Why You’re Still Living Paycheck to Paycheck, Even With a Decent Job

You have a solid job. Your direct deposits hit your account at the same time every week, and on the surface, it looks like you’re making plenty of money. Still, you find yourself living paycheck to paycheck. More specifically, you may find yourself living paycheck to a couple of days before paycheck.

According to the Social Security Administration, the average American brings home just north of $66,000 each year. Perhaps you’re making that much, or even a little more. But you still find yourself struggling to put any money back at the end of the pay period.

What’s happening to your money? On the surface, it looks like you should be making more than enough to live a comfortable life, but you’re still facing financial stress at every turn. Take heart in the fact that you’re not alone. According to some recent surveys, more than 60% of Americans live like this. Even more shockingly, many of those individuals earn six figures each year.

Financial stress and living paycheck to paycheck aren’t always about being irresponsible with money and a lack of discipline. Instead, it’s often about financial blind spots (everyone has them) and hidden expenses. If you’re ready to break the cycle of living paycheck to paycheck, learn more about some of the possible reasons and how to move past them so you can enjoy the peace of mind and security that should come with the money that you’re earning.

You’ve Upgraded Your Lifestyle Without Realizing It

One of the trendiest words in the world of personal finance right now is “lifestyle inflation.” While inflation, in its most foundational sense, has been at the forefront of the news for years, lifestyle inflation is a phenomenon that involves spending more money just because you’re making more money.

Think about the last time that you got a raise. While you went out to dinner that evening to celebrate, you may have also started dining out a little more often. You trade in that old beater of a car that you were driving for years for a new luxury model, and you finally buy a bigger home in a nicer neighborhood. Initially, all of these things look like you’re finally moving up in the world. However, if you look a little deeper, you’re actually falling into lifestyle inflation.

Now, this doesn’t mean that you shouldn’t move into a nicer neighborhood in a better school district when your financial situation changes. But it does mean that you need to evaluate your financial habits as a whole. Maybe instead of going out to a nice restaurant three or four times a week, you could go back to eating out once a week like you were doing before you started making more money.

Higher income doesn’t have to lead to more spending. When you make more money, remain vigilant about how much money is going out each month.

You Don’t Actually Know Where Your Money is Going

This one almost sounds too simplistic to be true, but you would be shocked to know how many people have no idea where their money goes every month. Even more surprisingly, these individuals aren’t deliberately careless with their money. Instead, they’re simply part of a culture that makes it ridiculously easy to “nickel and dime” yourself into being broke.

Take a look at how easy it is to spend money from your phone. You get on one of the major shopping websites and order two or three small items. Then, you bounce over to one of the apps from a local big-box retailer and have a “small” order delivered to your house because it’s more convenient. Before the night ends, you’ve also signed up for a new streaming service because you want to watch a particular show. Soon, you’ve spent $100 or more, and it’s entirely possible that your significant other has done the same thing from the other room.

It's not that those types of spending are necessarily careless. However, the ease with which you can spend hundreds of dollars without leaving your couch makes it easy to lose track of your spending. With this in mind, track your expenses for 30 days. When it’s over, sit down and take a look at where you spent money in the previous month. A budgeting app, a spreadsheet, or a good old pen and paper can allow you to take a look at where your money is going each month. When you have the information in front of you, you can make adjustments to your money management system.

You’re Carrying Hidden Debt

Wouldn’t it be wonderful if all debt showed up with flashing red lights that let you know about its presence? Unfortunately, that’s not the case. One of the most difficult aspects of debt management is dealing with the debt that’s lurking in the shadows of your budget. You know about your mortgage, car payments, student loans, and major credit cards.

However, there might still be some hidden debts that are siphoning money out of your monthly budget. Perhaps it’s a credit card with a smaller balance that you’re making the minimum payment on each month. You may even have an old personal loan that you’ve forgotten about over the years.

Knowledge is power when it comes to dealing with debt. Sit down and make a list of every debt that you owe. This list should include the name of the creditor, the type of debt, the minimum monthly payment, and the interest rate. Spend some time researching different payoff strategies and choose the one that’s best for you. Once you’ve chosen a plan, track your progress. If the plan isn’t working, make some adjustments to tackle all of your debt, including the hidden debts that you’ve lost track of.

You Don’t Have a Cushion, So Every Expense is a Crisis

The average American cannot pay cash for a $1000 emergency. This can include something going wrong with your vehicle or a major appliance in your home. When you don’t have the cash on hand to cover these unexpected costs, they quickly turn into crises. What do you do when the heat pump breaks down, the warranty has expired, and you need to spend $800 to fix it? Without the cash on hand, you probably put the cost on a credit card with plans to pay it off later.

Having an emergency fund allows you to keep yourself from going into more debt. Make no mistake about it, financial emergencies are going to happen. However, an emergency doesn’t have to be a crisis.

Your Financial Goals Are Too Vague (or Nonexistent)

The importance of having clearly defined financial goals cannot be overstated. Unfortunately, many people think that making more money is the only financial goal that they need to pursue. Generating more income is a great financial goal, but your financial success or failure is largely predicated on specific, measurable goals.

Start the process of making clear financial goals by setting one. Commit to paying off your smallest credit card debt. When you accomplish that goal, you can check it off and move on to the next. Your money needs to have a mission. When you make money and spend it without goals, you run the risk of spending the rest of your life living paycheck to paycheck.

You’re Letting Comparison Be the Driving Force in Your Life

It’s been said that comparison is the thief of joy. It’s also the thief of good money management. Unfortunately, we live in a culture that promotes comparison, thanks in large part to social media. When you scroll through your social media streams, you probably see people who have bigger houses, nicer cars, and more stuff. Those people may go on multiple luxury vacations each year, all while you’re living in the same house you’ve been in for 20 years, while saving up for a five-day trip to the beach.

Don’t let how others spend their money determine how you spend yours. Remind yourself that you’re not in competition with your coworkers, friends, and neighbors. The goals that you set for yourself are in place to make sure that you can live the life that you deserve. By falling into the trap of comparing yourself to others, you run the risk of constantly spending more money than you have.

Make Some Changes Today

You can’t break out of the cycle of living paycheck to paycheck in a single day. Instead, it takes time and effort. However, by making some of the changes that you’ve just read about, you can create a new normal in your life.