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5 Steps to Stop Living Paycheck to Paycheck

By Mary Dalrymple – Updated Apr 5, 2017 at 5:44PM

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End the stress caused by an empty bank account.

Do you get hot sweats, a cold fever, a nervous stomach, or something worse when you peer into your checking account on Tuesday and find it empty -- then realize that payday isn't until Friday?

You're suffering from Paycheck-to-Paycheck Syndrome, a malady that can affect anyone -- regardless of income -- who regularly runs short of money in the bank. Associated symptoms include sleepless nights, high blood pressure, fits of guilt, and denial.

The cure is simple, but it isn't easy. Follow this five-step plan to feel better:

1. Evaluate your illness. You'll never end the paycheck-to-paycheck sweats if debts claim most of your money before you can even get it in the bank. Add up your good debt (like mortgages and school loans) and compare it to your bad debt (credit cards and vehicle loans). If you carry a lot of bad debt, it's time to attack that drain on your income. If you don't have a lot of bad debt, but you're still buckling under monthly payments, it might be time to evaluate whether your good debt is too much of a good thing.

2. Attack the illness. Ever had a doctor tell you, "It will get worse before it gets better?" Before you can reclaim your money for yourself, you need to remedy your debt fevers. Put together a plan to pay off any debt that's too much of a burden as fast as realistically possible. Put your bad debts at the top of the list. Use this guide to debt reduction to map out your plan, and be patient. You'll suffer a little more for a short while, but you'll feel better.

3. Cure your denial. Do you end up living paycheck to paycheck because you "forget" that the car insurance is due? Do holidays catch you by surprise, even though they occur on the same date every year? Do you borrow from Peter to send Paul on a fancy vacation? You know which major expenses cause you the most stress. Go through your checkbook and add up those items. Now, divide that total by 12, and set aside that amount of money every month. Separate it from your everyday accounts. Use it only to pay for those irregular expenses.

4. Take some preventive medicine. Even if you prepare for the major expenses you can anticipate, there will be plenty that you never see coming. To stop these surprises from turning you back into a paycheck-to-paycheck patient, set aside a little bit of money every month in an emergency fund. Eventually, you'll have a significant stash that will absorb your unexpected car repairs, appliance breakdowns, and emergency travel.

5. Relax. With your debts paid off, your major expenses anticipated, and your unanticipated expenses covered, you will start to feel those cold sweats and nervous jitters abate. You may even feel a warm glow when you write a check without worry. You may positively jump for joy when you deposit a paycheck and find that some of last month's is still in the account. You're cured!

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Fool contributor Mary Dalrymple invites you to share your home remedies for financial ills. The Motley Fool has a very healthy disclosure policy.

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