How to Stop Living Paycheck to Paycheck by 2023

It's a vicious cycle worth breaking.

You’ll often hear that it’s important to maintain savings in case your bills come in higher than expected or you wind up out of a job for a period of time. The problem, though, is that inflation has been soaring this year. And because of that, many people have depleted their savings just to stay afloat.

The result? A lot of workers are now living paycheck to paycheck with no financial cushion to fall back on. If that’s the boat you’re in, you’re in good company, unfortunately. But it’s also important to do what you can to break that cycle. Here are a few steps to take to start off 2023 in a better place financially.

1. Rethink your spending

You may be paying for the same set of expenses you were before inflation took hold. But recent data shows that Americans are now spending an average of $445 more per month due to higher living costs. And so it may be time to rethink your spending and dump some expenses, or make adjustments to your current bills.

If you have no money left over in savings, now is really not the time to be paying a monthly gym membership fee or ordering takeout twice a week. It pays to cut any expenses along those lines. At the same time, you may want to consider shopping for groceries more frugally to trim your costs, or timing your trips more carefully to save money on gas.

2. Consolidate your debt

Consolidating debt could make it less expensive to pay off. And if you’re able to lower your monthly debt payments, it should free up some room in your budget.

One option to look at is a personal loan. You’ll generally pay less interest on one of these loans than you will on a credit card, so there could be some savings there.

Another option is to do a balance transfer and move your existing credit card balances onto a new card with a lower interest rate attached to it. You may even be able to qualify for a 0% introductory APR offer.

3. Get a second job

Although there’s talk of an impending recession, the U.S. labor market is in a good place right now. And that extends to the gig economy. As such, it's a good time to pick up a side job. And that extra income could help you build some savings so you have funds to fall back on.

It especially pays to consider a side hustle if you’re spending your entire paycheck every month and genuinely have no non-essentials to cut. We talked earlier about dropping the gym membership and putting the kibosh on takeout. But if you’re at a point where you’re not even paying for small indulgences like those, then a side job may be your best and most viable option.

Living paycheck to paycheck can be extremely stressful. If you’re tired of that lifestyle, take these steps to break out of that cycle in time for the new year.