This is How to Break the Paycheck to Paycheck Cycle and Pay Yourself First

By Ben Luthi
January 6, 2018
Chime is a financial technology company. Banking services provided by The Bancorp Bank or Stride Bank, N.A.; Members FDIC

If you’re living paycheck-to-paycheck, the idea of paying yourself first sounds almost laughable. You’re barely scraping by, so the thought of setting aside money before paying your bills is a concept that seems unattainable.

But, before you throw in the towel, there are ways to find extra cash throughout the month to make it possible to pay yourself first. Take a look at these 5 tips and you’ll be well on your way to saving more money. And, with a little diligence, you may be able to break the paycheck-to-paycheck cycle.

1. Search before you shop

If you’re a big online shopper, make sure you research available deals. For example, websites like Groupon and Gilt City offer discounts on activities, food and drinks, gyms, and even gifts. If you’re planning a date night or are looking for a gift for a loved one, you can often save 50% or more off the regular retail prices.

If you don’t want to be restricted to discount sites, no problem. Cash-back websites like Ebates, Swagbucks and Topcashback offer money back just for visiting your favorite retailers through their portals.

Lastly, several websites offer discounted gift cards to most retailers. In some cases, you can even get an e-gift card instantly, so you don’t have to wait to get it in the mail. Gift Card Granny, for example, allows you to see discount offers from multiple gift card websites.

2. Double check your deductions

If you get a big tax refund every year, this means that your employer is withholding too much from your paycheck.

Instead, use the IRS’ tax withholding calculator to figure out what your withholdings should be. You can always fill out a new W-4 form to give to your employer. Work with your human resources department to walk through how many allowances you should claim in order to lower your withholdings. This way you can hopefully pocket more of your hard-earned money.

Next, review your other payroll deductions to ensure you’re not paying for something you don’t need. For example, if you’re paying for the best health insurance plan available but don’t use it often, consider downgrading to a different health plan as this may save you money.

Lastly, if you’re donating some of your paycheck to a charitable organization even though you can’t really afford it, consider cutting back on that until you’re on more stable financial footing. You can always start donating again and remember: as much as you may love giving to others, you need to take care of yourself as well.

3. Do dinner and drinks at home

Eating out is generally more expensive than cooking at home, and this gap is widening. According to October 2017 Consumer Price Index data, the cost of restaurant food increased 2.3% from 2016 figures. Grocery costs, on the other hand, grew only 0.6% during this same time.

So, instead of meeting up at the bar with your friends or taking your date to a nice restaurant, consider bringing the party home instead. Plus, you may be more likely to eat healthier if you’re not tempted by entrees on a restaurant menu.

4. Switch your auto insurance

While most companies reward you for your loyalty, auto insurers often do the opposite.

According to an NPR report, some auto insurance companies gather data on customers to determine how sensitive they are to price increases. This practice, called price optimization, may result in higher premiums the longer you stay with one insurer.

To make sure you’re getting the best deal, shop around to see if there are other insurance companies that offer lower rates. And while you’re at it, consider paying semi-annually instead of monthly. You can usually save by paying less frequently.

5. Buy groceries online

We’ve all experienced it. You write up a grocery list, head to the store with plans to buy only what’s on the list, and come home with more. And, if you’re shopping while hungry, forget about any semblance of self-control.

To avoid overspending at the grocery store, take your grocery shopping online. Many large supermarket chains allow you to order your groceries online for pickup. Doing this can not only save you time but also money as you’re less likely to buy the extra items you don’t need.

Automate your savings

With these 5 tips, you’ll increase your cash flow throughout the month by boosting your income and saving money on things you already buy. With this extra cash on hand, you can now start paying yourself first. To help you begin, check out Chime’s Automatic Savings program, which offers two main features.

  1. If you set up direct deposit to your Chime Spending Account, you can automatically transfer a percentage of your paycheck to your Chime Savings account.
  2. If you use your Chime debit card, Chime will round up every purchase you make and transfer the round up from your Spending Account to your Chime Savings account.

By automating your savings, you don’t have to make a decision every month as to whether or not you should save. Plus, you can always transfer some of the money back to your checking if you really need it. Meanwhile, you can continue to work throughout the month to keep money flowing into your Chime Savings account. As you do this, you’ll soon break the paycheck-to-paycheck cycle and start working toward your financial goals.

This page is for informational purposes only. Chime does not provide financial, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. You should consult your own financial, legal and accounting advisors before engaging in any transaction.

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