Why Americans Are Struggling To Break The Paycheck-To-Paycheck Cycle & 4 Ways To Solve It

Sep 4, 2020 | Lifestyle

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“ I grew up living paycheck to paycheck but through hard work…. I now live direct deposit to direct deposit.”

Hi there!

You may seriously consider the sentence written above to embrace in your life for your benefit. The condition of the United States is not in good shape and you’re aware of it. The corona outbreak has suddenly altered the condition of America and divided it into pre-corona and post-corona time.

In the post-corona time, numerous persons are losing their jobs. American families whose earnings were below $40,000 have suffered the most from the corona. The Federal Reserve report says nearly 40% of the American lower-income group was affected by the corona outbreak.

The reason beyond why so many Americans are struggling to save 

You cannot always endorse the simple explanation that people are irresponsible with their money. Financial experts have analyzed the situation. Their analysis says that several reasons are working beyond people who are struggling to live a paycheck-to-paycheck life with zero savings.

Like, the house rent or apartment rent is one big problem. There are so many people whose more than half salary is gone to pay the house rent and the rest of the amount is spent on grocery bills and utility bills. Ultimately, the person’s savings remains nil.

The same thing can be said about low-wage getting workers. Almost their entire monthly salary is spent for monthly expenses and to repay the debt. So, finally, they got nothing to save.

The lower-income group is the one who is habituated to live the paycheck-to-paycheck life. You may have realized that they are in peril now due to their lifestyle. Without any savings, they are now the most vulnerable community in the entire USA.

In this article 4 Ways are described to break the paycheck-to-paycheck cycle before it becomes more dangerous for those who are economically living on the edge. 

Scrutinize your expenses and keep a track on your big spendings first

If you make the aim of saving some money from your last paycheck then what you must do is regularly scrutinize your spending.

Examine your big spending and keep track of it.  First see through, what is the big-spending that is eating your income. For example, if you think your house rent is eating a major portion of your income, change the rented apartment, and look for some cheap house apartments.  

In the same way, if regularly going by app cab is creating a burden on your regular income or if your cell-phone bill is too high then change it to some cheaper mode.

Are you thinking about how you will understand how much money will be saved by tracking your spending and examining your expenses? Well, there are several online budgeting apps available. All of them will help you to cut your unnecessary spending and find a way of savings.

Create a budget and better you should live with the 50:20:30 budget rule

When you’re living the paycheck-to-paycheck cycle for a long time, you need a good budget formula to break it. Maybe, amidst the current situation, the 50:20:30 budget rule can provide you the much-needed relief.

The basic rule with the budget formula is your after-tax income will be divided into 3 categories and they are: 50% to your needs, 30% to your wants, and 20% of the rest of the money will go straightway to savings.

The prime feature of the 50:20:30 budget rule is that it is an easy-to-follow budget rule. There is no need of making any complex calculations with this budget rule.

Just follow the rule. You will spend 50% of your after-tax income to fulfill the basic needs like grocery shopping, paying the utility bill, household maintenance, etc. 20% will directly go to savings like online bank savings, CD (Certificate of Deposit) savings, etc. You are allowed to spend the rest of 30% of the money for entertainment, leisure, and luxury purposes.

A tight budget is the right way to break the paycheck-to-paycheck cycle.

Get out from debt quickly and don’t touch your credit cards unnecessarily

Whereas living with a tight budget life must be your priority to break the paycheck-to-paycheck lifestyle; the next important thing to do is to get out of your debts quickly. Because each month, your debts are the culprits who snatch a major portion from your paycheck. Debts stop you from saving and investing a good amount of money required for your future. 

The CNBC report has depicted the picture. They have said that average Americans are suffering from $38,000 personal debt like credit cards.

The true point is most of us have the greed for getting lucrative offers and reward points that you can earn after shopping with a credit card. You have to stop your habit of using credit cards unnecessarily if you want to control your piling outstanding balance.

If it seems quite a tough thing to self-control on credit cards then one thing you can do is keep all of them in a safe place and use only a single credit card. It is a much better way to check using your credit cards unnecessarily.

With unsecured debts, the other debt that eats our earnings is a payday loan. We take out a payday loan to solve our urgent money needs but later we have to repay the loan with a minimum 300% interest rate. If you have taken out a pdl then consolidating the loan must be the best way to get out of payday loan debt. The main matter is be it unsecured debt or pdl loan debt, try to repay it before the loan amount turns uncontrollable.

Search and try out part-time jobs or weekend jobs or passive earning ways 

Making a tight budget and controlled use of credit cards will give you benefits upto a certain point for sure. Along with it, if you think creatively, then trying out some weekend jobs or part-time jobs have their own merits. With these jobs, you will earn some extra dollars each month which will be ideal for breaking the paycheck-to-paycheck living lifestyle.

  • Take a look at 5 Weekend jobs that will suit you:

You may choose to do Freelance Writer/ Editor job, Tax Preparer job, Web and Graphic designer job, Registered Nurse job, eBay/ Amazon seller job, etc as the weekend-purpose jobs. 

  • Take a look at 5 part-time jobs that will help you  to earn some money:

There are several high-earning part-time jobs you can choose from. These are Accountant jobs, Computer programmer jobs, Editor/ Proofreader jobs, Market research analysts jobs, Network and computer system administrator jobs, etc. There are several other part-time jobs to choose from, here we have described only 5 part-time job ways.

  • Have a look at passive earning ways to earn  money:

Other than weekend jobs and part-time jobs, there is another way of money-earning. It is a passive earning way. If you have a spare room or garage you can use it to earn rental income, you can invest in REIT or Real Estate Investment Trust sector, or invest in the stock market, etc.

Like the weekend jobs or part-time jobs; there is no dearth passive income ways for money-earning purposes. All these are creative and effective ways to have a second earning option; ideal for breaking the paycheck-to-paycheck cycle.

“Do not save what is left after spending, but spend what is left after saving.”

Warren Buffett

 A new Forbes survey has revealed that nearly 49% of Americans will be forced to live a paycheck-to-paycheck life each month this year. So better, you may accept these 4 ways written above to break the paycheck-to-paycheck cycle and find a way of saving.

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This is a

a contributed post by

Catherine Burke

Catherine Burke is a financial writer for online payday loan consolidation. She provides information on successful cash loans and payday loan consolidation to help people get over a difficult patch. She lives in Kansas and has earned a frame in the matter of payday loans.

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