
There is scientific evidence that people who use the debt snowball method actually eliminate their debt and do it faster than people who use other methods. Here’s a post I wrote telling you everything you need to know about the debt snowball.

What To Do Next

Now that you have that as a basic framework, the next step is to get as granular as possible. There will likely be questions you have and needs that you have in between each of these steps. Because of that (totally natural) phenomenon, I put together another “next level” guide for you. 

Here are 26 ways for you to escape the paycheck to paycheck cycle forever. Like I alluded to above, this is a much more “tactical” version of the principles I outlined above, but will definitely help you to build the granularity in your own process that you’ll need to break the cycle and tackle your debt.
Remember that there are always “micro-steps” in any set of principles you’re trying to follow. These 26 ways contain many of those micro-steps.

The 8 Steps To Fully Extinguish The Dumpster Fire:

This is the blog post that outlines the 8 steps I followed to eliminated $43,000 in debt in 2.5 years.
And whether this is your first or thousandth time on the blog, I want to make sure you have this “8 Steps” framework that ALL of our content is centered around. 
These are the steps I personally followed to obliterate $43,000+ of debt in 2.5 years
Maybe your number is bigger, maybe it’s smaller. Either way the principles are the same and I want you to have them.
0. Stop All Retirement Investing (Until Step 4)
2. Starter Emergency Fund of $1000
3. Eliminate Debts Smallest To Largest (a.k.a The Debt Snowball)
4. Full Emergency Fund of 3-6+ Months’ Expenses
5. Invest A Minimum of 15% Income Into Retirement Accounts (and increase savings rate to 50%+ if possible)
6. College Funding (if applicable)
7. Pay Off The Home Mortgage
8. Build Wealth, Serve, Be Ridiculously Generous And Go FI (Financial Independence)!
I’ve created a simple, easy to follow guide that you can use as your foundation as you navigate the absolute annihilation of your debt forever.


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When You Need More Help

And again, if you’re looking for some resources to get started, you can download our free budgeting forms. Also, if you’re in a place where you’re ready to kick your debt in the teeth, here's the link to our free “8 Steps To Erase Debt” guide for you to use as your foundation.
To your freedom,
This post may contain affiliate links. If you click & make a purchase, I receive a small commission (at no extra cost to you) that helps keep Zero Debt Coach up and running. Read my full disclosure policy.

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