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The reality of living paycheck to paycheck: What you can do to stop the cycle

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Westend61/Getty Images/Westend61

Do you breathe a sigh of relief when you realize that payday is in just a few days? Do you feel like you’re down to your last pennies when the next paycheck arrives? If you said yes to either or both of these questions, you may be living paycheck to paycheck.

If this sounds like you, take heart: You’re not alone. More than half of Americans report feeling like they are living paycheck to paycheck, according to Thrivent’s 2022 Consumer Financial Outlook Survey*, and 60% would be concerned if faced with an unexpected $500 expense.

The impact of inflation

Inflation has made it even harder to save, with rising prices forcing people to stretch their paychecks even further and make hard choices. 63% of those surveyed said that inflation is pushing them off track financially.

“We’re seeing financial stress across the board right now,” said Mary Jane Fortin, executive vice president and Chief Commercial Officer. “Due to inflation, many Americans don’t feel like they’re in a position to follow essential financial steps, like saving and budgeting.”

We’re seeing financial stress across the board right now. Due to inflation, many Americans don’t feel like they’re in a position to follow essential financial steps, like saving and budgeting.
Mary Jane Fortin | Executive Vice President & Chief Commercial Officer, Thrivent

How people are coping: Prioritizing short-term goals

In challenging times, it’s reasonable to prioritize immediate needs and short-term goals. The top financial goals among respondents in the Thrivent survey were increasing income, building emergency savings and paying off debt. These are smart moves, but the increased focus on short-term financial needs may come at the expense of planning for longer-term goals like saving for retirement or education.

It can feel frustrating to work hard for your paycheck and feel like you’re just getting by but never getting ahead. Everyone, regardless of income, can benefit from a financial strategy that includes both short-term and long-term goals. It starts with adopting a positive, purpose-driven mindset that keeps you focused, then setting specific, manageable goals. No matter where you’re starting, there is a way forward.

feel like they are living paycheck to paycheck
would be concerned if faced with an unexpected $500 expense
are saving more than enough or a good amount right now

Room to breathe: How to break the cycle

If you’re like the 78% of people in the survey who wish they had more breathing room in their finances, there’s good news. There are meaningful, realistic steps that you can take to build in that extra cushion.

Align your budget to your values

While 82% of those surveyed said actively following a household budget is very or somewhat effective, only 53% currently do it. One way to make your budget easier to follow is to customize it based on what matters most: your personal and family values.

Caring for the immediate needs of your loved ones is an obvious priority. If you have more breathing room in your budget, you can make a bigger impact and live more generously, too. This may mean enjoying time with family and friends, giving to causes you care about, and feeling less stress.

When you look at your budget, don’t just think about expenses. Instead, consider what they mean to you. If Friday night take-out is a weekly ritual that brings your family together, maybe it’s worth keeping in your budget. You could sacrifice something else or try a lower-cost alternative like homemade pizza night.

If you need to reduce your charitable giving, consider giving back in other ways such as volunteering or donating household items.

Boost your income

A top goal among survey respondents (36%) was increasing income. Inflation has been accompanied by growth in wages and employment and this is a good time for you to ask for a raise or look for a higher-paying job.

You could consider picking up a second job. Or maybe you could turn something you love to do or that you are good at into a side gig. Either could help bring in some extra dollars.

Create a long-term strategy

It all starts with a roadmap. Having a financial strategy in place can help you address both short-term and long-term goals and help you move beyond simply living paycheck to paycheck.

With your budget in hand, here are a few ways to get started:

  • Pay yourself first: Put a part of your paycheck into your savings, retirement, emergency or other goal-based savings accounts before it gets spent anywhere else. This may be just a few dollars to get started, but gradually raise it as more dollars become available. It’s important to get started.
  • Watch out for lifestyle creep: Continue to adjust your budget with any changes to your income; if income goes up but spending doesn’t stay the same or go down, you may find yourself living paycheck to paycheck again.
  • Plan to get out of debt: Debt can restrict your ability and spend and save according to your values. Taking steps to get out of debt can be liberating.
  • Build money confidence: Financial anxiety can slow your progress. Thrivent’s Money Canvas program offers free resources that can help you see money in a new way and build healthier budgeting, spending and savings habits.

Get professional guidance

While these are steps you can take on your own, having an expert alongside you can help. Talk to a financial advisor, who can help you identify both short- and long-term goals and guide you toward solutions that will help you on your financial journey.

*Methodology: This general population research was conducted in partnership with data intelligence company Morning Consult and polled 2,221 adults across the country between May 9 and 17, 2022. The interviews were conducted online, and the data were weighted to approximate a target sample of nationally representative adults based on age, gender, ethnicity, income, geography. Results from the full survey have a margin of error of +/- 2 percentage points.