Do you find yourself struggling to make ends meet? Are you coming up short a few days before payday? Maybe you’ve given up on saving and have started to turn to credit cards or even payday loans. While it may not be easy, it’s possible to save money all while living paycheck to paycheck—it’s just going to take some cutting back and a bit of motivation. Here’s how to save while living paycheck to paycheck.
Easy Ways to Cut Back on Spending
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The first step in saving is having more money to save. When was the last time you tracked your spending week over week to figure out where your paycheck is going? Start by cutting back on your spending.
Remember, there’s a difference between being frugal and being cheap.
Being frugal means maximizing value with your spending, while being cheap means only getting the lowest price possible at the expense of your own needs and reasonable comfort. Sometimes, being “cheap” is not the best way to save money because it could result in spending more money over time.
For example, if you purchase an old, run-down car for $1,000, that car might require a couple thousand dollars of maintenance each year. On the other hand, if you frugally purchased a slightly newer car for $10,000 with a monthly payment of a few hundred dollars each month, you might not have to pay as much in maintenance costs, and the car would likely last you much longer.
Below, you’ll find a few easy ways to be frugal but not cheap, including meal prepping, dining in, couponing, discount shopping, and downsizing. These are great ways you can learn how to save while living paycheck to paycheck.
Eating at Home and Meal Prepping
The average American household spends over $3,000 each year dining out. Even if you don’t think you spend that much on restaurant bills, it adds up quickly. Let’s consider that the average Starbucks coffee costs more than $5 and that the average fast-food combo meal ranges from $7 to $15. It seems small, but when you do the math, that daily coffee and takeout for lunch and/or dinner can total over $3,000 each year.
A good way to curb this expense is by meal prepping. Preparing food ahead of time for the week will prevent you from buying takeout during your lunch break or on your way home from work. Practice self-discipline. Only allow yourself to eat out a fixed number of times per month (or per week, to start).
Couponing and Discount Shopping
Couponing and discount shopping can go a long way. If you’re on a budget, you should avoid paying full price whenever possible. It might take a few minutes longer to do your shopping, but it will be well worth it. Here are some couponing and discount shopping tips:
- Be smart about sales. Not every discount is a good deal once you do the math. For example, “buy 10 cans and get one free” is only a 10% savings, and you’d end up spending $10 where you could have spent $1. Don’t feel pressured to use every coupon, either. It doesn’t always make sense to buy an item just because you have a coupon for $1 off. The money spent on that discounted item could be put toward something else that you need more.
- Let go of brand loyalty. When you’re learning how to save while living paycheck to paycheck, be prepared to visit different stores in your area to learn which has the most competitive prices and the best sale schedules. Ask about store policies for price matching and competitor coupons. Take advantage of rebates and download couponing and cashback apps like Ibotta.
- Be wary of wholesale stores. Their layouts and product displays are designed to spur impulse buys as you make your way to the heavily discounted items in the back or lower shelves. Once again, do the math. Not all memberships are worth the price. Know your breakeven point (how much you have to spend before your membership pays off) before signing up.
Downsizing
Do you need all that space? Does your home’s location make sense? When you calculate how much you could save by moving to a more affordable neighborhood or closer to your job to shorten your commute, it may be worth it. Just don’t forget to look at all the possible outcomes. Will moving somewhere with slightly cheaper rent lead you to spend more on gas and utilities? Have you considered refinancing your mortgage?
In many cities, renting is becoming more expensive than paying a mortgage. Credit scores and interest rates aside, the biggest barrier is making that down payment. Saving for a down payment may not be easy, but it’s not impossible, and it can result in your monthly housing expenses decreasing by a few hundred dollars. One way to start is by opening a savings account exclusively for a down payment. First-time homebuyer loans and programs can also help you decrease your down payment amount.
Regardless of whether you rent or own your property, you may also want to consider getting a roommate or two if you’re thinking of ways to learn how to save while living paycheck to paycheck. Splitting the cost of rent and utilities can make a huge difference for your wallet—you just have to decide if it’s worth the adjustment.
Minimizing Subscriptions
How much are you spending on meal delivery? Music and movie streaming? Cable and internet? Unlimited data on your phone plan? Tally up your subscriptions and rank their importance, then cut out the services you don’t need. For example, Netflix, Hulu, and Disney Plus combined will still cost less than your cable bill—do you need all four? Then, look at which package you are currently paying for. Do you really need to pay a few extra dollars each month just to avoid watching ads? These are just a few of the expenses you can reconsider to cut down on costs.
Reducing Transportation Expenses
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Find out how much your car is costing you in maintenance and monthly payments each year. Then, compare that against the down payment for a new car. It might actually make more sense to invest in a new vehicle rather than pouring money into your old one.
If that’s the case, make sure you weigh your long-term costs when purchasing a new car. It might be better to pick the newer model that will cost an extra $50 per month but requires less maintenance.
On the other hand, though it may be less convenient, public transportation can be a much cheaper option than owning a car. Even if you own a car, it can be cheaper to ride the bus to work than to pay for gas every week.
If you forgo car ownership, remember that you’ll be saving on the cost of buying your car and on gas, as well as on car maintenance (oil changes, tune-ups, fixes), registration, warranty, and mandatory insurance.
Keeping a Budget While Living Paycheck to Paycheck
The next step in learning how to save while living paycheck to paycheck is understanding how to keep a budget. We put together a simple budget tracker for you.
Use this to track your spending for three months without changing any habits. At the end of those three months, take a hard, honest look and see where you can cut the fat. Make sure you are working off of your net income.
One way to force yourself to stick to your budget is to pay for everything with cash. You can keep cash in envelopes for each variable expense budget category. Don’t spend more than is in each envelope, but feel free to make adjustments month to month.
Paying for purchases with cash can force you to stay within your budget. Seeing how much you’re spending is a great way to avoid credit card debt and figure out the best ways to save while living paycheck to paycheck.
Controlling Impulse Spending With the 30-Day Rule
Impulse spending is one of the biggest ways that you might accidentally neglect your budget. Impulse buying is when you go into Target to buy one thing and walk out with 12. Some stores are great at marketing and can convince people to buy things they don’t need.
The key is to take a breather and ask yourself, “Do I really need this? Can I reuse it? Is there a cheaper alternative?”
You can also try using the 30-day rule. This means you “spend” the amount you were going to pay for that item by depositing it in your savings account instead. If, after 30 days, you still want the item, you can withdraw the funds to get it. This is also a great way to learn how to divide your paycheck to save money and not just spend it as soon as you get paid.
Saving Money on Minimum Wage
If you don’t have a savings account, now’s the time to open one. Your extra money is safer in a bank than under your mattress, and saving accounts also come with a host of benefits, such as interest and member perks. To learn how to save while living paycheck to paycheck, you may want to start here with our guide on choosing a bank.
Using a Fee-Free Bank
Believe it or not, fee-free banks exist. Additionally, many are available with no or $0.01 minimum balance requirements.
Fee-free refers to no monthly maintenance fees or overdraft fees. These types of bank accounts are often available via a website or an app, so you don’t even have to go into a physical bank to sign up. Digital-only banks can be cheaper because the banks save a lot of money by not having to pay for their branch locations.
Once you have a bank account, you can also sign up for direct deposit with your employer. Ask a payroll manager about how you can use direct deposit for your wages into your bank account on payday so you no longer have to cash checks.
Treat Saving Like a Monthly Bill
Another great way to learn how to save while living paycheck to paycheck is to set up an auto-deposit to a savings account scheduled for the day your paycheck hits. If you force yourself to save in this way (the same way you force yourself to pay your bills each month), you’ll realize it adds up fast. Saving just $100 per month will give you $1,200 annually, plus interest!
Minimizing Debt
While it can be tempting to put everything on your credit cards or take out loans when you have a hard time making it from paycheck to paycheck, these methods can put you in a deeper hole than you were when you started.
If you currently have multiple streams of unsecured debt (short-term loans, student loans, credit card debt, etc.), try to consolidate your debt into one account at least. In other words, start small! For your debt consolidation strategy, start by paying off one credit card or one loan at a time.
When you choose to pay a smaller balance of debt and work your way up, this is called the debt snowball method. If you make paying off your debts a priority, soon you won’t need to take out more loans or acquire more unsecured debt. The cycle will be over, and you can start to focus on other goals, such as building your wealth and making investments.
Plus, focusing on debt consolidation will help you lift your credit score, which will make it much easier for you to make big purchases such as real estate or a car.
Keep in mind that it’s often better to use Rain to access your wages early than to take out loan. Rain is currently available to employees at businesses that have signed up for it.
Saving Money by Avoiding Loans
Perhaps one of the biggest things to understand when learning how to save while living paycheck to paycheck is the dangers of short-term loans (like payday loans). Payday lenders are good at advertising. Their signs say “get $500 today” and “no initial fees,” but what you don’t realize is that when all is said and done, the $500 cash you can get today can actually cost you over $350 in fees. That means that you would get the $500 today but have to pay over $800 back.
Rain offers an alternative. If your employer has signed up for Rain, you can access some of your wages early instead of having to wait until payday. That means that instead of paying over $350 to get $500, you might be able to withdraw $500 from Rain and only have to pay a fee of a few dollars.
If you’re interested in using Rain but your employer has not signed up yet, send them the link to this website and ask them to fill out the “let’s chat” form so we can get them started (it’s free for your employer)!
If you have a Rain account or need help setting one up, please text or call us at 424-369-7246. You can also email care@rain.us with questions about your account, or you can read our blog to learn more about how to save while living paycheck to paycheck.
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