Smarter and Harder

How to Break the Paycheck-to-Paycheck Cycle

Living paycheck to paycheck is stressful and tiring, yet a majority of people are still trapped in this cycle.

The great news is that breaking out of that cycle is easier than most people think. It just takes a bit of strategy.

While building your income, paying off debt, and investing can all make a difference, none of these is necessary for breaking the cycle.

Instead, all you need is to get one month ahead on your bills, one time, and then you're set. Here's how it works.

Start with an estimate of how much money you spend (not how much you make) each month. This number will be your goal.

1. Figure Out Your Monthly Expenses

Choose a place to start a "buffer fund." Preferably in its own place, like a savings account separate from your other savings.

2. Start a Buffer Fund

Contribute money, as aggressively as you can, to your buffer fund. Don't touch it until you reach the goal number from  step 1.

3. Save up to Your Target Number

Once your buffer fund is ready, use it to pay the following month's bills. Place that month's income back into the buffer fund. Repeat.

4. Pay Bills and Refill

Once you have "primed" your buffer fund, you will always have the money you need for next month's bills on the first of the month. New income will then pay for next month.

It's a simple, one-time goal, and once you reach it, you will never need to worry about when your paycheck lands or how you'll cover the next bill.

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