8 ways to stretch your paycheck further
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Living paycheck to paycheck can take a toll on one’s physical and mental health, yet it’s a reality for many Americans who struggle to make ends meet. While inflation is slowing, it’s still at an uncomfortably high level, as costs remain elevated on everything from gas to groceries to utilities.
The concept of stretching out your paycheck may seem impossible, but it can be done with some clever strategies and a little discipline. Money that remains after you’ve paid your expenses can boost savings or pay down debt — and the peace of mind you’ll have from living within your means is priceless.
Here are eight practical ways you can make your paycheck go further, along with some advice from personal finance experts.
1. Follow a budget
Having a budget helps ensure you’ll have enough money from each paycheck for your living expenses. It allows you to plan for purchases, avoid overspending and save money every month. You can create your budget using a spreadsheet, pen and paper, or a handy budgeting app.
A budget typically includes line items for your spending categories, such as food, transportation, insurance, credit card or loan payments, and savings.
No one ever makes a perfect budget, says Derek Sall, founder of personal finance website LifeAndMyFinances. “Your first budget won’t work. Accept it. But that doesn’t mean it won’t serve its purpose. By setting a budget, you’ll likely spend less, negotiate costs that you previously never got around to, and you’ll find items that you’re spending on that you didn’t even realize.”
Sall advises keeping your budget simple. “Make 10 categories of spending, max. Things like food, housing, cars, kids, pets.”
2. Reduce non-essential spending
Creating a budget is an eye-opener: You’ll see just where all of your money goes and identify which expenses are easy to cut. For instance, it’s possible you’re being charged every month for things you no longer use, such as gym memberships and streaming services.
Ultimately, you might find you can save hundreds each month by simply taking the time to identify and cut out miscellaneous unnecessary expenses.
In addition to small expenses, identify any larger ones you’re able to eliminate or delay. A big vacation can be replaced with a smaller trip or a staycation. A planned new car purchase can be put off if your current vehicle runs just fine.
3. Eat what’s already in your pantry
You can make your paychecks go further by cutting down on food costs. One way is to plan meals based on what’s already in your pantry. You likely can make plenty of meals out of already-purchased shelf-stable items like cereal, canned soups, sauces, noodles or rice. Also, check your freezer for things you may have forgotten about.
Along with focusing on the food you already have, give your wallet a break by cutting back on or eliminating restaurant meals.
“The simplest way to save money is to stop eating out,” Sall says. “When my family goes out to lunch or dinner at a nice restaurant, it costs over $100 a pop. It’s insane. By eating at home instead of hitting those restaurants, we’re saving at least $80 a meal.”
4. Spend wisely on groceries
Cutting food costs also means making better choices on your weekly grocery store purchases, which can leave you with more money for other expenses. You’ll be surprised at how much you can shave off your food bill by following a few simple rules.
For instance, the periphery of the store is usually where you’ll find the most cost-effective items such as fruits and vegetables. The inner aisles are full of pre-packaged convenience foods that often cost quite a bit more — and generally aren’t as nutritious.
Save the expense and hassle of lugging home cases of bottled water by drinking tap water. If yours could use filtering, try a reusable bottle with a built-in carbon filter.
LifeAndMyFinances’ Sall also stresses the importance of not buying groceries you ultimately don’t eat. “Recognize what foods you might be wasting and make a list of only the essentials the next time you go grocery shopping (ie. the food that you’re actually eating and won’t end up in the trash),” he says.
5. Avoid impulse purchases
The next time you see or hear about something you feel you must have (think clothing, accessories, electronics and home decor), give yourself 24 hours to think the purchase over. There’s a good chance you won’t feel the item is worth your money after a day.
6. Set monthly savings goals
One way to help keep you from running out of money each paycheck is to set some savings goals. Deciding what you want to save for — and how much you plan to save each paycheck — helps you to avoid overspending on other things.
Examples of savings goals include a down payment on a house, a new car, a college education, a vacation or retirement. Create line items in your budget for your savings goals.
“Your brain is an amazingly powerful tool,” says LifeAndMyFinances’ Sall. “If you don’t set goals, your brain is wasted. But when you set goals, you’re giving your mind a mission. Whether you’re actively thinking about it or not, if you set a goal and have it written down where you can see it, your brain will continually think of solutions to your ‘problem,’ ie. your goal.
“I’ve had it so many times where I set a money goal that I had no idea how I was going to achieve initially, but then my mind picked up conversations, caught opportunities, and developed creative solutions that enabled me to hit my goal (and often achieve it early).”
7. Automate your savings
Whether you’re building up your emergency fund or saving toward other goals, one way to ensure money gets saved every paycheck is by setting up automatic transfers from your checking account to your savings account.
Once you’ve set up automatic transfers, chances are you won’t even miss the money. Plus, you’ll have the added bonus of earning interest.
Case in point: If you start with $1,000 in a high-yield savings account that’s earning a 5 percent annual percentage yield (APY) and transfer just $20 each month (around $10 per paycheck) to the account, after a year you’ll have earned around $300 in interest.
8. Shop around for insurance
Lowering your premiums for auto insurance, renters insurance or homeowners insurance can help pare down your monthly or biannual payments. One way to pay less for insurance is to find a reputable provider that charges lower rates than those you’re currently paying.
In addition to comparing quotes from different providers, be sure to read their reviews online before making a decision.
“Many overlook the fact that insurance is savings, but it is definitely something that makes your paycheck last longer,” says Barbara Pietrangelo, certified financial planner and chair-elect at financial nonprofit organization Life Happens. “Investing in financial products like life insurance gives you financial security as you are protecting yourself and your loved ones from unforeseen tragedies that could impact your financial security.”
Other things to consider
In addition to the practical steps listed above for stretching out your paycheck, consider a few more things when you’re looking to make your income go further:
Have a healthy emergency fund
Saving some of each paycheck towards an emergency fund is key, Pietrangelo says.
“The rule of thumb for this fund is to have three to six months of expenses put away for unforeseen costs, just in case of an emergency,” Pietrangelo says. “Every dollar you put into an emergency fund is one dollar closer to your savings goal and future financial security.”
Avoid the debt trap
Putting groceries or gas on your credit card feels like a quick fix when your money’s run out — but it has negative consequences. Not being able to pay off your credit card in full every billing cycle often results in hefty interest charges.
If you’re in debt on multiple credit cards, consider simplifying your payments by consolidating your credit card balances onto one balance transfer credit card — especially if you can obtain one with an introductory 0 percent annual percentage rate (APR).
For anyone who runs out of money before the next paycheck arrives, it can be tempting to resort to a payday loan to bridge the gap. However, these come with plenty of potential pitfalls.
“Payday loans can get significantly more expensive if they are not paid according to schedule due to fees in the fine print and compounding interest,” says Jeff Zhou, co-founder and CEO of Fig Loans. He says a local nonprofit with an assistance program could be an alternative for those with a low credit score who are in need of emergency cash.
Live within your means
Everyone’s unique experiences and life lessons shape the decisions they make about money. Some tell themselves they work hard and deserve to have nice things or luxurious experiences. However, running out of money each month (or going into debt) to pay for such things can cause stress that outweighs the benefits.
Living within your means is one of the most powerful ways to decrease your expenses and increase your savings — and the benefits of peace of mind and better sleep at night are immeasurable.
Bottom line
Staying above water until your next payday takes some effort, but it can be done when you follow some practical strategies. These include following a budget, finding ways to cut costs, and avoiding spending on things you don’t need.
Finding ways to stretch your paycheck further will help you avoid financial stress, live within your means and achieve financial wellness.