How can I break the paycheck to paycheck cycle?

[wktaylor]

We live paycheck to paycheck. We do not have any debt but we can not save any money. We are a family of 4. Should three hundred a week be enough for food and misc? (not including any bills) I keep track of every penny but the money just goes. I feel like we should be able to save but I cant figure it out. THank you

[Josh Andrews USAA]

Wktaylor, 

Let me first start by saying thank you for your questions. Living paycheck to paycheck is a difficult situation to be in and you are not alone. Studies from Forbes and CNBC[1] show that roughly 80% of US workers live paycheck to paycheck.  Let me approach this in two parts. Let's first answer your question about food and miscellaneous items, and then I'll provide some tips to help you leave this paycheck to paycheck cycle. 

Your first question is "should $300/week be enough for food and miscellaneous items for a family of 4." The answer to that is it depends on what you are including in your definition of "miscellaneous items," and on the cost of goods in your area. I live in San Antonio with my wife, 12-year-old son, and 8-year- old-daughter and we spend about $250/week on groceries alone. The cost of goods can vary by location so food might be more or less where you live. Also, what you buy makes a big difference. We usually buy store brand items which are normally just as tasty as name brand items and save us money. My wife is always looking out for good coupons and the only thing we splurge on is gluten free items that fits my daughter's needs. We saw a $50/week increase when she started needing gluten free items. 

As far as miscellaneous items, it depends on what you include in that category. I would consider miscellaneous items as toiletries and hygiene products and for my family, that's part of the $250/week grocery bill. The needs of each family are different but accurately budgeting your grocery needs is the first place to start. 
Now, let's look at some ways to save some money and hopefully get you out of this paycheck to paycheck cycle. The key is to not overspend as that is what causes most people to live paycheck to paycheck. Below are five steps to help out. 

1.  Review your monthly spending to identify expenses you can cut back on. You are off to a great start on this by tracking where your money is going. Now, not only track where it goes but make sure it goes to the right things.

• What optional spending do you have that can be redirected towards savings or to pay off high interest rate debt? How is your cable/satellite bill? Can it be reduced? What about cutting back on eating out?
• Then, if cutting back on expenses is not enough, review your essential fixed and variable expenses. One very common item I see is a family living paycheck to paycheck because they purchased a vehicle that is too expensive. They purchased a $55K truck to commute to work and are paying $600/month on just the loan when a reasonable priced car would do the trick and lower the monthly payment to $250/month. That one decision alone would free up $350/month!!

2.    Review your tax withholding. If you typically receive a tax refund, consider adjusting your withholding and redirecting additional cash flow to build savings, pay off high interest rate consumer debt, and achieve other financial goals.

3.    Make the tough decision: This is the hardest part because in order to stop the paycheck to paycheck cycle, change has to happen This could be a behavior change when you are spending more than you need to in certain areas or it could be a change in material possessions like the one I mentioned in step 1.

Since you don't have any debt, reviewing steps 1-3 will really help you get out of your paycheck to paycheck cycle. However, since most Americans do have some type of debt, these next two tips can help them get out of their own paycheck to paycheck cycle. 

4.    Consider consolidating your debts to a lower interest rate. This will help reduce your cost of the debt which will enable you to pay if off quicker and then direct the savings towards other financial goals.
5.    Consider refinancing your mortgage to obtain a better rate and/or free up cash flow by lowering your payment.

I want to commend you on your desire to save and break this paycheck to paycheck cycle. Let us know how it goes and best of luck!! If you are unsure where to go next once you begin to save, please visit USAA's Financial Readiness Score as it can give you a personalized action plan to help you improve your financial health. 

1.  https: //www.forbes.com/ sites/zackfriedman/2019/01/11/live-paycheck-to-paycheck-government­
shutdown/#4538c5994f10 
 https://www.cnbc.com/2019/01/09/shutdown-highlights-that-4-in-S-us-workers-live-paycheck-to-paycheck...