Ways to Build Your Savings When You Live Paycheck to Paycheck

fanned stack of 100 dollar bills

Even in the best financial circumstances, saving money can be a challenge. The temptation to spend and live beyond our means can be very powerful. But long term financial goals like buying a home, going back to school, starting a business or simply retiring, will require some solid savings skills. How do we do this when we are living paycheck to paycheck? It’s not always easy, but it’s definitely not impossible.

Understand Your ‘Why’

Saving money simply because they say it’s a good idea isn’t going to give you the proper motivation to do it and actually make it a habit. And who are “they,” anyway? Your parents? Grandparents? The financial guru on TV? Forget about them and think about you. Why do YOU want to save money? What is your specific financial goal? Do you want to have enough money to put a down payment on a house? If so, how much do you want to save? Be as specific as possible. It’s hard to work toward a goal that you don’t clearly understand, but once you have exactly what you want in mind, you can make a strategic plan to achieve it.

Investigate Where Your Money Goes

Become a detective when it comes to your spending. Follow your spending carefully and see if you can identify any patterns that are causing trouble. Break out that calculator and break down your spending habits by month, by week, by percentage of your overall income. Print out your bank and credit card statements and add up your spending by category. How much are you spending each month on things like dining out, entertainment, etc.? Find places you can cut back.

Accept the Challenge of Lifestyle Changes

Cutting back on spending usually requires a change in lifestyle. Don’t let these challenges scare you off. Remember your ‘why’ and rise to the challenge.

If you’re used to getting fast food 4 times/week, it will take some planning and effort on your part to start making grocery lists, preparing meals and packing your lunch. If you’ve made your coffee shop iced latte part of your daily routine, you may need to learn to make them at home yourself. If your friends enjoy going to nightclubs every weekend, you might need to try suggesting a new and more affordable option for hanging out. (Or possibly try a new set of friends.)

Making lifestyle changes can be uncomfortable at first, but sometimes the things we really want in life will require us saying no to the things that are holding us back from those goals and dreams.

Pay Yourself First

With each paycheck, put a certain amount aside or deposit it into your savings account. Even if you don’t feel like you can afford to do very much, just put something toward your savings. And do not touch it unless there is an emergency! Treat that money as if it is “spent” and never to return. (Of course, the money can and will return to you, but at this point we’re trying to develop a mental habit and treating the money as if it did not exist is what’s needed to avoid being tempted to withdraw it.)

If your employer offers a retirement or any other kind of savings plan, it would likely be in your best interest to sign up and contribute. Most of these plans automatically withdraw money from your gross pay (that’s before taxes) so you don’t even have to think about it.

Get Help If Needed

Sometimes we get into such a financially difficult situation that simply following the tips above won’t work. This usually applies to people who have amassed a significant amount of debt and are constantly struggling to stay above water. If you’re in a situation where your income is not sufficient enough to cover your living expenses, you are relying too heavily on credit cards to pay your bills, you cannot afford basic necessities like food, or you are otherwise facing severe financial problems, seeking financial assistance and/or counseling is vital.

In many places, local governments and nonprofit organizations offer free or reduced cost financial planning services – particularly for people with special circumstances (elderly, disabled, veterans, etc.). Do a little research to find what resources are available in your area and take advantage of any affordable, professional help that is offered.

Here are a few resources to check out:

National Foundation for Credit Counseling

Financial Counseling Association of America

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