If you find that you're strapped for cash at the end of the month, you’re probably living month to month. You’re not alone, though. A recent study found that 61% of Americans live paycheck to paycheck.
But what exactly does it mean to live month to month?
What does living month to month mean?
Living month to month is also known as living paycheck to paycheck. Essentially, you need your next paycheck in order to afford your upcoming expenses.
It is difficult to save when you’re living month to month because you only have enough income to pay your bills until you get paid again.
So if you were to lose your job or source of income, you wouldn’t be able to afford basic necessities without possibly going into debt. As a result, living month to month is usually coupled with credit card debt to help make ends meet.
What can cause you to live month to month?
The reality is that most people don’t want to live paycheck to paycheck. We all want a sense of security–knowing that we have the money to take care of our needs.
A lot can cause someone to live month to month or paycheck to paycheck.
Here are a few reasons why.
Being underemployed means that you have a job, but it doesn’t compensate or make use of your experience and qualifications. In other words, you may be working a low-paying or low-skill job.
This causes a problem because although you’re working, you could be getting paid much more for your time and skills.
You’re living in a high-cost-of-living area
Living in a high-cost-of-living area can be a huge contributor to living month to month. This means that you’re paying significantly more for expenses like rent, food, and other essentials.
It’s challenging to get far with your finances when basic necessities are inflated. Some of the highest cost of living areas in the US include:
- Manhattan, New York City
- Honolulu, Hawaii
- San Francisco, California
- Brooklyn, New York
- Washington, District of Columbia
If you live in any of these expensive cities, you can be paying as much as 44% more for groceries than average.
Significant life changes impacting income
Life happens, and when it does happen, it can significantly impact your income. For instance, if you experience the death of a spouse or even divorce, this can drastically reduce your income.
So although you may not have been living month to month before, these major life events can completely change your financial situation.
How much cash should you have left after bills each month?
Living month to month is not the ideal financial situation. But how much money should you have left at the end of the month?
Well, there is no set amount. Rather, the goal should be to have enough money left over to save, invest, and put toward other financial goals.
At a minimum, try to have money saved for emergencies so that if you do lose your income, you can still pay for your necessities.
How to avoid living month to month
If you’re ready to get some breathing room in your finances, here are 8 tips to avoid living month to month.
1. Create a budget
The first step to avoiding living month to month is getting visibility of your income and spending. Could it be that you’re spending money on unnecessary items?
If you want to know where your money is going, create a budget. A budget will allow you to see all of your income and expenses. It allows you to create a plan for where your income will go.
There are several types of budgets that you can create, but don’t overwhelm yourself. Find one that works for you and is something that you can keep up with.
2. Keep expenses under your income
If you want to stop living month to month, you’ll have to reduce unnecessary expenses. This means getting rid of unused subscriptions and only spending on things that you need.
The goal is to keep your spending under your income so that you have money left over.
It’s not just about cutting expenses, though. You should also think of ways that you can reduce the cost of necessities. This may mean finding alternative options for your service providers and brands you may be loyal to.
Although it is a sacrifice, remember that it's for the greater good of your financial future!
3. Increase your income if necessary
Having a budget will reveal if you truly don’t have enough income or if you simply need to reduce unnecessary spending. Either way, there’s never any harm in making more money.
Some ways that you can increase your income include:
Picking up a side hustle or a part-time job
Use your spare time to pick up some extra work that’ll bring in additional income. There are plenty of side hustles that you can even do from home. They’re a great way to earn additional income on a flexible schedule.
You always have the option to take on a traditional part-time job as well. This may limit your flexibility; however, it’s a great way to get a quick boost in income when you're living month to month.
Asking for a raise
Leverage your skills, experience, and performance as grounds for an increase in your salary.
Applying for a new job
If you’re unable to get a raise at your current job, consider finding a new position. This might be with your current employer or elsewhere.
It doesn’t hurt to put your resume out there and apply. In some situations, you might have to gain new skills that will make you more marketable.
4. Adjust your bill due dates
Did you know it's possible to change the date that your bills are due? Most service providers will allow you to adjust the billing date on your account. This means that you can change when you have to pay your bills.
Doing this allows you to align your bills with your budget. So if your bills exceed what you make in one pay period, you can move it to the next. This allows you to equally distribute your bills so that you have enough money to cover them when they’re due.
5. Pay off debt
For most adults, outside of a mortgage, debt repayment takes up 30% of their income each month. This means that a significant portion of income goes to debt.
If this is the case for you, paying off debt can free up your income and give you breathing room. Eliminating things like credit card debt, student loans, and car notes will eliminate expenses in your budget.
As you’re paying off your debt, avoid creating new debt. This will only undo the work you’ve done to reduce your expenses.
6. Save (even if it’s small)
Having money saved helps you avoid living month to month because it provides a buffer if there is a lapse in income. So instead of needing your next paycheck, you can tap into your emergency fund.
An emergency fund is money you save that is there for emergencies. It’s money that’s there just in case you need it.
Simply putting what you can aside in a savings account makes a big difference. You can get into a habit of saving, even if it’s small. Over time, those small deposits will grow into a significant amount of money saved.
You can kickstart your savings by taking advantage of large windfalls of money—like tax refunds— to save or even eliminate debt.
7. Don't leave money on the table
The worst thing that you can do if you’re living month to month is to leave money on the table. This means that you’re missing out on opportunities to save money or get money back.
Here are some ways that you can avoid leaving money on the table:
- Check your tax withholding so that you aren’t paying too much in taxes throughout the year. This is money that you can be using each month.
- Use cashback apps to earn money from your purchases.
- Use coupons to save money on your essentials like groceries and household items.
- Mail in your rebates to get money back for large purchases.
- Negotiate bills so that you aren’t paying more than you need to.
All of these can combine to put money back into your pockets.
8. Be intentional about your spending
The essential thing to do to avoid living paycheck to paycheck is to be intentional about your spending.
Being intentional with your money means that you plan before you spend, and you also find ways to save.
One way that you can be more intentional is by meal planning. Planning out your meals ahead of time allows you to only get the groceries that you need and not waste them. Coupled with meal prepping, you can also avoid eating out and spending more money on food.
Break the stressful cycle of living paycheck to paycheck!
It’s time to break the cycle of living paycheck to paycheck and month to month. The first step is to make the decision to change your situation. From there, you can begin to apply the tips shared above.
You don’t have to do it alone! We have a community and more free resources to help you take control of your finances and stop living month to month. Get more ideas right away by reading our article about money leaks with your finances.