Living paycheck to paycheck might seem unavoidable at the start of your career, but there are proactive steps you can take to make it work — and make it stop. The paycheck to paycheck cycle begins when your income and expenses are out of balance.
WHAT IS LIVING PAYCHECK TO PAYCHECK
In its simplest definition, living paycheck to paycheck means having nothing left over in between pay periods. There are many reasons why this might happen:
- Your fixed expenses are too high for your income. If your rent, insurance, car payments, utilities, phone and other bills are too high, then you’ll live paycheck to paycheck because your income is gone before you have the chance to save it.
Add up all your income and expenses and see how they compare. If you’re deciding whether to take a job with a low starting salary, create a mock budget. Would you be able to live comfortably on this income? (Don’t forget to adjust for common payroll deductions, including taxes).
- Your other spending is too high for your income. Maybe your fixed expenses are within your means, but you overspend on other things such as entertainment, clothes, home goods, experiences, and other “wants.” If you spend excess money right away then you won’t be able to build up any kind of safety net to sustain you in between paychecks.