6 Tips to Pay Off Debt Faster When You're Living Paycheck to Paycheck (2024)

FAQs

How do I pay off debt if I live paycheck to paycheck? ›

Pay off your debt and save on interest by paying more than the minimum every month. The key is to make extra payments consistently so you can pay off your loan more quickly. Some lenders allow you to make an extra payment each month specifying that each extra payment goes toward the principal.

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

According to PYMNTS Intelligence, 62% of U.S. consumers now live paycheck to paycheck, and that includes 48% of consumers earning more than $100,000 annually.

Persons living paycheck to paycheck are often referred to as the working poor, but that may not accurately describe the full scope of this phenomenon because it cuts across multiple income levels. The "working poor" have been described as typically having limited skills and being paid low wages.

Sizable portions of high earners live paycheck to paycheck.

The increase in consumers living this financial lifestyle is evident across income brackets. The share of consumers living this financial lifestyle and annually earning more than $100,000 has increased from last January, currently standing at 48%.

How Many Americans Are Living Paycheck to Paycheck? A 2023 survey conducted by Payroll.org highlighted that 78% of Americans live paycheck to paycheck, a 6% increase from the previous year.

Prioritizing debt by balance size.

This strategy, also called the snowball method, prioritizes your debt payments from smallest to largest. You'll continue to pay the minimum on all of your debts while focusing the majority of your repayment efforts on your debt with the smallest balance.

How to get rid of $40,000 credit card debt? ›

Options For Paying Off Substantial Credit Card Debt. There are a number of strategies to pay off large amounts of credit card debt. They include personal loans, 0% APR balance transfer cards, debt settlement, bankruptcy, credit counseling and debt management plans. You may be able to use more than one of these options.

By age 50, you'll want to have around six times your salary saved. If you're behind on saving in your 40s and 50s, aim to pay down your debt to free up funds each month. Also, be sure to take advantage of retirement plans and high-interest savings accounts.

A monthly auto loan payment typically falls into the “needs” category.

If you're 30 and wondering how much you should have saved, experts say this is the age where you should have the equivalent of one year's worth of your salary in the bank. So if you're making $50,000, that's the amount of money you should have saved by 30.

50% of your net income should go towards living expenses and essentials (Needs), 20% of your net income should go towards debt reduction and savings (Debt Reduction and Savings), and 30% of your net income should go towards discretionary spending (Wants).

Apply for a debt consolidation loan.

That can make repayment simpler, and can help you budget since you'll be required to make a fixed payment toward the loan each month. A debt consolidation loan is best for those with good or excellent credit scores who can qualify for the lowest available interest rates.