3 in 4 Americans Live Paycheck to Paycheck. This Could Help You Break the Cycle

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KEY POINTS

  • Living paycheck to paycheck means risking debt the moment an unplanned bill arises.
  • Building emergency savings could help you avoid that scenario and give you peace of mind.
  • Set realistic savings goals so you don't get discouraged.

It's not a great situation to be in at all.

Even before inflation started to surge, many Americans were living paycheck to paycheck. But a recent survey by SecureSave found that 74% of Americans live paycheck to paycheck today. 

That means they have no money in their savings account to fall back on. It also means they risk racking up costly credit card debt the moment an unplanned bill arises. 

Not only can a paycheck to paycheck lifestyle be dangerous financially, but it can also be stressful. If you're constantly worried about money, it might impact everything from your relationships to your productivity at work. 

In fact, the aforementioned survey found that some Americans spend one to two hours a day worrying about money. And it's easy to see why you might land in that boat in the absence of a financial cushion.

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If you're tired of living paycheck to paycheck, there's one important step you can take to bust out of that cycle. It won't be easy, and it won't happen overnight. But in time, you can stop living paycheck to paycheck and start having less to worry about.

Build your emergency fund

When you live paycheck to paycheck, you might worry if your grocery bill for the week comes in higher than expected, or if your kids suddenly need new uniforms for an extracurricular activity. And these are relatively small expenses.

What if your roof springs a leak and needs a $700 repair? Or what if your car stops working and you're quoted $1,500 to get it back out on the road? 

When you live paycheck to paycheck, these are expenses you may not have a chance at covering without resorting to credit card debt. But if you build yourself an emergency fund, you'll have cash reserves to tap when situations like these arise. And that might help you sleep better at night.

Ideally, your emergency fund should have enough money to cover three months of essential bills at a minimum. The logic is that if you were to lose your job, it might take that long to interview and get hired elsewhere. 

If you're living paycheck to paycheck with no money in the bank, you're not going to suddenly come up with three months' worth of living expenses in short order -- even if you're willing to work a second job to boost your income. But you don't need to save three months of expenses right away. 

If you're able to save $300 in the course of a couple of months, that's $300 you didn't have before. And it buys you a little protection. And then, when you save your next $300, you'll have that much more protection.

Set realistic goals

The idea of building emergency savings can be daunting. So rather than set lofty goals that aren't realistic, be kind to yourself. If you're able to trim a few expenses, it might put $100 in your savings account at the end of the month. Do that for 12 months, and you'll be sitting on $1,200, which is a heck of a lot better than $0. 

In time, you can, and should, aim for that three-month emergency fund. But for now, do your best to save something so you can stop living paycheck to paycheck with absolutely no cushion.

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