How to Break The Paycheck-to-Paycheck Cycle (IN 2025)

on this episode of the personal finance podcast, how to break the paycheck to paycheck cycle in 2025.

What's up everybody and welcome to the personal finance podcast. I'm your host Andrew, founder of mastermoney.co and today on the personal finance podcast, we're going to be talking about how to break the paycheck to paycheck cycle in 2025. If you guys have any questions, make sure to hit us up on the master money newsletter by going to mastermoney.co slash newsletter and you can ask your question there. And don't forget to follow us on Spotify.

Apple Podcasts or YouTube if you're watching this on YouTube. And if you're getting value out of the show, consider leaving a five star rating and review on Apple Podcasts, Spotify or your favorite podcast player. Now today, we're gonna be talking about how to break the paycheck to paycheck cycle in 2025. And if you've been struggling with money over the course of the last couple of years, maybe it's been over the last year or two years or even five years or you've been struggling with money as long as you can remember.

This is going to be the year, and this is going to be the episode that can change your financial life forever. Now, maybe you are finally ready to get your financial life organized, or maybe you're finally ready to start building wealth, or maybe you just want to make enough extra dollars where you can hire a personal trainer and take a vacation at some point in time.

Whatever your goal is, this is going to change your financial future because understanding how to break the paycheck to paycheck cycle and how to avoid it is the first step to building out your financial foundation. And so today, I want you to remember something. It's not about how much money you earn. It's about how much money you

Keep. I have coached a ton of different people and I have had people who make $800,000 per year that live paycheck to paycheck and they have one very specific set of problems where they spend too much money. I have also coached people where they make $35,000 to $40,000 per year and they have a different set of problems, meaning that they just don't make enough money. And so today, part of the goal of this episode is to figure out where you land within that range. Now, I know exactly what it feels like to live paycheck to paycheck.

It is one of the most stressful things. It feels like there's always a weight on your chest. You never feel comfortable with money. You never feel comfortable making your purchasing decisions. And in fact, when I was in my early twenties, when I got my first real job, I made $30,000 per year. And guess what?

If you make $30,000 per year, the odds of you living at paycheck to paycheck are going to be pretty high. Now this was a little while ago, but I made $30,000 a year at my entry level job. And so I quickly realized that I am living paycheck to paycheck and I was struggling to make ends meet at that point in time. Now I was a financial analyst and I was struggling to make ends meet. And so eventually a big moment happened for me.

I went to a gas pump to go fill up my tank. And when I went to go fill up my tank, I did not have enough money in my account to fill up my gas tank. I felt frustrated. I was angry. I was anxious. But most of all, I was motivated. This actually motivated me to figure out my financial situation. And so immediately what I did was I said, I will never ever let this happen to me ever again.

And I vowed to do it. It is never happened to me ever again where I changed my entire financial life because of that one scenario. Nobody even saw it happen. And I was just embarrassed even for myself. And so follow along a decade later, I became a millionaire just by going through this exact process that we're going to be talking about today.

I know how it feels, the constant pressure, the constant stress about money, the anxiety about how you're going to get through this month. And I am going to change this for you forever. And in today's episode, I am really excited to teach this to you because in today's episode, we're going to be diving into the exact steps of what you need to be doing.

So we're going to do this in four phases. Phase one, I am going to help you find the problem. So we're going to find the problem and the issue that is causing you to live paycheck to paycheck. Maybe it's your income. Maybe it's how much you spend. Maybe it's a hybrid between the two. I'm going to take you through the math to figure out your exact

problem so that we can solve that problem. Now in phase two, I'm going to teach you how to find money, meaning that once you start to figure out what the problem actually is, then we need to find some extra cash on hand so that you can utilize that cash in

order to be able to build wealth and to get yourself ahead. We're going to take that cash and give you some breathing room so that you can get ahead. But first, we have to find that cash. And so in phase two, I'm going to teach you how to find that cash. Then we're going to go to phase three. And in phase three, what you are going to learn is how to build your financial foundations. The most people who live paycheck to paycheck have never built their financial foundation. I'm going to take you step by step on exactly how to build it.

So A, we're going to figure out what the problem is. B, we're going to find money in your specific budget. C, we're going to build your financial foundation. And then in phase four, we're going to break free from the paycheck to paycheck cycle. This is something that I'm so excited to help you through. We're going to have tips and tricks and tactics that are going to help you day in and day out stick to this so that you never have to live paycheck to paycheck ever again. We're going to get you ahead. You're going to be paying next month bills with last month's money that you earned.

And this is how we're going to be able to get you ahead so that you can start taking some of those extra dollars that you earn and you're going to take them put in towards your retirement. Imagine if you actually had a retirement plan and you could feel that stress and that weight lift off because you know there's light at the end of the tunnel. This is something I truly believe each and every single one of you can achieve. But you have to have the skills and you have to change your mindset when it comes to money.

And so we're going to help you do that in this episode. I am so excited for each and every single one of you because this episode could be life changing for you. It changed my life learning this system and teaching myself how to do all of this stuff. And it can absolutely change yours in 2025. This is the year you get your financial life together. This is the year that you change your financial trajectory for you, your family and everyone around you in 2025. So if you're ready for it, then let's get into it.

All right, so phase one is we need to find the problem, meaning we need to figure out what the heck is going on in your financial situation that's making you live paycheck to paycheck. Now, for each and every person, it's going to be different. So I'm gonna teach you how to find the problem so that any time you have an issue, you'll be able to figure out what that issue is. Now, one big thing is you may already know what the problem is, meaning that you may know that you spend a little too much money on Amazon or maybe you spend a little too much money online shopping.

or you might know that I just don't make enough money to make ends meet from my current situation, or you may have no idea what the problem is. In any of those scenarios, that is fantastic, because we're gonna help you through this process as we go through this steps. Now, one thing I want you to know is that during this process, when you are in the paycheck to paycheck cycle, or you're just getting by, maybe you're even going backwards a little bit, and you're going into debt every single month, when you are in this scenario, you must have a spending plan.

Those who fail to plan, plan to fail. And that is absolutely true when it comes to your money. If you think that you're going to keep doing the same thing every single month and somehow it is magically going to get better in the future, you are absolutely not correct. Instead, what we need to be doing is setting up a plan for success. And I'm going to teach you how to set up that plan for success right now. Now, when most people think about spending plans or budgets, they think of restriction.

I want you

allocate to those dollars towards the things that you value. And changing your mindset and behavior surrounding this is going to be a huge shift for a lot of people. And once you make that shift, your life will literally change forever if you can actually make that shift. Now, this means you are controlling your money goals. You are in full control of where your dollars are going to be going.

If you follow your dollars, you're going to find your values. And I want you to be able to find what your actual values are. Now, this means you are in control of your money goals if you're utilizing a spending plan. And you only spend when it is a need or a value. You don't spend on just frivolous things that you don't care about. Instead, you spend when it's a need or when it's something you truly, truly value. So needs are things like shelter, food, electricity, paying debt, daycare, transportation.

And believe it or not, even health, those are all needs in my book. Values are things like retirement, hobbies, those are things that you can truly value and you want to put your tolerance towards those things. But first, let's make sure that we are on track with the spending plan. Now, when you begin a spending plan,

I highly, highly recommend utilizing an online tool like Monarch Money or YNAB. Now, most people are going to kick back if you do not already utilize one of those tools and you're going to say to me, well, I don't want to spend $5, $6, $7, $8, $9, $10 per month on a spending plan when I'm already living paycheck to paycheck. Let me kick back on you really quick on that because the number one thing that you need to know is by utilizing these tools, you're actually going to save yourself money.

If you're using a spreadsheet and you think you're going to go to that spreadsheet every single month and correctly allocate dollars towards it and have a perfectly efficient spending plan, then you are one in a thousand, my friend. Most people need to make sure that we are automating our spending plans. We're not spending so much time in here. And $9 a month is literally nothing. You're going to frivolously spend $9 on Amazon tonight when you go home or you're going to frivolously spend $9 on coffee in the next day.

You need to understand this is an investment in yourself. This is not something where you're just throwing $9 away to have some sort of spending plan. All right. So the next thing we need to do then is to figure out what is going on. First, we need to calculate our income. Now, you'd be amazed at how many people don't actually know how much money they make. In fact, I talk to people all the time and they have no

No idea how much money they make after taxes. Sure, you may know your salary. I make $70,000 per year. I make $100,000 per year. I make $200,000 per year. I make $40,000 per year. But what do you make after taxes? What do you actually bring home that hits your bank account every single month? And I'm talking about your household income. If you and your spouse worked, how much do you make and how much do you bring home?

That is a very important number to know. And so we need to calculate this number and figure out exactly what this number is and write it down. So I want you to take out your bank statements from the last three months. And I want you to add up how much money you made from your W two income. I want you to add up how much money you paid yourself from your business. I wanted you to add up how much money you made from side hustles, add all of these things together and tell me how much money you make every single month. So go for the last three months. You can average it out if you want to, but how much do you realistically make?

make every single month. An example would be if you make $4,000 a month from your W2, you have a side hustle that makes $500 and you make $4,500 a month. You just add those two together. Now, again, you may think you know how much you make, but until you do this calculation, I want you to get that exact calculation. It's going to be very important so that we can figure out exactly what's going on in your specific financial situation. So first is calculating our income.

Number two is we are going to calculate our baseline expenses. And I want you to know upfront and off the top. We want your baseline expenses to be no more than 50 to 60% of your income. If it is outside of 50 to 60% of your income that you take home,

If it is outside of 50 to 60% of your income, then if it's below, great. That's fantastic. But if it's above that, we need to figure out what the heck is going on in your specific situation. So what is a baseline expense? This is going to be your needs, your necessity, what you absolutely have to have to live. So this is going to be things like housing and housing should be 30% or less of your income should be spent on housing.

Food is another one. Now food can be 15% or less somewhere in that range. Transportation is 10% or less. And then we have things like childcare, cell phones, groceries, healthcare. All of this stuff is going to classify into your baseline expenses. In addition, debt payments are also part of your baseline expenses because those are requirements. Those are things that you absolutely have to pay in order to live unless you want the debt collectors come in and you're paying even higher interest if that debt starts to snowball against you.

Now, to calculate these baseline expenses, it's a lot easier if you use one of the apps that we're talking about, and the same thing goes for your income. But if you don't, go to your last three months of bank statements, and what I would do is I would highlight all of your income in one color. I would highlight all of your baseline expenses in another color, so the things you absolutely have to have.

And then I would highlight some of the next stuff in another color. So I would kind of color coordinate this to make it easier for you to see. So when you add all your expenses related to your needs, make sure that this is a true need. You have to make sure that you're calculating the bare bones expenses, the bare bones necessities that you need so that we have a very accurate number. Now, if you're asking yourself, I don't know if this is that actual essential expense or if it's something else. It might be right on the line. So I'm going to give you three questions to ask yourself if you are in that boat. Number one.

Does this expense ensure my basic survival or well-being? So this is food, this is shelter, this is utilities, this is health care. Those are things that you need for basic survival. Number two, would my quality of life significantly decline if I didn't spend on this? Now let me tell you something about human psychology.

I know each and every single one of you that is listening to this right now is if we remove something that significantly reduced your quality of life, you're not going to cut it out. And so this is going to need to be an essential expense for you so that we can ensure that we are getting very accurate numbers. What do I mean by that? So for example, I've heard people in the finance space say, hey, if you're deep in debt, go ahead and sell that car and start biking to work. Guess who's not going to do that?

You're not going to do that. I'm not going to do that. Instead, getting rid of my car so I can bike to work is going to significantly decline my quality of life. I don't want to bike to work. I am not Lance Armstrong. I'm not here to go in the Tour de France. I'm not Mr. Money mustache. And so in any of those scenarios, I'm not doing it.

And neither would you because the basic human psychology is telling me you are going to keep and hold on to those things. And so if it's one of those things like transportation of work, essential clothing for work, those types of things, think through your quality of life. Number three, is there a cheaper alternative option that fulfills the same purpose?

So this could be like cooking at home instead of dining out. So you may be the type of person that says, well, if I eat out at lunch every single day, that's definitely a basic necessity that I absolutely need. Well, you could cook at home and reduce the cost significantly. And so there's things like that that we have to look at to make sure that they actually fit the essentials. Now,

I want you to know something right now. My goal for you is to get you out of this paycheck to paycheck cycle. And then once you start to have some relief and to have some cushion here, we're going to spend more money on the things that you love. If you love eating out, I want you to spend more dollars on eating out. But first, we have to identify the problem so that you can spend more on eating out when we find money. We're going to find some dollars so you can get out there and get balling. So don't worry about this. I just want you to get these baseline expenses figured out so that we can figure out what your needs are and how much money you need to take in every

single month. But asking these three questions will identify if this is a true need or not. Now, I want you to add this number up. If you're trying to figure out in your head, hey, how do I actually calculate this over time? How do I calculate what percentage of my income this actually falls into? I'm going to show you how to do it right now. So first, it's going to be your total needs. So whatever those needs are, you're going to total them all up when you actually highlight them all or when you go into your budgeting app and total them up.

And you're going to figure out what those total needs are and you're going to divide it by your total income and then multiply it by 100. This is just going to get you the percentage that you fall into. So if you make $5,000 every single month and your total baseline needs are $2,600, then what you're going to do is you're going to divide 2,600 by 5,000 and multiply that by 100 to get 52%.

You can even throw this into chat GBT if you want to, and it'll do the calculation for you. Say, hey, here is my total needs. Here's my total income. What percentage of my income is this? And it chat GBT will spit it out for you. Now, here's what I want you to think about here. If your needs are within the 50% to 60% range, you are on track. That is normal. That is where they should be. That means that that part of your pie is healthy. If your needs are below 50%,

Excellent. You're going to have a lot of flexibility to save and invest. There's going to be a lot of cool things you can do. You can go on a lot of vacations. You can do a lot of extra things if it's below 50%. If your needs are above 60%, then we need to take a look at what's going on. Either you are spending too much money

or you don't make enough money. And if they are above 80%, either you're spending a crazy amount of money on housing or transportation or food, most likely, and or you have an income problem. And we're going to help you solve that income problem. I promise you, we're going to talk through that later on too. And so you need to focus your time and energy and probably your money on making more money. And so that's going to be something else that we can talk through.

Now, to think of this as a grand scale, the closer you are to that 50% number between the 50 to 60% range, the more healthy your needs situation is. The closer you get to that 60% number, now you're toting a fine line because you only have 40% left over to save, invest, and put your dollars towards other things that you really want to do in life. And so we got to make sure that we have enough gap here to make this really work.

Now, if you are outside of this range and you're way higher than this range, then most likely you're living paycheck to paycheck, which is why we're talking to this episode. And that's going to be okay because we're going to get you out of this situation as we start to talk through this, okay? So you're in that 50 to 60 percent range, okay? But your goal though is to get to that 60 percent range so that we can make sure that we can get you out of this situation. We'll talk about how to find more money later on.

Now, number four is we're also going to calculate our non-essential spending. Now, you're probably gathering right now that we're trying to find that root cause of your paycheck to paycheck living, but we need to know how much you're spending on non-essential items. So for some, this number can tell you why exactly you are in this scenario. So take out the last three months again of your bank statements. And I want you to figure out what your non-essential spending is.

Now, I'm going to go through a list of non-essential spending so that there is no discrepancies on what actually is non-essential and what is essential so that you know and can figure out what your baseline costs are. So entertainment and leisure. So this is going to be stuff like streaming services, cable or satellite TV, movie tickets, concerts, subscriptions, hobbies, or we're going to have dining and drinks, so things like restaurants and takeouts.

Coffee shops, alcohol, snacks, or treats outside of regular groceries. If you go into the gas station and spend $12 every time you go there, that is going to be snacks and treats outside of regular groceries. Then there's travel and vacation, so airfare for leisure travel, hotel stays, cruises, car rentals, tourist activities. I want you to do more of that, and we will do more of that as we start to progress through here. Clothing and accessories, so luxury clothing, jewelry, trendy or seasonal fashion items, bag, shoes, or accessories, and any other non-essential clothing that is out there.

Personal care and beauty is a big one now. So things like spa treatments, premium skincare, haircuts, and I'm not telling you not to get a haircut. Get a haircut if you need one. I'm just saying, you know, getting haircuts at upscale salons, manicures, gym memberships, all that kind of stuff home to course or decorations or high in furniture or renovations, landscaping.

tech and gadgets, so upgrading your electronics or accessories or apps and software or tech gadgets. Miscellaneous luxuries like Uber and Lyft, monthly subscriptions, gifts beyond budget, premium subscriptions, all of this stuff. And then the big one for a lot of you. If you're living paycheck to paycheck and you're overspending.

This is the big one is impulse purchases, meaning items on social media ads or sale items just because or retail therapy splurges or collectibles or decor not aligned with your needs. So all of this stuff is going to add up and these are going to be your non-essential expenses that we can look at.

So see how much of the pie this is. You may be looking at your non-essential expenses and saying to yourself, it is barely anything. It is 5 to 10% of my pie. Well, that's going to tell me really quickly that you're most likely just not making enough money if you're not saving or investing anything. Or you may say to me, hey, it is 50 to 60%, but my also essential needs are also 50 to 60%.

I'm going in debt every single month. And that could be a scenario that you're in, which is a, okay, we can absolutely fix that. You're just going backwards right now, but we'll be able to fix that. Or you may say to me, well, all the rest of my money is going to these impulse purchases or non-essential spending. And I need to help figure this out. And so this is going to be something where we're going to figure out how much of this pie is in non-essential spending and between these three items. Your income is the first thing we found.

Then we found your baseline expenses or your needs. Okay, that's the second thing we found. Then third, we found your non-essential spending. So this is going to be all the stuff that's extra that you do not need, but it is stuff that you like to have. It improves your life. It's a want that you have.

or it could even be a value that you have. And so because of this, we wanna figure out exactly where you land. Now, what is the healthy percentage of pie? Here's what a great pie would look like to me. It'd be 50 to 60% on baseline expenses. It'd be 20% on non-essential and fun money. It'd be 20% on wealth building investments, and it'd be 10% on savings.

That'd be a really healthy pie. Now, you can shift this around. Say, for example, you have your savings already racked up enough. You could shift that into fund money, for example. You could spend 30% on fund money. You could spend more on wealth building. But we want to kind of get in that range. We're at least putting 20% towards wealth building to grow our net worth over time.

That's the gold long term. Right now, we're just trying to get you out of this paycheck to paycheck cycle so that you can breathe. This is not going to happen overnight. We're going to take steps gradually to get there. This is going to be small steps. And once we get there, you're going to feel so much more relief once we start to find money.

So in phase two, what we're gonna be doing is we're gonna be finding money. We're gonna be finding money that you can utilize towards wealth building activities. And it's going to help you figure out exactly what you need to do so that you can get breathing room. And once we find that money, then we're gonna build your financial foundation. So let's go to phase two, which is finding money.

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All right. So in phase two, we're going to start getting ourselves out of this situation. But first we need to make sure that we can find money within our budget. So I'm going to give you a bunch of different ways to find money. And I want you to write some of these down or take mental notes and tell yourself, I'm going to take action on some of these.

I am going to make sure I do this, this, and this. I want you to pick at least three of these and make sure that you are taking action on these. And if you can, try to take action on all of them because the more dollars that you can get out of your budget, the more you're going to find cushion so that you can breathe and rest and relax and not be so stressed out about money anymore. So first,

Step one is we're going to analyze our baseline or essential expenses. How the heck do we do that? These are things that we absolutely need. Let me show you. First, we're going to review our housing, utilities, transportation, groceries, and insurance. So opportunities to save. One is housing. When it comes to housing, if you are renting a house right now,

I would like you to try and you may say to yourself, well, I'm scared to do it. I'm nervous to do this, but I want you to do this. I want you to try to negotiate your rent. I want you to call up your landlord and you're going to give them something. And then what you're going to get back is a reduced cost and rent. So this is going to be your first step. Now, we have an entire episode on how to negotiate your bills and how to negotiate your rent. If you want to check that out and dive deep into it, go to those episodes. I give you a ton of info on how to do it, but I'm going to give you a quick overview here. So one thing that you can do

as you can go over to your landlord and say to them, hey, I will extend my lease on another couple of years if you can reduce my rent somewhat. Now, if there's someone who does not want to go through all the costs of trying to find someone and put a tenant into place, they are going to be willing to do that. Now, if they're just a massive huge company and they are not the person going up to bat, you may have to figure out who the person is that can go up to bat for you. But try to negotiate your rent. The worst they can say is no.

utilities. So to reduce your energy costs, there are not many things in my opinion that I think that you can do that are really worth the time, energy and effort. So there are things like you can switch providers, you can apply for energy saving programs, you can try to reduce your energy use by, you know, turn off the lights. I don't think you should be the guy or girl who's yelling at your entire family saying flip the light switch off every time they leave the house. Instead, it's not going to make that huge of a difference, but just making sure you're responsible with your utilities and your energy use can be go a long way.

groceries. But let's talk about groceries for a second because a lot of people spend money on groceries without actually tracking what they spend on groceries. And this is the first thing I'll uncover with them and they'll say, holy cow, I had no idea that I spent that much money on groceries. And this is one that is a huge blind spot for a lot of people.

The best part about this, though, is that a lot of people say, oh, I know how much I spent on groceries. I spent $600 a month, and we go back in there and track it, and it's $1,300. A lot of times it's almost double what they think it is. And so I need you to make sure that you're adding up what your groceries are, and then figuring out if you can cut back on that stuff. Because when you're intentional with your shopping, specifically at the grocery store,

It's going to make a huge difference. Now, there might be one person in your household that is significantly better at grocery shopping than the other. I believe grocery shopping is actually a skill. My wife is not as good as I am at grocery shopping, and she would tell you the same exact thing, where I know what we need.

And I know how to find good deals on it, whereas she just doesn't have the eye for it. She just kind of grabs stuff, throws it into the shopping cart. She plans and she has a list, but she just doesn't find the most cost effective way to do it every single time. So if there's someone in your household that is better than the other person at grocery shopping, make sure you do the shopping. It could save you hundreds of dollars a month just by switching who is actually doing the grocery shopping.

I don't really mind doing it, and so that's something that I do in our household. But if you can figure out a way to reduce your grocery bill, that'll be a huge, huge step. Now, I'm not saying deprive yourself of some of the stuff you love. The way I eat is Whole Foods diet. I eat steak all the time. I eat all Whole Foods. I eat really high protein, and I eat a Whole Foods diet, and we spend a decent amount on groceries, but it's because I'm cooking at home a lot, and I really enjoy eating a Whole Foods diet. So this is things like I eat a lot of meats, I eat a lot of vegetables, I eat a lot of fruits.

All of these different things are a huge part of my diet. So that's where the majority of our dollars go when we go grocery shopping. But it's worth every penny to me because it goes towards my health. It's a deposit into the long-term health of my body. And I want to make sure that I am investing in that. So it's a really, really important thing. So I'm not saying, skimp on your health whatsoever. What I am saying though, is make sure you are conscious of how much money you are spending on groceries and food. Lastly is insurance.

Now, this is going to be the time where you might be able to save a lot of money pretty quickly. I want you to compare rates, and I want you to see if you can bundle home and auto and other insurances altogether to save you some money. So this year, try to compare as many rates as possible. Get the lowest cost you can, but make sure you get enough coverage. We get the lowest cost that you can. I don't want you skimping on coverage. I just want you to make sure that you have the lowest possible cost.

This could save you $400 all the way up to $1,000 by shopping insurance correctly. So making sure you do that is going to be really, really important. So that's the first thing is you're going to audit those current bills, housing, utilities, groceries, and insurance. Next is you're going to look at your high interest debt. Make sure you're starting to pay down that high interest debt. Debt will absolutely destroy your ability to build wealth. You need to make sure you are focusing on it, especially high interest debt, which is any debt above a 6% interest rate. You can use the debt snowball.

You can use the debt wrecking ball. Both of those are great methods to pay down your debt and make sure that you are prioritizing any debt above a 6% interest rate. We'll talk more about that a little bit. Three. Now we're going to talk about negotiating your bills. So we've had Nicole and laughing on this podcast talking about negotiating your bills and you want to make sure that you are going through all of your bills. So things like internet providers. I just negotiated my internet and cable bill two months ago.

They just kept raising it and raising it and raising it on me. And I was paying $240 a month, which some of you might be gasping right now. And it's because I really wasn't monitoring it as close as I should, or I would see it. And I was like, I got to negotiate that and I just haven't done it yet. I called them up and started negotiating. And at first, they were willing to take it all the way down to 150. And I was like, man, I just saved myself $90 a month. That's massive. That's almost $1,000 right off the bat. But I kept pushing.

And I said, no, that's just not good enough. I'm going to move to YouTube TV. So they kept bringing it down and they kept bringing it down and they kept bringing it down. And we got to $110 from $240. That my friends is enough to help you significantly, if you're living paycheck to paycheck, to just free up some cash. So call up your internet company, call up your cable company, call up your cell phone company, any of those bills that are subscriptions and look at those and see if you can negotiate on those.

Secondly, this is the easiest money you'll ever make. Go through all your subscriptions. Tools like Monarch Money will help you do this and go through all of them and cancel anything you are not using or value. Anything you are not using or value, go ahead and cancel it. Like, for example, if you have Prime, if you have Netflix, if you have Paramount, if you have HBO, if you have Peacock, I'm going to go down the list over and over and over again. If you have Hulu, if you have everything else, if you have all of them, are you really watching all of them every single month and getting that actual value out of it every month? Disney Plus, all of these.

You need to make sure that you are rotating these at the very least, especially if you're living paycheck to paycheck. You don't need all of them. You can go and cancel one and sign up for another and try to rotate some of these subscription services for the shows that you're watching or the movies that you're watching, but you don't need them all. And I'm gonna tell you that right now. It sounds stupid.

But let's say you had them all and you canceled 80% of them. Each one is 10 to $20. You're saving yourself at least $100 a month. That's $1,200 a year. If you just negotiated your insurance, it's another $1,000 per year. And if you negotiated some of these other bills, you might save another $1,000 per year. That's $3,000 per year right there in cushion that you could be finding money in.

$3,000 just from some of this negotiation. And so this is just your baseline expense. We've even gotten to some of the other things about to talk about here. And so as we start to think through this, you can start to find money in your budget. So make sure you're doing some of these next.

is we're going to automate our savings on essential. So set up auto pay for utilities to avoid late fees. If you find yourself spending a lot of money on late fees because of bills, automate all your bills. They should all be automated. You should know which date they fall on. And maybe you aren't automating them because you're scared. You're not going to have enough money in your account because you're living paycheck to paycheck. Once you start automating them and putting them on calendar, you're going to know exactly when they fall. Now, a tool like Monarch Money, for example, actually has a calendar that shows you when your bills land every single month. It actually does all the work for you, which is again,

If you're spending nine, 10, 11, $12 a month, that's worth the money. It does it all for you, so you don't have to go in there and hand-write it and spend hours every single month on your money.

but also try to use cashback apps and or even cashback credit cards if you're not in credit card debt and you don't have problems with credit card debt so that you can be able to utilize some of that cashback for future bills and save more money. So just kind of a cycle that you can use to make sure that you reduce some of your bills later on down the line. I know people who take their cash back and invest those dollars and that's going to grow to even more dollars over time and it's really, really important.

So that's number one is analyzing those baseline costs. Step two is let's target non-essential expenses. So first, we're going to look at our non-essential expenses. And I want you to try to identify patterns, meaning that when you look at your expenses every single month, what are some of the patterns you see? Do you notice that you start to spend a lot of money

later on at night. Maybe it's before you go to bed, you're buying things on TikTok shop or you're buying things on Amazon or you're just online shopping at nighttime because you're stressed and you're anxious and you're spending more money there. Or you go and spend money at lunch every single day at work. Or do you notice that every single month you have a couple of big purchases because you want to treat yourselves. You spend $500 here and $1,000 here and that's where it really is getting eaten up. Look at all these different areas and try to figure out where

patterns are in how you spend your money. And then what we want to do is look at this and try to change our behavior surrounding these patterns. So if you have the sudden urge at nighttime, for example, to start spending money, try to see if you can do something else during that timeframe, maybe start to read a book or try to do something else to limit your spending and your impulse purchases. It's going to be really, really important.

Secondly, is we want to make sure that we're cutting out all those non-essentials. So if there's any non-essentials, things like alcohol snacks, treat yourself stuff that you do not value. You're just doing it because you're just bored. Then maybe let's cut out some of that stuff. Let's pause dining out or take out until we actually get this under control. Let's try to cook at home more if we can. Now, if you want to dine out a couple of nights a week, you really value that. You enjoy eating out more power to you. There's nothing wrong with that.

We just want to control it. If you're dining out seven days a week, let's tailor it back to two days a week and we'll find money right there. That's an instant way to find money is just by reducing the amount of times that you eat out. So it's just an example of some things out there and then obviously cut all the streaming services that you are not using. That's going to easily be able to find you a bunch of money as you go through this.

Next is let's set some spending limits. Let's allocate some dollars towards spending limits to each and every single category so that we do not go way over our spending limits and then pause big purchases. So if you have any big purchases that you want to make down the line, let's pause those big purchases until we get out of this paycheck to paycheck cycle and making sure that we actually can get some breathing room and get ahead with our money. So these are some of the things that we definitely need to be doing now.

Step three is I want you to rethink some of your payment methods. So number one is paying those recurring bills, making sure they're on a cashback card. If you can, if you have trouble with credit cards and you can go ahead and pay cash for them and then apply those rewards to essentials like groceries or gas, that's going to be a really great way to save a little bit of money there.

And then think about your mortgage. If you have a mortgage, for example, and you have a 15-year note, and you're just struggling to make ends meet, and you're struggling to make that payment, let's consider refinancing that mortgage. It's squeezing you, and every single month you have to live paycheck to paycheck. It's causing you stress, it's causing you anxiety, and instead, you don't have to have a 15-year mortgage. You can refi that and move it back to a 20 or 25, so you can give yourself some breathing room and get yourself a couple hundred dollars a month back.

so that you can take that money and put it towards activities that is going to give you more breathing room. We need to make sure that we are reassessing some of this stuff so that we can figure out what is wrong in our financial situation. That is going to give you some additional breathing room if you are on a tighter mortgage situation.

Also, if you do get some extra cash, you can pay ahead to reduce some of that interest with that extra cash. Now, step four, this is a big one because this is going to give you some additional breathing room to start off with. We want to get a head start with our breathing room in terms of how much cash we can have on hand. I'm going to tell you what to do with this cash in a minute, but I want you to think through this and think hard. This is some of the stuff you absolutely should be doing. Number one is you need to be selling unused items in your house.

This is the first thing that I would do if I was living paycheck to paycheck is I would go through to my house and I would say to myself, what are items that I do not use anymore or what are items my kids don't use anymore or what are items that are just in this house in general that I could sell? I don't care if you could sell the thing for five or $10 or if you're going to be able to sell it for $200. You need to sell every single thing that you possibly can for cash.

Now, most people are going to go out there and say, I don't want to sell this thing. It's, you know, it's only $5. It's only $10. Five or $10 added up over a bunch of different transactions when you're selling on marketplace is going to be something that makes a huge, huge difference. Now, let me just give you an example of this. So one year I decided to experiment with this. I had a bunch of extra junk in the house and every single year I started to get antsy when there's too much stuff in the house. I have three kids now. There's just stuff everywhere all the time.

And so I started to look at a bunch of stuff. I was like, I'm just going to sell all of it. I don't care what the price is, but I'm going to try to sell all of it for whatever I can get for it and see how much money I have at the end of it. In one month alone, I ended up with $2,700 with the stuff sold. This is just little random stuff. I'd sell something for 10 bucks here. I'd sell it for 25 here. And at first, I was like, this is not worth my time.

But I wanted to see how much I could get just for stuff we don't use anymore. There is value in the junk that's sitting around your house that's going to give you some extra cushion so we can help build your foundation. You need to go through your house. And if there's stuff you're not using, I don't care if it's 10 bucks, put it on marketplace. You're going to say to yourself,

This is not worth it or I'm embarrassed. Well, turn off the little thing on Marketplace that says it shows it to your friends and just sell as many of those different things as you possibly can. It will add up, I promise you, and you're going to be surprised. Just do it for a month, two months, and watch how much money you actually rack up once you start selling it. In fact, what I normally do is I'll take these items and sell it for $10 less than the cheapest one.

If you want to sell it fast, I sell it for $10 less than the cheapest one every single time. Sometimes you're like, well, nobody's going to buy this. They will. Trust me. Just put it up and see what happens. Now, if it doesn't sell, then you can donate the stuff that doesn't sell. I'm talking even your kid's clothes. I'm talking about everything.

put it on there and see what you can get because we want to get some breathing room in our budget. And once you get this breathing room, I promise you, it's going to feel so much better. You can use the money. If you're living paycheck to paycheck, you can use the money. So let's get some breathing room. Let's get some cushion, especially if we are just getting started.

Two, are there ways you can earn extra income? Is there a side hustle, a freelancing gig that you want to do? Or is there something you can actually implement to earn extra income? We have tons of episodes talking about ways to earn extra income. We have tons more coming down the pipeline. And our goal with those episodes is to spark ideas to give you a bunch of different ideas and then you take action on one and it starts to work. I want you to think through that on how you could do that. Another big one.

I love this tip is to adjust your W4 withholding, meaning that this is the form that tells you, hey, this is how much money we're going to be withholding from your paycheck every single month. Now, I want you to think about this for a second. If you get a big tax return every single year, adjusting this W4 withholding is going to be really, really powerful for you. Say, for example, your tax return is $4,000 every year. We're going to make it nice, easy math here.

Well, imagine if you got an extra $250 per month that you can put towards your emergency fund or you can put towards investments because that's what happens if you adjust your W for withholding. You're just giving the government a free loan every single month. So making sure you do this correctly is important. You could talk to a CPA or somebody who knows what they're doing.

But adjusting that W4 with holding can get you your money back and get you your tax return before you have to wait till tax day. And so this is another thing that you can do to give yourself some extra cushion. And then lastly is if you're over saving on for something specific or maybe a vacation fund or you're trying to save up for a car, let's pause that for a second. And let's make sure we can get out of this cycle first. Then we will go back to saving money towards those things that you value and towards those things that you want. But we got to make sure that we have enough cash on hand first saved in the emergency fund before we start saving for some of those big savings goals.

Also, if you're saving for kids college or you're saving for kids specific items, we need to pause that as well. You need to take care of your retirement first before your kids. I know this is harsh. I have three kids. I get it, but you got to make sure that you pause that first and take care of your own self. There are no loans for retirement. There are loans for kids to get if they want to go to college. So making sure you're pausing that savings until you get out of this cycle is going to be a really, really important thing. We're going to create some breathing room for you here.

So I just gave you a ton of ideas to find money in your budget, find ways to implement at least three of these, and start to really see what is available in your budget so that we can go on to the next step, which we are building our financial foundation with that money we just found.

All right. Phase three is to build our foundation. Now in this phase, I'm going to give you the foundation that it will protect your wealth forever. We're going to never go back to the paycheck to paycheck cycle again. Now a big part of this is saving cash. Now one thing I want you to understand is living paycheck to paycheck is going to keep you stuck and you're going to stay stuck if you don't have cash on hand to protect your money. A lot of people who live paycheck to paycheck

are in that situation because they don't have cash on hand to take care of things when they come up. So say for example, you started to save a little bit of cash on the side and you started your savings and all of a sudden your car breaks down and all that money goes to your car breaking down. Or you started to save up a little bit of cash and then all of a sudden a medical emergency happened and you had to go to the emergency room and then

All that money is gone. And in fact, you're even going deeper into debt. It took all your money and you're going into debt. This is what a lot of people feel when they go through the paycheck to paycheck cycle. And maybe that's you listening. And I did it because life happens. And when it rains, it pours. It feels like it's all pouring down on you at the same time. I cannot tell you how hard it feels to get ahead, especially when you're in this paycheck to paycheck cycle.

And so people who do not have cash on hand, usually A, cannot take care of emergencies when they pop up and they just have to start all over again. And B, they cannot take advantage of opportunities that come up. So say, for example, your job comes to you and says, hey, you got a promotion, but you got to move across the country. And you don't have enough cash on hand to be able to make that move. And they're not offering any incentives for you to move across the country.

What do you do? Most people who do not have cash or a living paycheck to paycheck cannot take advantage of opportunities like that, which keeps them stuck in the paycheck to paycheck cycle. I don't want that for you. So we're going to build this financial foundation so that you can learn how to get yourself out of this cycle.

very specific way that we do this here at the personal finance podcast and master money. And I'm gonna teach you it now. It's called the 136 method. Now the 136 method was our most popular episode last year. And it's a system that is going to help you build your foundation and manage your cash. So when we are looking to build this foundation, we wanna make sure that we have a little bit of cash on hand first. So I'm gonna give you five goals that we're gonna implement and we're gonna take very small steps and do this gradually over time so that you're gonna have this financial foundation built. So goal number one,

is we are gonna save one months of expenses in cash. So that's the one in one, three, six. Now our goal is to get as much of our found money as possible into one month expenses. And we are gonna put this in a high yield savings account. This is not gonna go in your regular bank savings account. This is going to go in a high yield savings account. Now I like Ally Bank, that's the one I've been using for a little while because they have buckets. And you wanna make sure they have buckets in place, meaning that you can just budget inside of that account.

And so you could put emergency fund in there, you could put a car fund in there, you could put a vacation fund in there, all in one account. It's really cool how it works. And so we have an episode talking all about this. If you want to learn more about that called the bucket method to saving, you could check that out as well. But you want to automate this money every single month into a high yield savings account. You're going to do one month of expenses every single month. So we totaled up your expenses. We looked at

Your baseline expenses and we looked at your non-essential expenses, let's get at least one month of your baseline expenses in this account. That is going to be really, really important to give us enough cushion to start to take action on some of these other steps. Once you have one month's expenses in this account, we're going to move on to goal number two. And goal number two is to pay off all your high interest debt.

So any high interest debt that you have out there, which is debt above a 6% interest rate. So having this cash cushion is going to protect you against life when stuff comes up while you're trying to pay down this debt. And then as we get that one month expenses, now we can start to pay off this high interest debt. Now I'm talking anything outside of a mortgage that's above a 6% interest rate. So I'm talking about your credit card debt. I'm talking about personal loans.

I'm talking about a car loan. Anything in that range, it's above 6%. Now, if you have a car loan that's above 6%, you can look at refinancing that this year and you could probably get a much lower rate. I would look at your local credit union and most likely they have some of the lowest rates in your area. But try to make sure that you can reduce these debts or get rid of any high interest debt above a 6% interest rate.

debt will absolutely destroy your life, specifically credit card debt because the interest rates are so high that they are just compounding against you. For example, if somebody had $13,000 of credit card debt and they made the minimum payment of $450 per month, it would take them 33 years to pay that off. 33 years of $450 per month because the interest rate is at 22%.

My friends, credit card debt will destroy your life if you let it. Make sure we get rid of that as fast as we possibly can. Now, a lot of you who live paycheck to paycheck, you may be feeling that weight on your chest. You may be feeling like, man, I got so many debt payments right now. That is why I live paycheck to paycheck. So let's take our found money.

and take as much of it as we possibly can and get rid of this debt. If we need to refi this debt into a lower interest rate, we can do that. But we got to make sure that we get rid of this debt as fast as we possibly can so that we can move on to the rest of the foundation. So goal number three is once we pay off our high interest debt, then we're going to move on to goal number three, which is to save three months of cash in that high yield savings account. Now, you already have one month of cash saved.

So once you have that one month of cash saved, now we're going to move into three months of cash. And now this is going to be able to protect us against a number of different things. It's going to be able to protect us short term against job loss. It's also going to be able to take care of us for most financial emergencies. And it's going to help us just bridge the gap as we start to progress down this line here. Now once you get to three months of cash on hand saved, I also want you to move on to goal number four, which is now taking half of that money that was going to your emergency fund and starting to invest

those dollars for your future. You will never be able to retire if you do not start investing. So I highly, highly suggest that you start investing once you get to that three months of cash on hand in your high yield savings account. This is going to allow you to start your progress towards financial freedom and to build your foundation towards being a wealth builder. And we're going to teach you how to build wealth on this podcast. Make sure you're subscribed. We talk about investing a ton on this podcast. We also have a bunch of episodes out there. But if you go to master money.co slash webinars,

That will take you to an investing webinar that I did. That is an evergreen webinar that teaches you step by step on how to invest. And it'll teach you step by step on how to open an account, how to find your first ETF and all those different things. And so if you want to check that one out, make sure you go to mastermoney.co slash webinar. So goal number four is to get started investing once you have three months of cash on hand. And then goal number five is to continue saving half of that found money until you get to six months expenses and that emerged.

Once you have six months of expenses in an emergency fund, you, my friends, are golden. You're protected against job loss. If you lost your job, you have six months of cash on hand until you can find another job. Or if some big emergency happened, that's going to take care of the majority of big emergencies that are out there.

And so this is going to protect you against life, because life happens, as all of you know, who are living paycheck to paycheck, life is going to happen. And so you got to make sure that you are taking advantage of this and building up that financial foundation. Six months is the minimum emergency fund here with us. And we want to make sure that you are protected. And that's how we think about that. So making sure you go through the 136 method is really, really powerful stuff to build your foundation.

If you built this foundation, you will be able to build wealth long-term because once you have this foundation in place, you can then start taking your extra dollars and investing and really growing that money. You can start to invest in real estate. There's so many cool things that you can do, but we gotta have our financial foundation first. Can you imagine, when you started this podcast, did you think you would ever have an idea of even how to build a financial foundation? These are the steps that you need to be taking and you'll be able to build a tremendous amount of wealth and you can do all the things we talk about on this show.

Once you have your foundation, you can do so many cool things in life. You can change your family's financial future. It starts right here. Now let's go into phase four, which we're going to give you the daily steps to break free from the paycheck to paycheck cycle. And it's going to be the habits that you can utilize daily to make sure that you are taking those steps day in and day out to getting out of this cycle. And you're going to get further and further away from that paycheck to paycheck cycle. Let's get into phase four next.

So now we're in phase four and I'm gonna give you some tips and tricks and tactics to break you free from this paycheck to paycheck cycle. I want you free from this and we're gonna be able to take you through five different tips and tactics that are gonna help you through this process. Number one is one of my favorite things that I do and it is called the two minute drill. Now when I started to try to get myself out of the paycheck to paycheck cycle, one of the hardest things for me was when I would have to go in and make sure my spending plan is correct every single month.

And I would save it till the end of the month. And on the last day of the month, it'd be like eight o'clock at night. I'd be like, oh my gosh, I got to go in there into my budget and make sure everything's budgeted correctly and all the categories are correct. Again, you're not going to have to do this forever. We just got to get you out of the cycle. And so you got to be on top of your money at the beginning here.

And so what I want you to do is instead of doing it at the end of every single month, we're going to do the two minute drill. Now the two minute drill is something where every single day you're going to open up your budget app and you're going to go in there and you're going to categorize all the spending from the previous day.

That's all you do. And all of a sudden, here's what happens. You're on top of your money every single day. You know exactly what is going on. You know exactly where every single dollar is and you're spending two minutes or less every single day on your money. That means you are spending less than an hour every single month on your money. And the beautiful thing about this is

Maybe you're just spending an hour at first. As time goes on, you're going to be spending less and less time because if you start to do some of the stuff that we teach here and you start automating your money and you start to learn all the ways that this can be done without you involved, then you're really going to be spending less time. You're going to be cutting that time in half or even less and you're going to be building way more wealth than you ever thought you could because you learned how to automate your money.

And so at first, we're going to be doing the two-minute drill, which is two minutes a day. That's all I want you to spend on your money. Is you set a timer, take out your phone, set a timer, and two minutes or less is all I want you to spend. And you're going to categorize all this stuff. For some of you, it may take you 60 seconds. For others who may have four kids and you have 10 transactions a day, it's going to take you the full two minutes.

But you just go, oh, this public's transaction, that's groceries. You go, Walgreens, that's healthcare. That's bum, bum, bum, bum. Down the line, that's it. And you will be on top of your money every step of the way just by utilizing this two-minute drill. Oh, this went over to Fidelity for my investment. Oh, this went over to my emergency fund and ally. That's exactly what I want you to do to go through that two-minute drill. So this is gonna allow you to budget without it feeling overwhelming. And we wanna take the overwhelm out of your money.

Two is automation. Now automation is the way that you're going to reduce that time from 60 minutes a month down to 30 to 15 minutes a month once you get this going. And so the two minute drill is going to turn into a one minute drill, or you can do the two minute drill every couple of days. And this is going to allow you to remove your willpower out of the equation. And so once you start to automate your money, what you're going to realize is, oh my gosh, my wealth is growing so much faster. Let me give you an example of automation. So I just texted my wife this right before the show is I was looking at our fidelity account over the course of the

last year, and I had this one extra brokerage account that for a long time, I just was automating $1,000 a month into this brokerage account. And I thought I stopped it, and I went back and just looked this morning, and we had automated another $12,000 into this brokerage account, invested it in the SMP 500, and it had grown another 25% over the course of the year.

And all that because of automation. It's literally because it's just automating into that account and my wealth grew to another $15,000 just because it was automated. Automation will absolutely change your financial life. You just have to know what to do. And it's a very simple

process once you get it down. And we're going to simplify that for you this year as well. We're going to be talking about automation a lot this year because it has absolutely changed my financial life. And so we have a course coming out called Money on Autopilot that'll go through exact steps of what I do. But I just want you all to understand that you need to be automating your bills. You need to be automating your savings and you need to be automating your investments. Those are the big three that you need to make sure that you are doing every single month. Number three is we're going to pay off our credit cards weekly. So if you use a credit card to spend on your bills,

I want you to pay them off weekly instead of monthly. This is what I did to stay on top of those payments. So your two-minute drill every single Friday is going to be paying off your credit cards. The day you get paid, every Friday you're going to pay them off in full during your two-minute drill.

And what that's going to do is you're going to be recognizing exactly how much money you've spent over the course of last month. You can scan those cards if you want to in your budgeting app, but you're going to be able to be on top of your money and it's not going to just pile up over the course of a month and then you don't have enough money in your checking account. Now, first, you should never be spending money on a credit card unless it's already in your checking account. That's rule number one. But two is if you pay it off every single week, you will be more aware than 99% of people.

Number four is we're gonna wait before we make purchases. Now what do I mean by that? What I mean by that is if you have some sort of purchase that is outside your baseline expenses and it is a bigger purchase or it is something that you really, really want and it's a non-essential expense. I want you to wait 48 hours if it's between 100 and 200 dollars.

Okay, just a cooling off period between that timeframe. I want you to wait seven days. If it's over $200, it's a seven day cooling off period to make sure you really want that item. And if it's over $500, I want you to wait 30 days. This is going to teach you to train your brain to exercise your muscle for delayed gratification. And once we start to have delayed gratification, what we realize pretty quickly is that that

thing is not really something I want now. Now that I see how much money I'm spending every single day doing my two-minute drill, I don't really have to cash on hand to even be able to do that right now. And so what you're going to do is delay your gratification. We are training that muscle because it is something you need to be training and spending is actually a skill. And so once you start to develop this skill, it is going to be really, really powerful for your long-term wealth building ability.

Number five is if you are the person who is not making enough money, you just can't make ends meet. And that's why you're in the paycheck to paycheck cycle. I want you to focus this year on earning more. Now, this is such an important subject that the next episode of this podcast is going to be all about how you can earn more money and ways to focus on yourself so that you can earn more money instantly because

I want every single person in that paycheck to paycheck cycle to know how to earn. And so one big thing that you want to invest in is yourself. And so if you only have a thousand extra dollars, for example, well, maybe it's worth your time and energy to invest in yourself so that you can earn more money. So that's what we're going to talk about in the next episode on this podcast. Make sure you're subscribed to this podcast to ensure that you get that episode in your feed.

Thank you guys so much for listening. Again, share this episode with a family member or friend who is struggling in the paycheck to paycheck cycle. Or if you're getting value out of this podcast, please share it with someone else so that they can learn how to build wealth as well. That's exactly what we'll be teaching in 2025 is how you can build wealth super, super excited for you to be here.

Thank you so much and thank you for investing in yourself because it's exactly what you're doing when you listen to this podcast. I truly appreciate each and every single one of you. Again, we have Master Your Money Goals webinar. It is on the 7th. So make sure you go January 7th at 8 o'clock p.m. We have a live webinar with me. You can ask me questions after and everything.

Talking about how to master your money goals in 2025. And if you want to just fast track and learn all the stuff in master your money goals, you can actually take our course. It's 99 bucks teaches you how to set money goals and how to accomplish them step by step. We also have that available for you as well if you're interested. So thank you guys again so much for being here and we will see you on the next episode.