We're supposed to save money for a host of reasons -- emergencies, retirement, and other goals, like homeownership or college. But almost half of Americans are sabotaging themselves off the bat. Specifically, 47% of working adults say their spending regularly equals or exceeds their income, according to a new report by the Center for Financial Services Innovation.

Released in late 2018, the report found that among workers whose spending exceeded their income over the previous 12 months, 43% were using credit cards to make ends meet. Meanwhile, only 10% said they were able to access non-retirement savings to cover their expenses when their paychecks didn't suffice.

Man sitting at a table reviewing documents while woman looks over his shoulder at a table with a computer and fruit.


If you're in a situation where you regularly spend all or more than your income allows for, you're essentially sentencing yourself to a mountain of credit card debt and a world of financial upheaval. And frankly, you deserve better. Here's how to get there.

1. Create a budget

A big reason why so many spend down their entire paycheck month after month is that they have no sense of how much their bills cost or where their money is going. To remedy that, create a budget for your household.

That budget should account for all of your recurring monthly bills, as well as expenses that only pop up once a year, like license or membership renewals. Once you have that budget in place, you'll be able to identify expenses you can reduce to ensure that you're able to put some of your income into savings, even if it's just a small amount.

2. Cut back on one or two major bills

You'll often hear that eliminating your morning latte could help you sock away thousands of dollars a year. Well, that's probably not true. Sure, you'll save some money by making coffee at home rather than buying it in a store, but if you really want to improve your financial situation, you'll need to think bigger. That means cutting back on a couple of major expenses that monopolize much of your income, like housing or transportation.

If you can manage in a smaller home, downsizing could, indeed, save you thousands of dollars a year. Similarly, if you own a vehicle but have access to public transportation, selling it could free up hundreds of dollars a month in your paycheck by not having to bear the cost of insurance, maintenance, and repairs. The key is to find a way to free up a substantial portion of your income if you're not currently in the habit of saving anything.

3. Get a second job

Maybe you're stuck in a dead-end job due to circumstances you can't change right now and there's really no feasible way for you to cut back on expenses. If that's the case, you can boost your income by getting a side gig on top of your regular job. This way, any extra income you take in won't be earmarked for existing expenses, which means you can use it to build some savings to make up for the fact that your primary paycheck doesn't allow for that.

4. Build a safety net

In the aforementioned report, 41% of workers whose spending exceeded their income in the past year blamed an unusual uptick in expenses, unusually low wages, or both. And let's face it: Sometimes, we have no choice but to take on added expenses, like when we get sick and start racking up medical bills.

At the same time, you never know when your boss might cut your hours, thereby reducing your income substantially. The best way to protect yourself from such scenarios, however, is to build an emergency fund with enough money to cover at least three months' worth of living costs. If you follow the steps mentioned earlier -- cut back on spending and get a second job -- you'll have money to stick in the bank so that the next time your financial circumstances change for the worse, you won't need to resort to credit card debt.

We all need savings at various points in life, but if your spending consistently exceeds your earnings, you won't manage to build any. If that's the way you've been operating thus far, it's time to change your ways -- before it's too late.