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How Can I Save When I'm Living Paycheck to Paycheck?

While it can be difficult to end the cycle of living paycheck to paycheck, there are actionable steps you can take to slowly start saving money. [Duration- 2:44]

Reading time: 5 minutes

A staggering number of Americans – nearly 80 percent – live paycheck to paycheck, and this problem has only been exacerbated by the Coronavirus/COVID-19 pandemic. If you're barely making ends meet, it can feel like you're stuck in a trap and powerless to break free. While it can be difficult to end the cycle of living paycheck to paycheck, there are actionable steps you can take to slowly start saving money.

Write out your budget

If you haven't done so already, writing out a detailed budget is the first step to saving money. Once you have budgeted for the necessities – rent, food, utilities, transportation, etc. – make a list of your discretionary spending. Many people who live paycheck to paycheck have already cut down on all non-essential spending, but if you haven't taken a look at your budget in a while, you may find areas where you can dial down spending. For example, you might be able to reduce your food budget by eating out less or shopping at a less expensive grocery store. Perhaps you can temporarily cut out cable if you find you're not using it often. If you ever receive a windfall that you didn't budget for, such as an unexpected bonus or a tax refund, aim to put the money into your savings or apply it toward debt.

If saving within your current income and budget parameters isn't working and you have extra time, you might consider taking on a side gig to make additional money, such as babysitting or driving for a rideshare service. Plan your budget so that any money you earn from odd jobs can go straight to your savings account.

Open a savings account

A designated bank account is essential as you begin to build up your savings. Look for an interest-earning savings account with limited access so that you can't easily transfer the funds to a checking account. Once you've opened a savings account, make an initial deposit and then contribute to it whenever you're able. Banks generally require a minimum deposit to open a savings account, but this can be as low as $25, so do some research to find one that will align with what you can afford.

Many people find it helpful to set up automated payments each month to add to their savings. Even if it's just $10 or $20, knowing that you're adding to your savings little by little can decrease the stress of living paycheck to paycheck, and the dollars will add up over time. If recurring automatic payments don't work for you, try simply “paying yourself first.” When you receive each paycheck, deposit a small amount into your savings before you use the money for anything else. Some weeks it could be $5, others $25, depending on your expected expenses. This approach will ensure that you are at least saving some of your paycheck. Unlike automatic payments, however, you can adjust the amount based on what you can afford in any given week or month.


Debt – whether small or significant – can make saving much more difficult. Luckily, there are ways to prevent debt from stifling your ability to save. Try to pay down as much of your debt as you can before you begin building up your savings. If you're struggling with student loans, look into forbearance and deferment, as well as loan assistance and forgiveness programs. If these are not viable options for you or the type of debt you carry, consider refinancing your debt at a lower interest rate. Reducing your interest rate, even by a small percentage, can help you pay off your debt faster and start saving sooner.

You might also look into refinancing your mortgage. While a refinance can be beneficial if you're able to significantly lower your interest rate, it's important to note that there are various fees associated with refinancing that may prove prohibitive. First, talk to a lender to see if you qualify for a refinance. This will depend on various factors, including your debt-to-income ratio and credit scores. If you are able to secure a lower rate, crunch the numbers to make sure the savings outweigh the costs.

Renegotiate your bills

Taking a look at your monthly bills – utilities, cable, phone, insurance, credit cards, etc. – can be one of the best ways to start saving. First, browse your current plans to determine whether you may be able to cut back. Are you using all of the features on your phone plan? Do you actually watch the cable TV you pay for? Are there other providers that may have lower rates? For home utilities, like gas and electric, you likely cannot choose your provider, but you can call and try to renegotiate your rates. Alternatively, you can cut down on your usage to lower your bills, even if only slightly. Many utility companies offer free energy audits in which they inspect your home and point out opportunities to be more energy-efficient and save money in the process.

You'll also want to look at all of your insurance policies, including car, homeowners, renters and life insurance. When your policies are up for renewal, shop around and see if you can get a better rate. You may also be able to bundle your policies, as some insurance companies will offer a discount if you have two or more policies with them. For homeowners insurance, tell your agent about any improvements you've made. For auto insurance, make sure your plan aligns with how much you're actually using the car because you may be able to lower your rates if you drive less. Many policies also include discounts for multiple cars and a safe driving record, or for teenage drivers who earn good grades.

If you have credit card debt for multiple accounts, you may be able to save on your monthly payments with a balance transfer. To do this, you will need to find a credit card with lower interest rates and then transfer your debts from your other accounts onto the new card.

Be patient

Building up your savings when living paycheck to paycheck will take time and energy, but it can be done. You may find that there are few areas where you can cut back and it may take longer than you anticipated, but making even small, regular contributions to a savings account can be incredibly stress-relieving and motivating. Those deposits will add up over time until you eventually reach your savings goal.

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