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ynab guides

Stop Living Paycheck to Paycheck

Break the paycheck to paycheck cycle, once and for all.

Stressed and scrambling because you’re living paycheck to paycheck? Take a deep breath.

We get it—the constant juggle of timing your bills and your paychecks, running out of money before you get paid again. You feel like you’ll never get ahead financially, and it’s exhausting.

You might wonder: “Why is this so hard? Why can’t I figure this out?”

Nothing is wrong with you! There is a missing piece to this puzzle, though. This piece will cause your financial stress to drop immediately and help you break the paycheck-to-paycheck cycle forever.

It will change everything.

Ready to break the paycheck-to-paycheck cycle? Let’s go.

chapter 1

What is the Paycheck-to-Paycheck Cycle?

Do any of these scenarios sound familiar?

Timing paychecks to bills

“Ok, I get paid on Friday, and my partner is paid the following Thursday. The phone bill and electric bill are Monday and Tuesday, so we’ll pay those out of my check on Friday, along with the mortgage. We also have to go to the grocery store. Oh wait, the car insurance bill is due. We can’t cover all of these bills. Well, the electric bill will just have to be a few days late.”

There’s some heavy mental overhead happening there just trying to keep track of your logistic gymnastics. Maybe you dip into overdraft or turn to payday loans, a credit card, or asking your boss if you can get paid a little early. Feeling like you can barely make ends meet is an exhausting, stressful way to live.

I should have enough money—where does it all go?

Let’s say you have a job that pays the bills—or should be able to. The end of the month arrives, and your hard-earned cash has disappeared. You run through the plausible explanations: a leak in your bank account, an error on your credit card, the cost of living continues to climb, a sneaky gnome that perhaps just stole all your money. Alas, it seems to be a pattern that repeats most months. It’s one you can’t quite figure out.

In both of these scenarios, there’s the shame. “Why is this hard? Why can’t I sort this out? What is wrong with me?”

Are you ready to reclaim your time?

All this juggling takes time. You play out the scenarios while lying in bed, staring at the computer, making dinner, or watching TV. How many hours are you losing to this constant worry?

Friends, we want your financial situation to be boring. That way, you don’t even have to think about it. We’re talking hour-four-of-a-slug-documentary-boring. Get those hours back and feel that heavy mental overhead disappear.

Right now, you have a big pile of bills sitting around, just waiting to be paid. Maybe they’re shoved under a book or something, so you don’t have to think about them.

Soon, we want you to have a big pile of money, sitting around, waiting for the bills.

Let’s flip your script. It can happen. You can stop living paycheck to paycheck.

chapter 2

The Root Cause of the Paycheck-to-Paycheck Cycle

Let’s start with a question:

Icon of a dollar sign in a speech bubble
If you got paid today, how long could you hang on to that paycheck before you had to cash it?

A few days? Weeks? Hours? Would you be running to the bank to cash it immediately? Yep—that’s the paycheck-to-paycheck cycle.

Living paycheck to paycheck doesn’t necessarily have anything to do with how much you make. Your income bracket doesn’t matter—you could make $40,000/year or $240,000/year (really!) and still live paycheck to paycheck.

It’s not about how much you make—it’s about how much you keep. You could be a high-income earner making six figures, but if you spend it all, you’re still living paycheck to paycheck.

Another way of looking at the paycheck-to-paycheck cycle

A dollar is born the day it arrives in your life.

Let’s say you’re on your way to work Friday morning. You can’t afford to put gas in the car, but you get paid later today, so you’ll do it on the way home. You get paid, you cash the check, and then fill the tank.

When you buy that gas, you’re spending money that’s barely 15 minutes old.

That money was baby money, just born in your account. It barely arrived in your world, and it’s headed right back out the door. The following day, when you buy groceries with that paycheck, that money has reached some form of toddlerhood—it’s 12-hour old money.

Icon of a dollar sign in a speech bubble
The root cause of the paycheck-to-paycheck cycle is that your money isn’t old enough.

We want you to get to the point where money hangs around for a while before heading back out the door. Let it get a little older: crawl, walk, experience adolescence, perhaps.

To hang on to money longer and let it age, you’ll need to do one of two things, or possibly a combination of both:

  • Reduce spending
  • Increase income

Reduce Spending

This is a good place to start. Are there any areas you can cut back on? Check out this list of ideas.

Dining Out

Maybe you don’t have a formal system or structure that you’re following. You deposit money when you get it, then spend until it’s gone. However, this creates an opening for chaos when a large unexpected expense pops up. You’re left guessing if you can afford it, crossing your fingers that you don’t overdraft your account with other expenses.

Spending Freeze

Can you go a few months without buying new clothes or decor? Maybe you could cut all non-obligatory spending for a short time.

Negotiate Lower Interest Rates

Don’t be shy. Call your credit card companies and ask for a lower interest rate. This is more effective than you may realize. Apply any money not covering interest charges somewhere else or use it toward credit card debt you’re trying to pay off.

Cut Cable

Maybe you aren’t really watching as much TV as you used to, and you’re paying this bill out of habit. Can you let it go?

Eliminate Subscriptions

Make a list of all subscription services and decide if they’re worth keeping.

Borrow or Rent (things, not money)

Instead of spending money to replace something, can you borrow or rent for a while? This allows you to buy a little time.

Sell Some Stuff

Walk through your house or apartment and make a list of things you no longer use but could sell. It’s a one-time influx of cash, but it can generate some initial momentum.

If you’ve cut the smaller-ticket items, maybe it’s finally time to look at the big-ticket items like rent. If your rent is $1,900 a month, and you can find a new place for $1,600, that’s $300 a month—$3,600 a year. That can go a long way to building a cushion of cash you can hang on to.

Increase Income

You may be in a situation where you simply aren’t making enough money to cover the basics. You’ve already cut cable, internet, and dining out, but there just isn’t enough money coming in.

We recommend starting by looking at spending and avoiding working more hours. If it comes to that, an extra 10 hours more a week or one more shift can often make a big difference.

Thinking a short-term side hustle may be for you? Check out our video to help kickstart some ideas:

Reduce spending or increase income?

While combining reduced spending and increased income generally offers the most powerful path, the root of your problem will often come back to one or the other.

If you aren’t sure whether the root of the problem has to do with income or spending, start by tracking and evaluating spending. Cut first where you can. If you decide that you truly need more income, you’ll know it’s a true need.

If your salary puts you higher on the income spectrum, the issue is likely spending. Start there.

If your household income is lower, the issue is likely income.

Do you make somewhere in the middle? Perhaps your problem is a combination of both.

chapter 3

How to Break the Paycheck-to-Paycheck Cycle Once and For All

Want to stop living paycheck to paycheck? Spend less than you earn. By spending less than you earn, you will hang on to more money, thus increasing the cushion in your savings account.

Thank you, Captain Obvious.

Okay—we get it. That’s not super helpful. The key is figuring out how to spend less than you earn. There are three pieces to that puzzle.

  • You need to know what you earn each month. This may fluctuate for some of you, but a ballpark amount is helpful.
  • Know what you need each month. Track your spending, and you’ll gain an incredibly informative awareness of your expenses. In YNAB, once you’ve set up your budget, you can see exactly how much you need every month in one streamlined number.
  • Know the difference, and know your gap. Once you know what you earn and what you spend, you can see what your gap (or lack thereof) amounts to. The larger the gap, the more quickly you’ll build up your savings cushion. With a smaller gap, it might be time to evaluate some of your spending.

You need a budget

A budget gives you the power to do all of this. It will give you clarity, allow you to track your spending in real time and, provide the opportunity to spend with confidence—knowing your priorities are already covered.

Icon of a dollar sign in a speech bubble
"But a budget is restrictive! I don’t want to live on rice and beans forever!"

We’re definitely not saying you have to live on rice and beans forever. (On a related side note: Have you ever tried rehydrating dried beans instead of canned beans? I’m not saying I could live on those forever, but definitely for a week or two. They’re something else. Really elevates the bean. I digress).

Does a budget tell you what you can and cannot spend? Yes. Who sets the budget? You! You decide what you want your money to do.

Icon of a dollar sign in a speech bubble
"I can’t stick to a budget! I’ve tried—it never works!"

Can’t stick to a budget? Well, the budget you had in the past sounds pretty rigid. Budgets should bend, change, and flex with everything life throws at you. If your budget changes, it means you’re doing it right—not wrong!

If you want to spend less than you earn, a budget is key.

Now that you know the pieces to the puzzle, you need to know how to put them together.

chapter 4

Four Rules to Make Your Budget Stick

If you’ve tried budgeting before, but nothing ever stuck—just give us a chance.

There are a few keys to making a budget work. We call them the Four Rules. We want to walk you through the first three in this chapter to help you save money and build a cushion between this paycheck and the next one.

Rules One, Two, and Three

Red construction hard hat
Rule One: Give Every Dollar a Job

Money is finite—no matter how much of it you have, you need to prioritize where it goes. As you prioritize your expenses, it will become clear where you should spend your money.

Decide in advance what you need it to do and where you need it most. You’ll work only with the money you actually have. This will finally give you clarity into what your money needs to do before you get paid again.

Light bulb with a dollar sign inside
Rule Two: Embrace Your True Expenses

Imagine never dreading the arrival of a big bill. It arrives in the mailbox, and you just pay it. This rule simply means treating non-monthly bills as if they were monthly.

Have a yearly bill? Divide the cost by 12. Have a quarterly bill? Divide the cost by 3. Is the annual car registration $300 a year? Set aside $25 every month, and when the bill arrives, all the money will be sitting there waiting for the bill.

With some of the money you have now, you can prepare for next winter’s high heating bills or next summer’s vacation. You know these things are coming, and it’s time to start playing offense.

Not everything in life is predictable, but Rule Two helps you prepare for those things that feel like surprises. It makes them predictable. Car repairs, home repairs, and medical bills come eventually. That’s not a surprise—you just don’t know exactly when they’re coming or exactly how much they’ll cost.

When you put money aside for them now, they aren’t stressful later.

Green boxing glove
Rule Three: Roll With the Punches

So, you’ve got a plan for your money and you’ve given every dollar a job. When things change, you must adapt. You can reassign jobs to dollars: maybe they need to pay for extra grocery spending instead of paying for new clothes this month.

Over in Budget Land, these money movements happen so often they have their own name. Many budgeters call this WAMing dollars, which stands for Whack-a-Mole(ing). It’s as if the dollars get whacked from one category and then appear in another, just like the arcade game. Sometimes, it won’t be just monthly spending that changes, but even our big-picture priorities. It doesn’t mean you’ve failed at budgeting—it’s normal, accepted, and encouraged. You’re still trending in the right direction!

Roll with those punches. Need to make a change to your budget? Go for it. A budget is not static, but rather dynamic. When you use your budget to make adjustments and solve problems, you’re more likely to stick with it.

Get a month ahead

By giving every dollar a job, treating non-monthly expenses as monthly, and letting your budget roll with the punches, you will begin to spend less than you’re bringing in and hang on to more cash. Follow those three rules, and you’ll watch your cash last longer and longer.

What’s the best way to break the cycle? How will you know it’s gone once and for all? Get one month ahead of your expenses. This one’s a game-changer. Once you’ve done it, you’ll never go back.

Getting a month ahead may feel daunting. A member of the YNAB team shares a few quick tips for getting a month ahead in your budget in this video:

Work to get to a point where you’re using this month’s money for next month’s expenses. Follow the three rules laid out above, and your cash cushion will move further and further into the future. Eventually, you’ve funded all of next month’s bills before next month even arrives.

For many new budgeters, they hit this point after 3-6 months of budgeting. Once you’ve reached that glorious, freeing state, here’s how things flow:

  1. You get money, but you don’t need it right now. You’re currently spending the money you earned last month.
  2. You budget the money for the following month.
  3. When that month arrives, you spend it.
  4. Rinse and repeat.

What you’re really doing is saying, “I want the job of some of my dollars to be covering next month’s budget.” You are assigning them to a very special and powerful job.

chapter 5

See How it Works in a Budget

In YNAB, there are two ways to do this within your budget:

Option #1: Budget into a holding category.

Create a holding category for next month’s money. After you finish budgeting for the current month, budget any extra money into the holding category.

animation showing assigning money to a "hold for next month" category

You can apply the money in a couple of ways:

All at Once

Wait until the holding category has enough for an entire month. Release it to Ready to Assign, cover the next month, and use next month’s income for the following month.

Make sure you throw a big party when this day arrives.


Add as much to it as you can each month. When the month rolls over, the money is released back to Ready to Assign and redistributed to other categories. Over time, it becomes bigger and bigger, until you’re a month ahead.

This approach is also deserving of a party.

Option #2: Budget into the future month.

You may prefer to assign those dollars directly to categories in next month’s budget.

As money comes in, budget to cover the current month’s monthly and non-monthly expenses. Once the current month is completely covered, move to the next month and start assigning dollars there.

animation that shows assigning money to a category in a future month

Aim to be able to budget for more and more of the next month over time, until you reach the point where you’ve covered the entire next month before it even arrives.

With these strategies, you’ll be hanging on to more money for a longer period of time. Instead of spending a dollar 15 minutes after you get it, you’ll get to a point of holding on to money for 30 days or more before spending it.

We call this aging your money—and this is YNAB’s fourth rule. It’s also an essential step of breaking the cycle of living paycheck to paycheck.

chapter 6

The Most Important Rule of All

What is old money?

Remember: a dollar is born the day it enters your life. If you still have that dollar the next day, it is one day old. If you still have that dollar in 30 days, it’s 30 days old. If you save money for retirement, that money could be 30-40+ years old when you take it out.

That’s the basic idea behind Rule Four: Age Your Money:

Of course, it’s not that simple. You can’t just hoard money so it can sit around and get older. We all have bills to pay.

Too many people find themselves waiting for more money to arrive while a pile of bills continues to grow. Money finally comes in, but that money is already spoken for by the bill pile. Before you know it, your newfound money is gone, and you’re once again waiting for that next paycheck.

In that scenario, the gap between money arriving and departing is too small. The dollars barely have a chance to get settled in an account before they’re out the door again.

How your savings rate affects aging your money

It doesn’t matter if you make a lot of money—you can still find yourself stuck in the paycheck-to-paycheck cycle. As long as your income barely covers your expenses, whether that is $1,000, $10,000, or $100,000, you’re stuck. As long as you find yourself juggling and timing your spending, you’re stuck. Your money isn’t old enough.

Imagine that Tony makes $2,000 a month and spends $1,999 a month. He’ll be able to save $1 every month. It’ll take him 166 years to get a month ahead!

Now imagine Sandy makes $2,000 a month and spends $1,500 a month. She’ll be able to save $500 every month. She’ll get a month ahead in just four months.

Think about it with regard to their savings rates. Tony is saving 0.1 percent of his income, and Sandy is saving 25 percent of her income.

They are both aging money, but Sandy ages more money more quickly. (In this scenario, we want to age quickly. Skip the eye cream and bring on the wrinkles!) Yes, Tony will eventually save $500, but it will take almost 42 years versus four months for Sandy. In four months, Sandy will be one month ahead in her budget.

Your savings rate can also be helpful in determining how long it will take to get a month ahead. If you bring in $3,000 per month, and you have a budget template for $2,700, you’ll be saving $300 per month for next month. After ten months, you’ll have saved one month of income.

chapter 7

How Old Should Your Money Be?

Aim to Age Your Money At Least 30 Days

How do I know how old my money is? Well, in YNAB, your budget calculates that number for you.

age of money screenshot

If you’re not using YNAB, you can get a rough idea by looking at your account balances, which should hopefully grow each month.

Remember: any money you’re hanging on to will get older—not just the money assigned to next month. If you have money saved up for a vacation, that money’s getting older too.

Think of 30 days as a starting point. Get to 30 days by following the first three rules, and then evaluate where you are. Are you a month ahead? If not, keep working on it until you’re there.

What’s your sweet spot?

If you’re not sure what to work toward, consider these guiding questions:

  • How often are you paid? If there’s a big distance between paychecks, a higher number is better.
  • When are you paid? If you’re paid near the end of the month, you may be using that money for next month, but it doesn’t sit around very long before you spend it. A higher number is better.
  • How stable is your income? If it’s stable, a lower number may be ok. If it’s variable, a higher number would be better.
  • What’s your risk tolerance? If you have a low risk tolerance, maybe you want to be two months ahead instead of one.

chapter 8

Getting a Month Ahead or Debt: What Comes First?

Getting a month ahead and aging your money is the way out of the paycheck-to-paycheck cycle. Hopefully, you are totally pumped and ready to rock.

If you’re in debt, you want it gone, which brings up a great question. What should you prioritize: getting a month ahead, paying down debt, or building more of an emergency fund?

You might feel like you shouldn’t hang on to money when there’s a pile of debt out there waiting to be paid down. You also want to save that for a rainy day and build up an emergency fund. Ack! What should you do? Be wary of falling into the trap of picking one, finishing it, then moving on to another.

We recommend that everyone start with the following steps:

  • Budget for monthly expenses, including the minimum payments on debts.
  • Budget for non-monthly expenses to prevent future debt. You don’t need to have all your True Expenses completely funded. You’re saving toward them every month.

At this point, there will hopefully be some money left. The next step is to find a balance between paying down debt and getting a month ahead.

Let’s say there’s $500 left after budgeting for monthly and non-monthly expenses. There are essentially three options, and you should choose the one that you think will work best for you.

Option A: Month-Ahead Focus

You crave a cushion of cash for security.

Put all $500 toward getting a month ahead. Continue making minimum payments on debt. Work on debt after you get a month ahead.

This is a good approach if your debt will take a long time to pay back. Imagine a 10-year student loan or 30-year mortgage. Given that long time frame, it makes sense to get out of the paycheck-to-paycheck cycle now and enjoy the security that comes with it. It’s also easier to work steadily on debt paydown if you’re working to establish financial security.

We also want people to get there as soon as possible by using the method as intended.

Option B: Debt Focus

Your debt drives you absolutely crazy.

Put all $500 toward debt repayment, rather than toward getting a month ahead. You’ll work on that after the debt is paid off.

Maybe you don’t have a lot of debt and can knock it off pretty quickly. In that case, a debt focus makes sense. Having more cash on hand gives you options. With your debt out of the way, you’ll free up more cash sooner, which you can use to get a month ahead and stop the cycle of living paycheck to paycheck.

Option C: Split Focus

You want both—the security of a cash cushion and the satisfaction of seeing that debt total go down.

Use some of the $500 for debt repayment and some for getting a month ahead. This allows progress on both fronts—increasing financial security and paying off debt.

This approach offers some flexibility and the ability to make progress on both goals. Keep in mind: even with a split focus, you can still channel more money toward debt if you want to. You have levers to pull on with that option.

chapter 9

Next Steps

You’ve made it this far—now let’s put your knowledge into action.

  1. Start a Budget
  2. Give Every Dollar a Job
  3. Plan For Non-monthly Expenses
  4. Roll With The Punches
  5. Age Your Money And Get A Month Ahead

Surveys in the past have told us that most people can get a month ahead within 4-6 months. The constant stressor of living paycheck-to-paycheck could be gone in fewer than six months.

You can get there, stay there, and feel the peace and security that comes from no longer being trapped in that dreaded paycheck-to-paycheck cycle.

Are you ready to start rewriting your money story?

chapter 10

Additional Resources

Ready to do a personal finance deep dive into how to stop living paycheck to paycheck? We’ve got plenty of resources to help you get started!

More to explore

Ready to fast track your journey and put living paycheck to paycheck in the rearview mirror even sooner? Our Change Your Money Mindset workbook and email series helps you explore your finances and your feelings so you can see exactly how money and emotions influence your past, present, and future. Download it for free to change your relationship with money, once and for all.

chapter 11