How to Save Money When You're Living Paycheck to Paycheck
When my husband and I got engaged, we really didn't make very much money. He had a full-time job and I had a new pet care business that was just getting off the ground.
And with the cost of living soaring in my hometown of Portland, OR, expenses were higher than ever. On top of that, we also had $16,000 in debt between the two of us.
We knew that we were going to want to start a family at some point after we got married, but to do that was going to require some real financial preparation. Thankfully, we worked hard and were able to pay off the last of our debt 3 days after we got married. And it only took us 8 months!
Here are some tips we learned along the way about paying down debt and saving money while you are living paycheck-to-paycheck.
1. Take A Hard Look At Your Expenses
I'm not going to rail against your lattes or tell you to stop buying little treats you love. Unless you are hitting up Starbucks everyday, a few coffees here and there probably isn't going to make or break you.
Instead, let's talk about the big stuff that is eating up your budget without you even realizing.
Eating out instead of packing your lunch is the big one.
Most people spend hundreds of dollars a month just grabbing quick to-go food, so unless you are already super diligent about this (and check your Mint account to be sure!), I'd recommend coming up with a weekly meal plan right away.
Another big budget killer is your car(s). Many American families now have two, three, or even four cars in their name!
When you factor in the cost of fuel, maintenance, tires, repairs, and insurance, cars are an extremely expensive way to get around. Not to mention, if you have financed them on top of that, the situation is even worse.
I'm going to challenge you to take a really hard look at your car situation and see if you can pare down.
Our family used to have two cars. Then we moved to Seattle and my husband began biking to work, so we decided to have only one car.
After months of little use on our one car, we then realized that with so many other options available to us, we really didn't need a car after all.
I know the thought of giving up a car or two is hard, but the majority of families can make it work. And the savings can be huge! Even if you can get by for the next 3 to 6 months with one less car, you'll see much more money in your savings account.
Another big money suck is your grocery bill. I don't know about you, but groceries are the number one thing I am most likely to overspend on. Which brings me to my next point...
2. Trim Your Grocery Bill
Groceries always seem to take the biggest bite out of our budget. Living here in the middle of Seattle, groceries don't come cheap and we are pretty picky about quality as well.
That being said, I have found a number of ways to drastically cut back on our grocery bill each month. You can check out my post on How to Save Money on Groceries and Still Buy Healthy Food here.
3. Save Your Tax Refund
If you are getting a refund around tax time, save it in an account that isn't linked to your checking account. It's really important that the accounts aren't connected, that way you can't accidentally dip into it later on.
Saving all of your tax refunds and windfalls that come your way is a great way to put a few thousand dollars in savings without having to change your lifestyle.
4. Download the Acorns App
One of my favorite little ways to save is by using the Acorns app. Acorns links to your bank account and rounds up each of your debit card transactions to the nearest dollar, taking the change and putting it aside in your Acorns account.
Say for example that you spend $21.70 at a store.
Acorns will automatically go through and sweep up the extra $0.30 for you, and it does this for every single transaction.
All of this runs in the background without you having to do anything.
I typically find that Acorns saves me somewhere around $75 each month, and I don't even have to think about it.
I love that the app runs on autopilot, and at only $1 per month it's a very cost-effective way to save.
At the end of each month I then withdraw the money it has saved and move it into my savings and investment accounts.
Helpful post: How to Save Money on Autopilot with the Acorns App
5. Pay Off Your Debt with the Snowball Method
If you have any non-mortgage debt, one of the best things you can do to stop living paycheck to paycheck is to pay it all off! Monthly payments and interest eat away at your monthly budget so quickly.
When my husband and I were paying off debt, we followed the Dave Ramsey approach and used the snowball method. Here's how it works:
- The snowball method asks you to first list all of your debts on a piece of paper from the smallest debt to the largest.
- Then you begin paying the minimum payment on each of your debts, while focusing everything you can on paying off the littlest one.
- Once the smallest debt is paid off, you rollover that debt's minimum payment plus any extra money you were able to throw at it, and start sending that money towards the second one. This is “snowballing”, and it's an incredibly effective way to pay off debt quickly.
6. Pay Yourself First
One of the best and simplest money tips I ever picked up was from reading The Automatic Millionaire by David Bach.
In the book, the author tells the story of a couple who are able to retire by the time they are 50, and they do it by paying themselves first, automatically.
How did they do it? The author recounts how the couple set up savings withdrawals with their bank that came out every payday on autopilot, year after year.
I think one of the reasons that saving can be so difficult is because we try to make it complicated.
Relying on yourself to remember to put money aside, or to somehow keep two debit cards from not using all of the money in your checking account is crazy. It's just really hard and there are so many variables to account for.
When you put that money on autopilot at the very beginning of your pay period, it's like it doesn't exist. You never see it, so saving it isn't an issue. I highly recommend setting up automated savings withdrawals today. Even if you can only start with a small amount.
7. Save At the End of the Month Too
Once you setup your automated savings, another thing you can do is start saving any leftover money from your checking account at the end of the month.
I personally like to go in the day before payday and anything that is left over I sweep into our savings account. This is a great way to incentivize you to spend less throughout the month, and start off each month on equal footing.
It's also fun to see how much you are able to add to your automated savings. Of course, if you find yourself with hundreds leftover, it's a pretty good sign you are ready to increase your automated savings.
8. Start A Lucrative Side Hustle
If all else fails and you've cut everything you can cut, and you automated what savings you can, the next step is to get a side hustle to bring in some extra income.
Whether you choose to rent out an extra room on Airbnb, start a profitable blog, sell your handmade crafts on Etsy, or something else, making extra money on the side can help you build a good emergency fund quickly.
It doesn't have to be something you do forever if you're already working really hard and are short on time, but it might be just the thing you need for the next couple of months until you reach your savings goal.
Helpful Post- 6 Low Cost Side Hustles You Should Seriously Consider
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